Prescott says he may revive rate-capping

Infuriated by the size of some of the council tax bills that will be going out soon, the Deputy Prime Minister, John Prescott, is considering resorting to "rate-capping" – a form of central control previously associated with the Conservatives.

Weymouth is likely to top the list of councils to be capped, after voting through a 53 per cent rise in its council tax precept, when inflation is below 3 per cent. The rise has annoyed ministers because Weymouth has been given a 12.5 per cent increase in its government grant this year. More than £5m of the council's total budget of £9.3m comes directly from the Government.

Mr Prescott told party supporters in Southport yesterday: "It is only fair to warn those authorities proposing excessive council tax rises, some as high as 40 or 50 per cent, that I do not rule out using reserve capping powers."

A return to rate-capping will risk confrontation with Labour councillors, who dislike having Whitehall make decisions which, they claim, should be left to locally elected representatives.

The practice – under which town halls are set strict spending limits by the Government – was introduced by Margaret Thatcher's government nearly 20 years ago, to target high-spending Labour councils. Labour's election manifesto promised an end to "crude and universal" rate-capping, but reserved the right to extend the rule in individual cases.

The council tax hikes are embarrassing because they coincide with the first appearance on payslips of the national insurance increases announced in Gordon Brown's 2002 Budget.

The council that has annoyed ministers most is Tory-run Wandsworth, in south-west London, which cut council tax by 11 per cent last year, when councillors were running for re-election, only to raise it by 45 per cent this year. But Wandsworth is safe from rate-capping because it has been singled out by the Audit Commission as one of the most efficiently run councils in Britain.

This leaves Weymouth in the firing line, even though it cannot be accused of timing its council tax rises for electoral convenience because its elections are held every year. Also, the town is no longer in the Tory heartland. At the last general election, the Labour candidate Ian Knight managed to take the seat from the sitting Tory MP, and now holds the most marginal Labour seat in the country. Labour has more councillors in Weymouth than any other party, though too few to control the council.

Weymouth claims it must fill a £3m hole in its finances. The town lost much of its income when the Royal Naval air station and dockyard were closed, and even after this year's increase, its council tax will still be lower than nearby Dorchester's.

The council considered drastic measures such as emptying waste bins once a fortnight rather than weekly, closing its publicity department, and sacking the council's weatherman, but decided against the moves.

The £5,000 a year it pays to retain a weatherman is viewed as an investment, because of Weymouth's dependence on its tourist trade. The weatherman's measurements recently produced a crop of helpful headlines promoting Weymouth as the sunniest place in Britain.

Council leader Anne Thomas said: "We worked very hard to achieve a budget which is supported by all parties except the Conservatives. We have had to deal with some extraordinary circumstances."