Only a quarter of local authorities are to take up the government’s grant to freeze or lower council tax this year, according to new figures.

The figures show that 114 councils and police authorities are to accept the freeze grant, with only eight choosing to reduce council tax bills.

Local government secretary Eric Pickles urged councils to do more to lower council tax bills and protect frontline services, after government analysis showed councils had at least £30bn in reserves and uncollected income.

The analysis showed that council reserves have increased by 50% in the last four years to £21.4bn at the end of the last financial year. In the same time period, £2.5bn of council tax and arrears was uncollected, and £2.1bn was lost to fraud.

Mr Pickles said: ‘Reserves have rocketed up in the past few years and councils could be making better use of assets to keep taxes down and protect frontline services, while at the same time doing more to stop the billions they are losing to fraud and collecting more council tax arrears.’

However town hall chiefs warned that reserves were essential to protect councils from bankruptcy. Chair of the Local Government Association (LGA), Cllr David Sparks, said: 'Reserves are all that stands between councils and financial collapse. With further cuts expected in the next Parliament along with ever-growing pressure on services, putting aside money for the difficult years ahead is prudent financial management.

'Councils work hard to ensure council tax and business rates have among the highest collection rates of any tax. The exchequer would be billions of pounds better off each year if central government's collection rates matched those of councils.

Cllr Sparks added that the increase in unpaid council tax was a result of funding cuts for council tax support.