Publishing the local government spending settlement, ministers have told town halls to keep council tax bills down.

Local government minister John Healey announced a three-year settlement for councils in England on Thursday.

He promised an above-inflation four per cent increase in funding for 2008/09, followed by a 4.4 per cent rise in 2009/10 and 4.3 per cent in 2010/11.

And he told MPs he expected local authorities to keep council tax rises "substantially" lower than five per cent next year or face being capped.

"Keeping council tax under control remains a high priority for this government," Healy said in a Commons statement.

"We expect the average council tax increase in England to be substantially below five per cent a year.

"We will not hesitate to use our capping powers to protect council tax payers from excessive increases. This is a tight settlement but it's fair and affordable."

However the Local Government Association said that because of increased demands for services, the money would not be enough to keep average council tax rises at this year's four per cent level.

And shadow local government minister Alistair Burt claimed the average band D property could face an extra £208 on its council tax bill in the spending period.

"This pushes council tax at Band D through the £1,500 barrier by the next general election," he said.

"This statement is a cunningly worded invitation to reduced services from councils and higher bills for taxpayers," the Conservative spokesman added.