Hampshire council taxpayers may have to foot the bill for a burgeoning black hole in the local authority pension fund.

The £271m deficit in 2001 was predicted to more than triple to £970m by 2004, according to a report by the county treasurer. A three-yearly valuation by pension fund actuaries was carried out last March.

Hampshire wants to keep the final salary scheme, but increase employee contributions in a bid to reduce the amount that will have to be paid by council taxpayers.

At present, the employer puts in 12% of salary, while employees give 6%. The authority wants to up the employee contribution to 7%, as people are living longer after retirement. But the Government has put on hold any hike in employee contributions until after a review this autumn.

While this is good news for the thousands of council workers, teachers, police officers and firemen in the scheme, it is bad news for council taxpayers, who may have to plug the gap. The effects are expected to be started to be felt in 2005/06 council tax bills.

Rosemary Conway, chairwoman of Winchester Council Tax Action Group, called for the Government to take immediate action.

"This pensions black hole is a terrifying threat to council tax payers of the future. Existing tax levels are already intolerable, threatening our retirement savings and ability to maintain our homes.

"Whitehall must reform local government pensions, end indexed-linked final-salary schemes and up employee contributions in the private sector. It must also come up with the cash to fill the pensions gap.

"The cost must not and cannot be borne by council tax payers, whose own pensions will be reduced by stock market decline. No-one will bale us out."

Local authority bosses have lobbied the Government for extra cash and are calling for ministers to extend the age at which workers qualify for full pensions from 60 to 65.

A council spokesman said: "This deficit is notional and based upon all staff of any age drawing benefits immediately. The fund does still have a positive cash flow-the level of contributions being paid is higher than the payments for pensions currently being drawn-and will do so for at least the next decade."

The scheme was set up for HCC staff, the unitary authorities at Southampton and Portsmouth and 11 district councils, including Winchester, Test Valley and New Forest. Other employers include: Hampshire Constabulary, Hampshire Fire and Rescue, the University of Portsmouth and Southampton Institute.