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Councillors in Caerphilly have backed a new budget after a protracted argument over raising council tax and spending reserves.

The Labour group, which controls the local authority, ultimately won a majority vote on proposals the council leader said will “focus on the fundamentals” by supporting key services.

A set of alternative budget proposals put forward by the council’s Plaid Cymru opposition group was earlier defeated.

The passing of the budget means council tax bills will increase by 7.9% from April, and the local authority’s community safety warden service will be axed to save money.

But the council has withdrawn proposals to cut nine school crossing patrols, and the leader, Cllr Sean Morgan, said there will be extra spending on schools, social care, a new waste strategy and various infrastructure projects.

Cllr Eluned Stenner, the cabinet member for finance, said Labour’s proposals had “residents at the heart of everything we do”.

She said “none of us wants to see an increase” in council tax, but warned that raising bills by a lower rate would instead lead to further “unpalatable” cuts to services.

Plaid councillor Greg Ead said his party’s alternative proposals offered “a challenge to years of local Labour austerity”, however.

He said budget cuts “have a direct and detrimental impact on our residents”.

Cllr Ead’s plan focused on initially repurposing an initial £3.1 million of various council reserves, which he said would free up enough money to reduce a council tax rise to 5.9%, slash a planned rise in fees, and cancel 15 cuts proposed by Labour.

The size of Caerphilly Council’s reserves have long been a battleground for Labour and Plaid, with the latter claiming some of that money would be better spent on day-to-day operations.

Cllr Ead accused Labour of “holding onto it selfishly like Smaug” – the treasure-guarding dragon in The Hobbit.

But Cllr Morgan said his party would not support Plaid, over proposals he claimed were “simply asking that we spend reserves to keep services running for another year”.

“I don’t wish to kick the can down the road,” the leader warned. “Reserves are not the answer to a budget problem that is annual in nature.”

He also reminded members that Birmingham City Council had been forced to effectively declare bankruptcy because of its financial situation.

Plaid councillor Gary Enright challenged that claim, however, telling councillors the “fundamental reason” for the Birmingham authority issuing a so-called Section 114 notice had related to equal pay obligations.

Councillors voted 41-19 to defeat the Plaid proposals, and then voted 39-18, with two abstentions, to pass Labour’s budget plans.