Council tax increases in Oxford are to be capped, according to the man in charge of the city's purse strings.

Nationally, the Liberal Democrats have pledged to scrap council tax if the party should win a General Election, and replace it with a local income tax.

And months before the city council's budget is finalised Lib Dem city councillor Stephen Tall, executive member for better finances, has vowed to push down the annual increase.

Historically, the authority has increased rates by four per cent.

But next year, the increase could be as low as two per cent - as long as the council can find the cash. Every one per cent decrease in council tax equates to about £100,000 in revenue.

Mr Tall said: "Oxford's council tax is too high. The city's £233.52 average council tax bill is the 8th highest of the 238 district councils in the UK.

"The Lib Dems are determined to turn this around and to keep council tax as low as we possibly can.

"We know how unfair council tax is, hitting hardest the poorest and most vulnerable in society.

"Nationally, the Lib Dems would scrap it. Locally, we're going to cap it.

"Overall, the city council the Lib Dems inherited is still high-cost and we're determined to change that."

Finance officers have been instructed to find savings of 3.5 per cent this year, and also £500,000 of so-called 'policy space' in which the authority's political groups can draw up their 'wish list' of policy ideas.

The Lib Dem minority administration would require the support of at least one other political group to push their budget through next year.

Labour group leader Bob Price said: "The current budget has a four per cent increase pencilled in. Lowering it to two per cent is a gesture and would make a tiny difference to the ordinary taxpayer."

Council tax bills are four bills rolled into one, with Oxfordshire County Council's demand being the largest portion.