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Borough councillors in Lincolnshire have voted against a 60% pay rise in their allowances during the recession.
An independent panel had concluded councillors in Boston were the worst paid in the county and among the worst paid in England.
It said their basic annual allowance should rise from £2,378 to £3,700.
Council leader Richard Austin said it should "lead from the front" in tough times but a rise would be revisited to encourage people to stand for office.
Democracy 'suffering'
Mr Austin said the rise would have sent out the wrong message in the current economic climate.
"The public are suffering financial hardship, there is a credit crunch.
"We have got to balance the council's budget and we want the council's staff to work even harder to help with that, and we want to lead from the front."
However, he added that the rise would be reconsidered in the future.
"In my view, democracy is suffering from these low allowances because it limits the people who can put themselves forward to be a councillor.
"It is only retired people or those with a private income that can afford to be a councillor and the vast majority of the public are therefore excluded."
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