Council tax and business rates could rise by as much as 30 per cent in Brighton and Hove to pay for the city's refuse service.

Brighton and Hove City Council has yet to sign with a new contractor, despite calling a special meeting of its policy and resources committee last night.

It had been thought an announcement would be made that Serviceteam was to take over from Sita.

We can reveal the council will have to spend at least an extra £3.3 million for Serviceteam to take over.

This would have to be paid for by a huge increase in council tax and business rates from next April.

Paul Elgood, leader of the Liberal Democrat group on the council and a member of the committee, said: "I am predicting a rise of between 20 and 30 per cent.

"The council is already over budget, it has no reserves and the finances are spiralling out of control."

Leader of the council Ken Bodfish refused to talk of percentage increases.

He said: "There is no doubt the new contract will have a negative impact on council tax. To say anything more will be unrealistic."

He said the previous Sita contract had been seriously under-budgeted and he was determined to ensure there were no mistakes this time.

Mr Bodfish said: "One of the problems we are facing is that, until now, nobody knew the real cost of running an efficient refuse collection and street cleaning service in the city.

"Now we do, and we are still in discussions with Serviceteam about this."

Details of the contract and the exact date a new contractor will take over are being kept secret on grounds of commercial confidentiality.

The secrecy is angering the 250 dustmen and street cleaners in the city, who shouted their disgust from the public gallery at Hove Town Hall yesterday when councillors went into secret session.

There were shouts of "Why the secrecy?"

Green councillor Keith Taylor left the meeting saying: "This makes Mickey Mouse look like Tolstoy."

Tory Opposition leader Brian Oxley said: "I am disappointed we are in the same situation again with this council."

Council chief executive David Panter said: "We are close, but not yet in a position to put Serviceteam's offer before members. The intention is to do this at the scheduled meeting of October 12."

Sita is contracted to remain until October 14.