A rise in council tax could well be inevitable to meet the financial challenge of the credit crunch, as Pembrokeshire County Council copes with increased fuel and other costs and a reduced revenue settlement.

This was council leader John Davies's warning to today's (Monday's) Cabinet meeting, when he reported a below inflation 3% revenue settlement and an 8% reduction in capital settlement.

"With inflation of 5.2% and a settlement of 3% you don't have to be a mathematician to work out that difficult choices will have to be made in the immediate future," he said.

"We will be receiving about £10m towards capital, and we are spending the best part of £8m or more on the new Leisure Centre in Haverfordwest alone, in one town in Pembrokeshire, which says it all regarding our ability to turn cash into real benefits for the people we represent.

"Nationally, all council leaders are forecasting problems maintaining services not to mention developing them. It sends a clear message to council tax payers that it is difficult to maintain services when the authorities are receiving half the level of inflation."

It was going to be a 'straight-jacket' year, he predicted.

Joint deputy leader John Allen-Mirehouse suggested Mr Brown and Mr Darling should make use of some of the excess money they are going to spend to get us out of recession to help local authorities lift the burden on individual citizens by reducing council tax. He suggested a letter to Westminster if the WLGA has not already done so.

Joint deputy leader Jamie Adams said while the council provided services direct to the public, the Welsh Assembly Government spent considerable sums on their internal operation.

The leader said that in 1998 the Assembly employed 2,500 civil servants while the current figure is 6,400 at a cost of £400m, and efficiency costs did not exist as far as they were concerned.