AN UNEXPECTED £1m cash windfall has helped bridge the multi-million pound gap in Southampton Council's finances.

Cabinet members were told last night the extra cash meant the anticipated £3.5m shortfall had reduced to a gap of £2.5m.

Half the money has come from the scrapping of the clawback system that saw councils penalised for spending above the level set by Government.

The remainder of the cash will be raised by new properties built in the city during the past year.

Finance experts say it's still too early to say whether the news will affect the anticipated rise in council tax for residents in the city.

A 5.2 per cent rise is still predicted - this will mean Band D property bills will rise from £772.86 a year to £812.93 plus the police precept.

Tory group leader Councillor Conor Burns said people in the city would be pleased to see some small improvement in the 'dire situation' facing the city.

But he said: "If this was 2000 years ago it would be the case that the inn is now only half full rather than completely full.

"Ultimately this still means they have to find £2.5m - and that means cuts in vital services."

Liberal Democrat group leader Councillor Adrian Vinson welcomed the news that extra cash had been found but had harsh words for the Labour executive.

"There is nonetheless still a very severe situation facing the city council. After 18 years of Labour rule, the council is facing the prospect of further drastic cuts in services or a double-figure council tax increase since our reserves have been run down," he said.

Meanwhile, residents in the south face the prospect of yet another costly hike in their council tax bills.

Bosses at Hampshire County Council are looking to raise £9m from the public's pockets because of a budget shortfall.

Government "Scrooge" spending targets and the council's own overspends have been blamed for leaving the authority in the red.

It was revealed last night that taxpayers in the county could be left facing a bill increase above the nine per cent currently feared, mainly because of the dire state of Hampshire's school funding.

Residents could also be hit by a double whammy of being asked to fork out more for using council services.

The suggestions came as members of Hampshire County Council's Cabinet placed proposals for next year's budget under the microscope.

Under the current feared increase in council tax, residents in the average band D property could face a £61 rise in the council's bill demand, taking it to £741.58. The rise is needed to meet budget pressures, including a feared £1m overspend in social services, a £1m increase in the fire and rescue service budget, £1.5m-worth of cash demands racked up across departments, a £1.2m rise in staff costs and a £4m financing gap in the council's building programme.

Council leader Ken Thornber has vowed that whatever happens services will not be cut to keep the increase down. But education boss Councillor Don Allen warned his fellow Cabinet members that he could be coming cap-in-hand for even more money.

This year's government assessment of the council's spending needs for education is the second lowest of all the county authorities.

The department also lost vital funding thanks to a government shake-up of how post-16 education is run.

Cllr Allen said: "I may well be making a case for further resources and if that means we have to go with budget increases that are over the eight to nine per cent I will be supporting that."

Councillor Michael Woodhall suggested that the budget could be shored up by increasing the council's fees and charges - currently bringing in £40m - by ten percent.

Cabinet members also urged Hampshire's fire chiefs to better balance their books to help fight the increased budget demands.

They want members of the Hampshire Fire and Rescue Authority to reconsider a proposed eight per cent increase in their budget which would leave the council needing to find £1m.

Members of the Tory-run cabinet are also pressing for the fire authority to review its whole budget-setting process.

During the meeting, political chiefs from all three parties agreed to issue a joint edict condemning the level of money freed up by the government.

Cllr Thornber said: "Government continues to shift the financial burden onto local people instead of funding key services.

"The people of Hampshire have made clear that their priorities are core services such as schools, social services and roads.

"I am determined therefore to do everything I can to ensure that these key services continue to be properly funded."

Service budgets will now be considered by the relevant executive members.

A recommendation on the budget will then go to full council on February 21.