A VITAL ferry service could be axed next winter because of a massive increase in costs.

Hythe Ferry, which links Southampton to the Waterside, is in jeopardy because it faces a 740 per cent hike in its annual business rates.

If it closes it would bring to an end more than 500 years of history. Last year the ferry carried 440,000 passengers.

White Horse Ferries has run the operation since 1994 but says the service, which is already heavily subsidised by taxpayers, will not be able to continue if the rise goes ahead.

The company is still reeling from a fall in passenger numbers after a dredger crashed into Hythe Pier in November 2003.

Ferries had to operate from Hythe Marina Pontoon after the Donald Redford ploughed into the pier, causing £300,000 damage to a 50ft section.

Captain Andrew Bartlett, of Milton, Portsmouth, was jailed for eight months after admitting being in charge of a ship while under the influence of alcohol.

The firm is now seeking talks with the Inland Revenue's Valuation Office Agency, which sets business rates.

The VOA re-evaluates all businesses and non-domestic properties every five years and the latest set of rates will come into force from April 1.

Bosses have decided that Hythe Ferry's current annual rates bill of £1,459.20 should leap to £12,257.25.

White Horse will initially qualify for relief to help it adjust but this is expected to run out after four years.

The firm already relies heavily on Hampshire County Council for more than £113,000 in annual grant aid to keep the service running and carry out essential repair work.

Ferry bosses believe the grant aid will be withdrawn if they cannot afford to pay the bills.

This would mean vital repair work, expected to last for several years, would cease and the service would close next winter because of safety concerns.

Director Richard Lay told the Daily Echo: "This is catastrophic. This sort of rates burden brings everything back into question. We have fought every problem that has been thrown in our path over the years and found a solution but this one should not even be there in the first place."

Passengers say the loss of the service would have a huge impact on the community.

Hythe Ferry Users Group chairman Ted Vaughan said: "If we lost the ferry I think Hythe and the Waterside would become a backwater. If people don't have cars or don't want to sit on a bus for a long time the ferry is the only alternative. A lot of people might feel they have no option but to up and move."

New Forest East MP Julian Lewis said: "On the face of it this is a totally bizarre and unacceptable increase which is putting a vital service at risk. I will support any representations which the ferry company ask me to make."

A VOA spokesman said: "The VOA is unable to make specific comment about the trading figures involved, but it did come to our attention, through conversations with White Horse Ferries Ltd last year, that the turnover of the pier had been significantly underestimated.

"This is the reason for the considerable increase in rateable value for the 2005 rating."