LABOUR yesterday announced plans to ram through dramatic changes to give Exeter "home rule" from the rest of Devon, despite admitting the cost of doing so is likely to spiral out of control.

The move to bring the unitary council plan back from the dead is being seen by many as an attempt to save the political skin of the city's MP Ben Bradshaw.

Last night critics branded the move "madness", a "disaster" and the "last, desperate act of a dying Government" which would leave taxpayers in Exeter and the rest of Devon worse off.

It is feared what is left of the rural county area – covered by district and county authorities – will struggle to provide services in more remote areas.

Bizarrely, county council staff would remain based in the city, able only to see their area of responsibility on the horizon.

Two years ago the attempt by Exeter to go it alone was thrown out by ministers because of "financial risks" that it would break one of its own five golden rules – that it must not take more than five years to recoup the costs of any changes.

But with just weeks until a general election, local government minister Rosie Winterton has sensationally dumped the requirement for the sums to add up.

She claimed yesterday that the economic downturn – which has seen council revenues drop but demand for services soar – now calls for "local leaders to provide strategic leadership to promote economic growth".

Opponents are expected to mount an immediate legal challenge to push any changes beyond polling day. The Conservatives have vowed to abandon the entire project, which has already cost taxpayers substantially more than £2 million. However, Tories on Exeter City Council are in favour of the move, claiming "the local economy needs this".

Coun Rob Hannaford, a Lib-Dem on both the city and county councils, warned: "It will lead to soaring council tax rates, massive cuts in vital services and would hurt the most vulnerable."

Elections to the proposed new Exeter authority – taking on the services currently carried out by both the district and county councils – will not be held until 2011.

Ms Winterton said: "The city of Exeter is at the centre of regional economic activity and its economic performance is crucial for its residents and the wider area. That's why we're putting Exeter's local leaders, who know their areas best, in charge of delivering all local services and at the heart of delivering economic growth."

After dumping the so-called five-year affordability test, officials scrambled to justify the U-turn, insisting ministers are "confident the costs of transition, even if longer than five years, can be meet from council's own resources without impacting on council tax".

A separate proposal from the independent Boundary Committee, for a single council covering the whole of Devon, was rejected by Ms Winterton in favour of allowing Exeter to go it alone.

Mr Bradshaw, who has long campaigned for a unitary Exeter, said he was "delighted".

District councils from rural Devon were quick to condemn the decision as a "tragedy", which they fear will drive up costs for council tax payers both in Exeter and across the county.

Coun James McInnes, leader of West Devon Borough Council, said: "If the figures didn't stack up for Exeter in 2007, they surely won't stack up now as we are just emerging from one of the longest recessions in history."

Teignbridge Council said there was "no economic case of any substance for the city to become a unitary council" while East Devon Council said it would be "disappointing to see our county broken up into yet smaller pieces", with Plymouth and Torbay already run separately.

Devon County Council estimates council tax bills in Exeter will rise by £200-a-year as a result of the change, with charges in the rest of the county also likely to rise.

Council leader Coun John Hart said: "This is a last, desperate act of a dying Government, scrambling to shore up support in the city at the expense of the ordinary people of Devon and Exeter.

"Sadly, this Government is putting short term electoral advantage above the wellbeing of people in Devon and Exeter – and that is despicable."

MPs from across Devon have been outspoken in their criticism of the plan, claiming Labour hopes to gain support in the city at the general election with the promise of home rule.

Gary Streeter, Conservative MP for South West Devon, said: "It will be a disaster for Exeter and for the rest of Devon, ripping the heart out of the beating body."

Tory MP Geoffrey Cox (Torridge and West Devon) accused Labour of having "no interest in rural interests", claiming ministers "are engaged in a political fix, deliberately intending to leave a scorched earth legacy to the people of Devon".

Nick Harvey, Lib-Dem MP for North Devon, said the proposal was "the worst of all possible worlds" with Exeter left struggling to fund social services, education and highways while "Devon is going to have its urban heart ripped out".

Orders will now be laid in Parliament to enact the changes, which the Department for Communities and Local Government hopes can be debated and passed by MPs before the general election, expected on May 6.