Council tax bills in Birmingham will rise by no more than the rate of inflation in April.
The city council's Tory-Lib Dem coalition is considering undercutting last year's 2.8 per cent increase.
Council leaders say a small rise will be possible because the local authority is now being run more efficiently.
In a politically-charged joint statement, Tory council leader Mike Whitby and his Liberal Democrat deputy Paul Tilsley claimed fiscal discipline had returned to Birmingham and there would be no repeat of the "obscene overspending" of previous Labour administrations.
Their comments reignited a row a year ago when Coun Whitby (Con Harborne) accused Labour of setting an artificially low council tax for electioneering purposes.
The 1.5 per cent increase, approved by Labour weeks before the party lost office in 2004, led to a £31.5 million overspend when the coalition took control, according to Coun Whitby.
The joint statement continues: "The immediate task this year was to restore financial discipline and stability, and to make progress around the most pressing service priorities. We have had major success in these objectives.
"Fiscal discipline has been restored with no repeat of the obscene over-spends the new administration inherited." A major £50 million investment in social care & health has enabled the service to rise to a one-star assessment with promising prospects.
"Improvements in service outcomes for tenants have ensured housing was awarded a Fair One Star rating with promising prospects for the future," he added.
The statement was dismissed by Sir Albert Bore, leader of the Labour opposition, who described the claims as "colourful but entirely inaccurate".
Sir Albert (Ladywood) added: "The coalition has only been able to keep spending under control because of the generosity of a Labour government which awarded Birmingham £75 million additional revenue support grant.
"They are quite wrong to say that we overspent. We did not. It was a golden rule to balance the books."
The task for the 2006/07 budget, according to the statement, is to put the council on the path to excellence.
"We propose to put in place a range of plans, policies and processes which will fundamentally shift the way the council is run and will deliver excellent services for those that live, work or visit the city," the statement adds.
Budget pledges so far include:
* Further significant investment in social care and health
* More money for street cleaning and recycling
* Major investment in regeneration ..SUPL: