A NORTH district council must cut its council tax bills or be capped so it can "learn a lesson", Local Government Minister Nick Raynsford said.

At a Westminster Press conference, the minister defended his decision to threaten the toughest sanction despite proposed band D bills in Hambleton, North Yorkshire, of only £80.

Mr Raynsford said what was important was the rate of increase - 17.6 per cent in Hambleton's case - rather than whether the overall bill was high or low.

He said otherwise all local authorities with lower bills would believe they had a green light for inflation-busting increases - in turn, driving up bills everywhere.

Mr Raynsford also suggested that it was "not a coincidence" that all nine authorities facing capping were district councils, which did not face local elections on May 5.

He said: "There is clear evidence that councils do learn a lesson. Of the 14 that were capped last year, none are going to be capped this year."

All nine authorities had breached two limits - that budgets should rise by no more than six per cent and that council tax bills should go up by no more than 5.5 per cent.

Mr Raynsford said: "All local authorities were given clear indications on this. No one can say they were not warned."

His threat was branded ludicrous by Hambleton District Council chiefs last night.

Its leader, Arthur Barker, said: "The council is being penalised for having set one of the lowest council taxes in the country for many years.

"We are talking about 23p per week for each household, and it would be ludicrous to cap us as a result of that."

The average band D council tax levied by the district council is £80 a year - the authority said the Government's assessed target was £181.53.

Tory spokesman Eric Pickles accused the Government of targeting Conservative-run councils for political reasons, with a General Election thought to be only six weeks away.

He said: "You have decided to line up a few councils to face the guillotine, to demonstrate the firm hand of government. But this is not the firm hand of government. This is the slaughter of the innocents.

"This show trial of a statement fools nobody. It is petty, vindictive and pointless.

"It does not penalise those who have caused these massive increases in council tax - the Government."

Mr Raynsford said Hambleton council received a 3.4 per cent increase in its Government grant this year - above inflation, but well below the average rise of five per cent.

He said he hoped capping would not be necessary next year, with the average increase driven down from 12.9 per cent in 2003, to 5.9 per cent last year and to 4.1 per cent this year.

Next year, local authorities will be given greater financial certainty when the Government reveals grant allocations for three years, instead of only one.

Nationwide, two adults living in a band D property will see their bills go up, on average, from £1,167 to £1,214 in 2005/6, a rise of £47.

Council tax will be a key election issue, with the Tories offering discounts of up to £500 to pensioner households, and Labour announcing a one-off £200 rebate for over-65s.

However, the Liberal Democrats have gone further by pledging to scrap the council tax altogether, to be replaced by a local income tax.