A city council has promised to consult staff and unions over job losses resulting from the decision to limit council tax rises to two per cent next year.

Newcastle City Council said that despite a disappointing Government grant settlement, residents could look forward to a below-inflation rise in council tax. This, the council said, was largely as a result of continuing efficiency savings that began last year.

The authority has also pledged to spend more on key services.

The overall amount of money spent on services will rise by £10m and an extra 6.2 per cent (£7.3m) will be spent on schools.

There will be an increase of £1.5m for the environment, £200,000 for youth activities, £650,000 to improve community safety - including £150,000 to tackle domestic violence - and £250,000 for the Year of Exercise and Sport.

In addition, the council said it would make efficiency savings of more than £8m, including £3m on travel, supplies, printing, insurance costs and office accommodation.

It will also generate £1m of income and save £5m from some service reductions and changed priorities.

In total, about 200 jobs may be lost as a result of the savings. The authority has pledged to work with trade unions and staff about job cuts, but has said it cannot promise there will be no compulsory redundancies.

The proposals will be outlined in a report to the executive next Friday.