Despite a tough grant settlement the council's deputy leader believes the borough should still only see a five per cent rise in council tax.

Croydon Council will receive a 4.4 per cent rise in its Government grant bringing the figure to £273,362,000 according to figures published by the Office of the Deputy Prime Minister last week.

Councillor Tony Newman, who will take over as leader of the council in February, told the Guardian the money would be enough to protect key services such as street cleaning and prevent an excessive rise in council tax.

It follows a warning by local government minister Nick Raynsford to local authorities that there was no excuse for high council tax rises and he threatened to cap councils that exceeded an average rise of five per cent.

Coun Newman said the council was still waiting for an announcement on other grants before making a final judgment on the authority's future financial fortunes, but he would be talking to the Government about a change in the way the settlement was calculated for the borough.

He said the current calculation does not reflect the size of the borough, its diverse community or the needs of residents.

Last year Croydon saw a 7.2 per cent rise in council tax at the same time as £35million was cut from the budget.

Coun Newman said: "It's a tough settlement for Croydon but better than we have had in recent years. It should allow us to keep the council tax, we would hope, close to five per cent."

He added: "It doesn't reflect the fact that Croydon is an outer London borough.

"It provides enough money to protect the front line services. And the council is beginning to see the benefit of some of the big capital investments in the last two years in reducing overheads."