A £3 million cut in services and a hike in council tax of more than twice the rate of inflation is on the cards for Bolton after the Government revealed its annual cash handout.

Town hall chiefs face a savings package of up to £3.5million on what they need to spend next year along with an increase in council tax of around five per cent from April.

The annual Government handout was just over £248million, an increase on last year of £13millon -- but the council is already spending £260million and has for a long time spent above that figure.

Over the next two months councillors and officers will consider the options and could choose an even higher council tax increase so there are less cuts on service spending.

But finance chiefs plan to lobby the Government for more money before the final allocation is rubber-stamped early next year.

Director of finance Steve Arnfield said: "It is disappointing that the settlement did not give us the changes that we projected in terms of funding. We have been given £1.2 million less than we anticipated.

"The council will have to find some savings but we need to look at the figures more.

"How much money is found in the level of savings will affect the council tax increase but it is too early to say."

Education has been protected in the settlement with £700,000 left over for growth in the service once everything else is paid for. But there is uncertainty hanging over social services as the council waits to see about separate grant allocations.

The Government has made education and social services priority areas and the axe is likely to fall on highways, leisure services and the environment.

But Mr Arnfield says the council will attempt to minimize the impact on the front line services.

Deputy leader of the council, Cllr Guy Harkin, says the forecast means "redirections" of money within services.

"We have got more money in real terms than we had for this year but not as much as we wanted," said Cllr Harkin.

Conservative leader John Walsh said it is bad news for Bolton.

"Which ever way we look at it it is bad," he warned. "Highways are going to suffer badly. The Audit Commission says Bolton already has one of the lowest spends per mile.

"If the council tax rises by five per cent it will mean it will have gone up by 32 per cent since 1997/8 -- which is a damning figure."

The current cost of council tax per year for the middle band D property is £885. A rise of five per cent would mean another £44 a year.