The severance payment, in particular, has been criticised in some political quarters as a sop to Labour councillors who are likely to lose their central belt seats under the single transferable voting system that will be used for the first time at the council elections in 2007.

However, the Executive says the proposals would encourage long-standing councillors to make way for fresh blood in Scotland’s town halls.

Dundee City Council’s Labour leader, Jill Shimi, said the important thing about the proposals is that they would be decided by an independent process, and not by councillors themselves.

She added, “It’s really important it’s not us making the decisions on our remuneration, as the public would see that as very wrong. The scheme may be taken into consideration by long-serving councillors who are trying to decide whether to stand again, but no Dundee councillors have come to me to say they will be stepping down as a result.

“I would hope experienced people who still feel they can make a contribution will decide to carry on.”

The leader of the SNP group, Councillor Willie Sawers, said the present system of a basic allowance and special responsibility payments for councillors with extra roles to perform was confusing for the public.

He said, “I think a proper level of pay is required. Undoubtedly, councillors who currently receive a basic allowance of £6000 a year are not properly paid.

“No other workers are allowed to decide the level of their own salaries, so I think it’s right for the Scottish Executive to have a working group look at this issue.

“If those are the figures the working group has come up with, I’m happy to agree to that.”

Mr Sawers added he was not aware that any members of his group would consider taking a severance payment should the proposal be ratified, and he believed he had many more years in him as a councillor.

Tory leader Bruce Mackie, the longest-serving Conservative councillor, said he was “quite happy” with the remuneration he receives, and felt the figures being talked about seemed “an awful lot of money”.

“It seems they don’t want older councillors and are giving them something to sweeten the pill to get rid of them, but you can lose a lot of experience that way,” he said. “Why don’t they just leave things alone?

“I would need to know more about this scheme before saying much more, but I don’t know if £30,000 would tempt me to stand down as a councillor.

“MSPs and Welsh councillors get a severance payment, so maybe they want to bring us into line with them.”

Councillor Ian Borthwick, the longest-standing councillor in Dundee with 42 years service, said he feared the sums on offer might cause councillors to lose touch with the people they represented, people who often had very little.

Making it clear he had “every intention” of standing at the 2007 election, he said his views on the issue were well-known.

“I remember a time when we had councillors who worked and did sterling service for no financial gain at all,” he said.

“I know things have changed and we can’t go back to those days, but at a time when council tax payers are facing above inflation rises and one in five pensioners is living in poverty, does this not strike a discordant note?

“The argument is that paying councillors a salary will ensure that people of calibre come forward, but did we not have people of calibre in the past or even now?

“I heard an MSP saying the severance pay would allow councillors to retire with dignity, but what dignity you have in retirement comes from the service you have given over many years.

“And what about the dignity of pensioners who are facing hardship?

“I think all of this raises the question of whether or not we are getting the balance right.”