The government has imposed council tax caps on two local authorities that set "excessive" budgets for the current financial year.

Council tax rises will be limited in both York and Medway councils after they failed to persuade ministers to hold off from the capping measures.

They had been given 21 days to appeal against the threat of capping after the government deemed their budgets for 2006-7 to be excessive.

But in a written statement on Thursday, local government minister Phil Woolas said: "In putting forward their challenges, neither authority has, in the secretary of state's view, presented strong arguments as to why an excessive increase was necessary."

The government has now proposed a notional budget for Liberal Democrat-controlled York City Council in 2006-7 of £97,484,000 and for Conservative-run Medway Borough Council of £148,101,000.

The councils will not have to re-bill this year but increases in council tax next year will be restricted.

The government has warned councils it expects an average council tax increase in England of less than five per cent next year.

Woolas said: "Authorities should remain in no doubt that the government will not hesitate to use its capping powers to deal with excessive increases in future years, including requiring them to re-bill if this proves necessary."

Shadow local government secretary Caroline Spelman said the real problem with council tax is that "Labour has loaded councils with extra burdens and bureaucracy without funding them properly".

"Council tax has soared by 84 per cent since 1997 and the government's abuse of the council tax system means hard-working families and pensioners are facing year-on-year hikes in bills," she added.