A ROW has erupted over warnings that New Forest residents are facing a sharp rise in the council tax and a cut in services.

Senior members of the ruling Conservative group on New Forest District Council have accused the government of starving the authority of vital funds.

But Tories have come under fire from a leading Liberal Democrat, who says the council has spent beyond its means.

The row follows a meagre increase in the council's annual government grant, which will rise by less than two per cent next year.

Council leader Simon Hayes claims the authority has been short-changed by ministers.

He said: "The government believes we need to spend an additional 4.1 per cent next year to provide the same level of services as this year.

"But it's given us additional grant funding of only 1.38 per cent.

"The shortfall will need to be met by significant increases in the council tax or reductions in service levels. More likely it will be a combination of both."

Cllr Hayes said the grant figure for 2002-2003 had made its position "very difficult".

"Unpalatable decisions will need to be considered by the authority before next year's council tax is set at the end of February," he said.

The council tax for the average band D property in the district is currently £888.79.

Last month Forest residents were warned that their council tax could rise by at least £80 - but the increase could now be even higher.

Forest North councillor David Scott described the grant increase as "terribly low" and claimed the council was being under-funded by central government.

But leading Lib Dem councillor Brian Dash, who represents Hythe and Dibden, said the difficulties faced by the authority were of its own making.

He said: "Last year they had a bumper increase of eight per cent - and it was 3.5 per cent the year before.

"They have consistently spent beyond their means and now even the reserves are at rock bottom."