Council taxpayers in Hampshire face the lowest rise in bills for over 30 years after a raid on civic coffers.

The Tory-controlled county council is considering an increase of 3.5%. This means the total for residents in average Band D properties will be around £1,200, after the district and parish council, police and fire authority taxes are added. Hampshire's part of the Band D charge has risen from £840 to £869.

HCC leader, Ken Thornber, said this would be the lowest rise since 1974. The authority has £20m in reserve and plans to spend £6m to keep council taxes down. But Lib Dem opposition councillors argue the council only has this cash because it overtaxed residents in previous years.

Meanwhile, Winchester City Council is also proposing a tax rise of 3.5%, putting its share of the average council tax bill up to £107.

Lib-Dem leader, Sheila Campbell, said: "It's time to see our increase in terms of the whole bill. We are bit players, accounting for only an eighth of the total. While we struggle to hold our increase to inflation, the real difference to the bill will be made by the county."

HCC services include education and social services. Said Mr Thornber: "We won't indulge in cuts in frontline services." He also stressed there would be no job losses.

The council has saved money by using new computers and cutting costs on agency staff. Mr Thornber added that Whitehall had given local authorities an extra £660m this year, but it was likely to be a one-off.

To deliver the proposed rate, the council also intends to use £6m from the Grant Equalisation Reserve, aimed at cushioning the blow of Whitehall, diverting money from the South to the North.

In 2003, when the council created the reserve, it hiked taxes by 15%, five times the rate of inflation. Mr Thornber said the fund was now worth £20m and he intended to use £6m of it this year and the rest in 2006 and 2007. "This is not a ploy in an election year," he insisted.

County treasurer, Jon Pittam, added: "If we didn't use the reserve, we'd still be talking about a 5% rise."

But Lib Dem leader, Adrian Collett, wants to see all £20m returned to residents immediately. "This money should never have been taken out of council taxpayers' pockets in the first place."

The county council will vote on the proposed £1.1bn budget on February 23rd.

* Households will be asked for an extra 5.5% for policing and a rise of 1.6% for fire and rescue services. This means that people in a Band D property will pay an extra £1 a week.

Chairman, Michael Cartwright, said that it was possible to set a "below inflation" rise because of the prudent financial management decisions taken last year when the authority became responsible for setting its own Council Tax for the first time.

The total budget for 2005/06 will be £60m and this will be funded by a government grant of £9m and business rates of £19m, with the balance of £32m being met from council tax.