The Local Government Association has calculated that 10 local authorities could face caps on their budgets.

These include two police authorities and a number of councils whose budgets have risen by less than £1 million.

A further 20 authorities can expect warning letters from local government minister Nick Raynsford, who is expected to announce budget caps next week.

"Some authorities who have had to set high [council tax] increases this year will still be among the lowest authorities even after the increase," said LGA chairman Sir Jeremy Beecham.

"It would be ludicrous for them to be punished."