BOLTON council taxpayers face a projected increase of more than five per cent in their bills coupled with possible cuts in services. Council spending is predicted to increase by around £11 million to £263 million next year. But with extra money from the Government only expected to amount to around £8 million, the council could have a serious shortfall - even if council tax rises in line with the national guideline figure of 5.4 pc.

The council's revenue comes from two sources: funding set by central government and cash raised locally through the council tax.

Authority insiders point out that the council are in a "no win situation" because successive governments have shifted the balance away from the central coffers so that councils are required to collect more money themselves.

A report by finance director Steve Arnfield, approved by councillors yesterday, calls on council departments to come up with ways of tightening their belts ahead of council tax bills being set in spring.

Education, classed as a government priority, will be spared but all other services are being asked to identify ways of slicing two per cent off their spending.

Council leader Bob Haworth said: "We are looking to make efficiency savings wherever poss- ible.

"There are areas where if we do have to find savings it will give us real problems but it's still early days.

"It's not a situtation that's new to us. Under the Thatcher and Major governments we had to make up some huge shortfalls and the situtation with education is a happy one."

He rejected suggestions by Liberal Democrat Roger Hayes that the local eduation authority should also look at reductions to its budget.

"We may find because of year on year cuts some of the options being put before us are so horrific we may wish we had at least looked at education," Mr Hayes said.

Mr Arnfield said it was hoped to minimise the impact of any eventual cuts.

He said: "Wherever we can we will be looking for efficiency savings but it could well be that some of our services have to take on reductions.

"We hope in the end we will not to have to take all the options but we need to be flexible." Cuts of at least 1.1 pc were required but each section had been instructed to find bigger efficiency savings to ensure there was room for manoeuvre when the final budget was settled, said Mr Arnfield.

Both Mr Howarth and Mr Arnfield stressed that both the expected council tax rise and the level of cuts which services were required to make would change if government funding - due to be announced in December - is better or worse than expected.

"This is always a difficult exercise because of the great number of uncertainties which currently face the council," said Mr Arnfield.