OPPOSITION councillors have attacked a decision by council chiefs to hold back money that they argue should have been used to offset the need for a council tax rise.

However, Test Valley Borough Council leader Ian Carr said the council had to look at the long term picture.

Residents look set to pay more council tax after the council’s cabinet voted on Monday to increase it for 2013/2014 by 4.1 per cent – the final decision will be made at full council today.

But it also agreed that the 2013/2014 New Homes Bonus of £1.6m should be held in reserve as a potential source of capital for one-off projects, but also as a contingency against the Government imposing further savings in future years.

Leader of the Liberal Democrats Councillor Peter Hurst said his party would argue today that five per cent of the 2013/2014 New Homes Bonus should be used to offset the proposed council tax increase, keeping the rate at current levels.

Conservative leader Councillor Carr defended the rise, saying in real terms it was a rise of £5 a year or 10p a week.

“I don’t think £5 a year is a pain,” he said. “The fiscal cliff is approaching and if we don’t do something now we’re likely to go over it and struggle to deliver services in the future – that’s why we made the decision we did.”

The New Homes Bonus comes from Government, which calculates how many new homes have been built each year and pays a subsidy at band D council tax level.

Cabinet member for economic affairs Peter Giddings said it would be wrong to use the funds to supplement the day to day running expenses of the council and that this was not sustainable as the money is only given for six years. It would lead to a situation where, once it stopped, council tax would not be at a level to cover council spending and would have to be markedly raised.

Some of the New Homes Bonus has already been set aside for the ward members’ budgets and £280,000 for rural broadband.

Cllr Carr added: “By giving a nought per cent increase you have lost £1m of revenue you could have had up to 2015/2016. We expect further cuts in the grant, we know the grant will be cut next year. We have taken money out of reserves but we can’t keep doing that. It’s a long term budget not a short term budget.”