HOMEOWNERS in Newport are facing council tax hikes of up to 10 per cent for each of the next two years and more cuts to services, financial planners are warning.

The council's finance department was telling the new cabinet today that an expected shortfall in the cash the authority receives from National Assembly will force cuts to services with only health and education emerging unscathed.

The band D council tax level in Newport - currently at £589.49 - is predicted to rise to £645 from April and reach the £700 mark by 2006. The level is before any anticipated rises in the Gwent police precept which had one of the largest increases in the country last year.

Head of finance Joyce Steven said that an element of "efficiency savings" built into the Assembly's calculations was to be expected when calculating next year's budget.

In her report, Ms Steven said: "The current indications are that the 2005/6 year is likely to be one in which there is no money for anything other than the extra costs of pay and prices. Indeed the Treasury at Westminster are implying that savings (cuts) will be required from most areas of service other than education and health.

"Even for education and health the increase may be insufficient when the full costs of already agreed pay matters are considered."

Issues such as pay increases for teachers which come into effect from September, shortfalls in the council's pension fund and the costs of caring for an ageing population are all expected to contribute to a rise in costs.

The council has already identified nearly £2 million of savings from its budget for the coming year. Rises in car parking fees will raise £105,000 while cut backs such as ending the £100,000 subsidy for the Bridge Training Centre have also been identified.

A savings review is also to be made regarding the facilities at Underwood and Lliswerry Leisure Centres.