THE region’s town halls will today (Wednesday, February 5) be cleared to push through council tax hikes of up to two per cent, after a fierce Cabinet clash.

Eric Pickles, the Local Government Secretary, had pushed for any authority planning an increase of 1.5 per cent to be required to win a ‘yes’ vote in a referendum.

Such a move – lowering the threshold from two per cent – would have trapped both Durham and North Yorkshire County Councils, under their current proposals.

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Tory-run North Yorkshire – which is already cutting £94m from its budgets up to March 2015 - plans a rise of 1.99 per cent, for 2014-15.

And Labour-run Durham also wants to increase bills by the maximum allowed without a referendum, a proposal to be agreed at Cabinet next Wednesday.

Now – in a significant defeat for Mr Pickles – the Government will announce today that the threshold will remain at two per cent.

The Local Government Secretary had vowed to crush “democracy dodgers”, councils raising local tax by just shy of the limit without staging a referendum.

But Nick Clegg has blocked the idea at the last minute, arguing it was too great an infringement on town hall freedoms.

A Lib Dem spokesman said: “Shifting the goal posts in this way could have a devastating effect on council budgets and local services at a time when many councils are feeling the strain.”

The decision will come as a relief to Durham and North Yorkshire councils, which have argued increases are unavoidable to prevent further, damaging spending cuts.

Whitehall’s “offer” of help to freeze bills gives town halls just one per cent of the cost of doing so, when inflation is still significantly higher.

Hilary Benn, Labour’s local government spokesman, attacked the confusion, saying: “The Government's approach to council financing is descending into chaos.

“Councils have to set budgets for the next financial year - but have been operating in the dark as Mr Pickles postures and dithers.”

Yesterday, Mr Pickles sought to tighten the screws on councillors in a different way, ordering that all their votes on budgets must be properly recorded.

At present, many authorities only make the overall outcome publicly available, leaving voters in the dark about the actions of their own councillors, he argued.

Mr Pickles said: “With voting decisions openly recorded and local referendums for excessive increases, council tax bills will no longer dodge local democracy.

“This Government is helping hard-working families manage their cost of living by funding those town halls willing to freeze council tax bills - in stark contrast to Labour, when bills more than doubled.”

Nevertheless, the prospect of council tax rising in more areas is potentially deeply embarrassing for David Cameron, who has repeatedly boasted about a “freeze”.