An extra £340m was given to local authorities in England by the chancellor in his pre-budget report last week alongside an instruction to keep down council tax increases.

Gordon Brown made it clear that, in light of the extra money, he expected council tax increases to be kept to "single low figures", adding that the government would be prepared to use capping powers where "appropriate and necessary".

The increase comes on top of the additional £420m for English councils announced in the local government funding settlement last month, and brings their allocation for next year to £54.5bn.

The Local Government Information Unit said the increase would help to close the £800m local authority funding shortfall identified recently by the Local Government Association.

Before the extra funding, the LGA had complained that 13 councils would have to pass their full grant increase on to schools "leaving nothing for other vital services", and a further 18 would have "practically no room for manoeuvre" (news, page 6, 27 November).

Brown also outlined an extra £20m for Wales, £35m for Scotland and £11m for Northern Ireland, but the devolved administrations are yet to decide how this will be spent.