Lancaster City Council will increase its portion of Council Tax by 2% for 2013/14, helping to protect frontline services in the long term.
In real terms this mean households will pay an average (based on a Band D property) of an extra £3.84 a year – or 7p a week – to the city council from April 2013.
As 80% of the district's homes are in the lowest bands (A to C) the actual increase will be even lower than 7p a week for the majority of households.
Councillor Eileen Blamire, leader of Lancaster City Council, said: “The city council has frozen its council tax for the last two years to help all households in the short term and during this time we have focused on making big efficiency savings in a drive to protect frontline services.
“Unfortunately we have now reached the point where to maintain a freeze for another year would have an unacceptable impact on service provision.
“The outlook is incredibly bleak - Government funding will fall dramatically again over the next couple of years. Our budget now stands at £5million less than it did three years ago and in 2014/15 we will have to make further savings of £1.2million and then £2.5million in 2015/16.
“We therefore need to do what we can now, to try and protect vital frontline services in the future and to do that a modest increase in Council Tax is necessary.”
While as the billing authority Lancaster City Council collects Council Tax, it only receives around 13% of the total bill to spend on its services.
Of the remaining the majority goes to Lancashire County Council (74%), with precepts from Lancashire Police Authority (9%) and Lancashire Combined Fire Authority (4%) making up the rest of the bill.
Lancashire County Council's Cabinet is, meanwhile, recommending a council tax freeze, for the fourth year running.
The county council accounts for the largest proportion of council tax bills as it is responsible for around 80% of local government spending, overseeing major services like schools, road maintenance and social care.
The proposed freeze will be put to a meeting of the full council for a decision on Thursday 21 February, when the county council's budget for 2013-14 will also be set.
Geoff Driver, Leader of the county council, said: "It continues to be a very tough period for the economy and we have made provision to freeze council tax again this year to avoid putting household budgets under any! extra pressure.
"The reductions in council funding from government led us to set a three-year budget back in February 2011 and, because we put a clear plan in place right through until March 2014, we have been able to plan for another freeze whilst protecting front line services.
"Over the course of the three years we'll have spent over £200m less on management and administration alone, as we seek to minimise the impact of any savings on front line services.
"County council staff are working hard to deliver the budget plan and, although it hasn't been easy for them either, they can already move into 2013-14 with certainty about what needs to be done."