DISTRICT councillors in Stroud are refusing to hand back more than £500,000 it owes to the government saying that the payment is a "stealth tax on residents".

The council's ruling coalition of Labour, Green and Liberal Democrat councillors have said that having to pay the council the money at a time of "punishing cuts" was "morally unacceptable".

At the end of last week, councillors met to plan next year's budget discussing how it would fund a £549,000 payment to the government.

Council leader and Labour councillor Steve Lydon said: “Stroud district faces a dire financial situation.

"We are the first Gloucestershire council to see an end to its central government grant from 2018, meaning we must now rely solely for our income on council tax and business rates, which is shared with the county council and other district councils, as well as any bonuses from new homes built in the district.”

'Tariff adjustment' means that the council is due to pay £549,000 to the government by 2019/20 – the largest sum of all of the county's districts whilst its funding from government, through the revenue support grant, will have reduced to nothing by April.

"This claw-back of funding is a stealth tax on local residents," said Cllr Ken Tucker (Wotton-under-Edge), group leader of the Liberal Democrats. "Last year the government proposed these figures to us, and promised that we would be allowed to keep 100 per cent of our business rates to help us finance our services.

"They have broken that promise and we are now looking at a black hole.’

A joint statement from councillors of all three parties in the coalition hit out at funding cuts from central government.

"As local Labour, Green and Lib Dem councillors we have been elected to represent our communities and to provide services that keep our citizens and our streets and our buildings safe," it said.

"The Conservative government has cut our funding for the past seven years and we have, reluctantly, made the necessary savings in order to pass balanced budgets as required by law.

"It is our moral duty as councillors to ensure we do all we can to prevent any more suffering.

"Our country and our citizens cannot bear it. Enough is enough.

"Whatever it takes, austerity must now be stopped.

"It is an ideology that has been imposed on the country, it has failed to achieve its main aim of reducing the deficit, and it has left in its wake too many stories of personal suffering.

"We therefore call on the government to halt the planned cuts to local government funding, and to work with us to find ways to provide local councils with the finances they need to keep our people safe."

Councillors are now investigating ways in which it can withhold the £549,000 payment.