DEBT-FREE authorities such as Bromsgrove District Council are to be penalised for their prudence - it has been claimed.

Householders whose local authority has managed to balance the books will see their cash used to help other councils, which are in the red.

Bromsgrove District Council, which recently hiked council tax by almost 27 per cent, has joined a cross-party campaign of other councils nationally to lobby the Government to stop the proposals.

Finance chiefs are appalled the Government believes all local authorities should be in debt and those that are not should help fund poorer authorities "in areas with a greater need".

Council leader Dennis Norton (Con - Norton) branded the situation ludicrous.

"The council has no long-term external debt so it does not have to pay out interest," he said.

"It allows the council to spend all new capital money on capital projects such as the proposed arts centre, a major upgrade at the Dolphin Centre and a new cemetery at Catshill."

According to the authority, the Government is specifically targeting debt-free housing authorities saying they should pay the money from selling their assets into a central pool

Cllr Norton added: "For every pound Bromsgrove will need for its own purposes we will have to raise a sum in addition that will be creamed off to help those authorities who have been less well able to look after their financial affairs, despite receiving Government funding."

Earlier this year, the district council was slammed by the Audit Commission saying its services were not up to scratch and standards had declined in recent years.

This week district council Labour group leader, Cllr Peter McDonald (Uffdown and Waseley) said: "It was the council's decision to pay off its debts instead of leaving the money in the bank, making a good return.

"The council is awash with millions of pounds, yet it continues to penalise residents and insult their intelligence by ignoring numerous Audit Reports that have severely criticised its poor performance."