A survey of 132 local authorities, undertaken by the Local Government Association of draft council tax budgets, has found that overall the 2007/08 Council Tax rise will be less than the latest Retail Price Index (RPI) of 4.4%.

Although only a quarter of authorities responded, figures indicate council tax bills in England are set to rise by an average of 3.5% this April.

However, the survey found many councils are planning for 4.9% - a fraction below the level at which they risk capping by the government.

The survey has also revealed that councils with the responsibility of caring for the elderly are facing intense pressures from both the increasing number of elderly people needing care and the knock-on effects of the NHS deficit crisis which has left many councils picking up the costs of care.

Recent figures found that almost seven out of 10 authorities can now only afford to provide care to people with the most substantial and critical needs.

A second report published by the LGA, Meeting the Challenges Ahead, found that by 2009/10, up to 370,000 older people currently receiving low level care could have it withdrawn completely due to demographic and cost pressures.

LGA chair Lord Bruce-Lockhart said unless the government gave authorities more money, care for older people would suffer.

"Without additional funding, local government may potentially face a situation, by as early as 2009, where it cannot afford to provide support to the 370,000 people with lower levels of need," he said.