The decision was made by the full council following an hour-long debate and means a Band D household will pay an extra 7p a week for borough services.

The meeting heard there had been unavoidable increases in expenditure, including an estimated £160,000 per year in respect of Waterfield Leisure Pools and the waste management contract.

In addition, there had been a £180,000 shortfall in predicted investment income because of the recession.

The council said these had been covered by savings elsewhere without a significant impact on frontline services.

Presenting the budget, Conservative council leader Malise Graham there was great uncertainty over future income, external grants and the cost of the concessionary fares scheme so the council had to take a cautious approach.

However, councillors did agree to invest £20,000 in Melton's new Scout hut and £10,000 in the Wheels to Work project which helps young people living in rural parts of the borough access employment.

Mr Graham said: "We are the seventh lowest funded district on the country but we are quietly efficient and plan for the future, making difficult decisions when needed and realising we cannot do everything or please everyone."

During the debate the Labour group had proposed an amended budget which would have resulted in a 1.5 per cent increase in Council Tax.

Councillor Matthew O'Callaghan said: "Many Council Tax payers are not getting anything like a rise of 2.5 per cent and we need to really tighten our belts. We maintain that the council is top heavy but staffing has not been reviewed."