Municipal associations in Victoria say they must be allowed to raise rates beyond the level of inflation, or jobs and services will be at risk.

Victoria’s Labor put forward a plan while in opposition to limit council rate rises to the level of the consumer price index, which most recently sat at 1.7 per cent.

But the Andrews Government will not bring in the policy until July next year.

There is much speculation that council will seek to push up their rates before the new policy takes effect, something Local Government Minister Natalie Hutchins has warned against.

It is a tough time for councils’ hip-pockets, with the rate cap plan coming on top of a Federal decision to freeze financial assistance grants to councils.

Municipal Association of Victoria chief executive Rob Spence said the combination of a rates cap and frozen grants will mean councils have to cut.

“If you cap their rates and we have got Commonwealth grants frozen, the only place you can go is to dump staff or dump services,” he told Fairfax Media.

“Where you are likely to see the cuts are reductions in road maintenance or reductions in maintenance of pools or buildings; the things you can put off and have to deal with in five or 10 years.”

Victorian Local Government Association chief executive Andrew Hollows said the move harked back to similar steps taken by the government of former premier Jeff Kennett.

“Victoria has been here before,” Mr Hollows said.

“We'll see the same outcomes this time.”

Opposition local government spokesman David Davis says that while the Government has undertaken a “solemn” commitment to cap council rates at the inflation rate, “[Daniel Andrews] did not say before the election, however, that local community services would be cut or vital infrastructure projects cancelled,” Mr Davis said.