There is enough money in Bradford Council's kitty next year for it to make just a five per cent Council Tax increase, give similar service to this year and still make relatively few cuts.

City Hall accountants have calculated that Bradford will get £25.7 million more from central Government next year.

The figure of £518.38 million represents a 5.2 per cent increase in the annual handout and will be topped up by a council tax to be set early next year.

They now believe there is enough cash in next year's settlement to keep Bradford ticking over with only £417,000 of cuts.

However the authority's director of finance Steve Morris urged caution and will advise members that they should also be thinking about setting aside £1.8 million extra for a rainy day. He said the sum would help address potential future legal claims such as union action over disparate pay between white and blue collar workers.

Mr Morris added: "The settlement gives the authority the opportunity to take a view over the next two to three years to establish a sound financial base and begin dealing with the financial challenges it faces such as single status."

For the first time that money was divided into two pots - £292.93m for schools and £225.45m for everything else the Council spends its money on. Previously the schools cash came out of the same pot as the rest of Council expenditure. This year schools did best, getting 7.6 per cent more than they did last year, while the rest of the authority's money rose by 2.3 per cent - about the rate of inflation.

Bradford Council leader Councillor Margaret Eaton said: "The settlement has been more generous than we expected but that still leaves a possible Council tax rise of five per cent and I do not believe anybody should be paying high Council tax.

"The grant will only accommodate planning targets, allowing us to stand still. There are still pressures that have not been funded, which will take £9.4 million out of the budget."

Labour group leader Councillor Ian Greenwood (Lab, Little Horton) said: "This is one of the best settlements Bradford has had in recent years on top of some very good recent settlements, and we should recognise that. I don't think we should just be spending the money per se."

"Liberal Democrat group leader Councillor Jeanette Sunderland (Lib Dem, Idle and Thackley) said: "There is still a black hole in the Council's finances which is not being addressed locally. Any extra money we get will have to be used for that."