COUNCIL tax in Lancashire needs to rise by more than four times the rate of inflation if £20million of cuts are to be avoided, a shock reports revealed today.

Lancashire County Council leaders -- who last year aimed to peg back future rises to around 3.5 per cent -- will this week be told that £19.1million of cuts need to be found if they are to keep that promise.

The alternative, says a report from finance officers, is to increase council tax by 9.1per cent -- taking the average amount paid by residents to the county council above the £1,000 mark for the first time.

For the Labour leadership of the county council, their cuts versus increases dilemma is complicated by the fact that elections will be held a month after the new budget comes into force next April.

And it is likely the Government will once again repeat its threat to cap any council which pushes council tax increases over the five per cent mark.

The new figures, to be presented to the county council's cabinet later this week, reveal that increasing energy costs for powering street lights, soaring highway maintenance fees and transport costs are all to blame for the cash crisis.

Loss of specialist grants for social services, the need to put £1.8million towards the overhaul of secondary school in Burnley and Pendle and loss of some revenue streams have all pushed up the council's annual budget, leaving councillors with an unenviable choice.

A spokesman for the county council said: "Overall, this forecast aims to take a prudent view of likely resources available to the council, including the assumption of a lower than shire average settlement from Government for Lancashire."

But Lib Dem leader David Whipp said: "Where do they expect people to find the increase from? Wages aren't going up like that.

"Savings can be made, like the £500,000 for corporate hospitality and the staff canteen."

Tories are looking at which vacant posts could be scrapped altogether.