Jeremy Corbyn has accused ministers of agreeing a “sweetheart deal” to ensure a Tory-controlled council dropped plans to raise council tax by up to 15%.
In PMQs, Labour’s leader read out what he said were leaked messages showing Surrey council’s leader negotiating with the government to call off a referendum on the rise.
On Tuesday, Surrey County Council restricted the increase to 4.99%, so a referendum was no longer needed.
It said “no deal” had been offered.
Downing Street said all conversations between the government and Surrey had been “entirely appropriate” and there was no “sweetheart deal”.
The proposed 15% rise was mooted by Surrey Council to cover what it says are shortfalls in funding to cover the rising costs of social care.
But plans for a referendum – which kicks in on proposed council tax rises of 5% and above – were dropped during a full council meeting on Tuesday. Councillors will now consider an alternative budget.
BBC assistant political editor Norman Smith said the prospect of such a sharp increase by a Conservative council had “set alarm bells ringing” in the government, which feared it would hit the “just about managing” group the prime minister has vowed to protect.
In the Commons Mr Corbyn said he had seen leaked text messages intended for a Department for Communities and Local Government official called “Nick” from the leader of Surrey County Council, David Hodge.
Mr Corbyn said: “These texts read, ‘I’m advised that DCLG officials have been working on a solution and you will be contacting me to agree a memorandum of understanding’.”
He asked: “Will the government now publish this memorandum of understanding and, while they’re about it, will all councils be offered the same deal?”
Noting that Chancellor Philip Hammond and Health Secretary Jeremy Hunt are both Surrey MPs, Mr Corbyn said: “But there was a second text from the Surrey County Council leader to Nick – and in the second text it says ‘The numbers you indicated are the numbers I understand are acceptable for me to accept and call off the R’.
“Now, I’ve been reading a bit of John le Carre and apparently R means referendum. It’s very subtle all this.”
He added: “He goes on to say in his text to Nick ‘If it is possible that info to be sent to myself, I can then revert back soonest, really want to kill this off’.
“So how much did the government offer Surrey to kill this off and is the same sweetheart deal on offer to every council facing the social care crisis created by this government?”
The prime minister said: “The deal that is on offer to all councils is the one that I have already set out.”
She added: “He stands up and constantly asks for more spending, more money, more funding. What he fails to recognise is that you can only spend money on the NHS and social care if you have a strong economy to deliver the wealth that we need.”
Mrs May also said of Mr Corbyn: “He comes to the despatch box making all sorts of claims. Yet again what we get from Labour is alternative facts; what they really need is an alternative leader.”
In a statement issued after the Prime Minister’s Questions dispute, Mr Hodge said: “Surrey’s decision not to proceed with a 15% council tax increase was ours alone and there has been no deal between Surrey County Council and the government.
“However, I am confident that the government now understands the real pressures in adult social care and the need for a lasting solution.”
Councils have been allowed to implement a 3% increase solely for social care over the next two years to plug the funding gap in this area. That is on top of a discretionary general increase of 2%, making a total of 5% before a referendum is needed.