Birmingham council tax bills are to rise by 1.9 per cent in April, equivalent to 37p a week for a Band D property and expected to be one of the lowest in the country.
Mike Whitby, leader of the city council, said people would be asked to pay "less than the cost of a Kit Kat", but would still benefit from a significant improvement in services.
Coun Whitby (Con Harborne) promised the ruling Conservative-Liberal Democrat coalition would be rigorous in its pursuit of efficiencies and maintain tight fiscal discipline in the year ahead.
He added: "At 1.9 per cent, the increase is less than any of the Government's four measures of inflation. We have managed to do this because, slowly but surely, we have eradicated the culture of overspending we inherited from the previous Labour administration."
The 2005/06 budget involves additional spending in front line services, particularly housing and social care. Childrens and adult services will get an additional £38 million investment, while housing will benefit from £374 million over three years.
The boost comes despite the council receiving only an additional £16 million in Government revenue support grant.
Other initiatives include:
* £2.5 million to pump-prime the redevelopment of New Street Station
* £5 million for street cleaning and recycling
* £27 million for leisure, sport and culture facilities
* £35 million for regeneration.
In addition, the coalition will make £500,000 available to boost council emergency planning and £400,000 to create a task force to maximise the benefits of the 2012 Olympic Games for Birmingham.
Savings totalling £100 million a year by 2008/09 are planned through a business efficiency drive, better procurement of goods and the rationalisation of council offices and property.
Coun Whitby said he wanted to deliver a change in performance that would put the council on the path to becoming excellent. This would involve sharper focus on people who needed help the most.
"The vulnerable and the homeless need extra special care, which is why we have generously funded housing and social services. We have been able to do this, while still delivering a below-inflation council tax rise, because we have brought fiscal discipline and efficiency to Birmingham City Council."