Barnard Castle Town Council’s proposed precept for the year 2014 to 2015 is £159,573 – an increase of 7.97 per cent on the previous year's figure.
It equate to a rise of £5.56 a year for a Band D property, with such households contributing £102.58 per annum compared with £97.02 from 2013 to 2014.
However, when setting the precept, councillors were warned of the potential for the Government to impose a cap on rate increases to two per cent.
If such a cap was imposed, the council would be left with a shortfall of £8,826 in its budget.
Town clerk, Michael King, said: “There is no mechanism to cap parish or town councils at the moment.
“It would need to be made law by the Secretary of State.
“Although it would be a rush now, they could still do it.
“It’s a small risk and a theoretical one.
“We need to understand that in the next 12-months they could still impose a cap and we would be restrained in coming years.
“We can still have ways of dealing with it if the council was instructed to reduce the increase in precept, either retrospectively or to look at the reserves and think about the difference there.
“It is a manageable risk but members may wish to reduce that risk of being capped.”
Councillor Tony Cooke, chairman of the town council’s resources committee, said: “This council has done a lot for community needs and for us to maintain that level, I don’t think we should go backwards.”
Councillor John Blissett encouraged the precept to be increased by the proposed figure while there was still no cap in place.
He said: “They (the Government) are going to do it sooner or later and if we haven’t got the money there then we are going to start falling backwards.”
The figure will be formally decided by the full town council next week.