A “multi-faith burial site” costing millions of pounds is being planned by Tower Hamlets Council in its draft budget for the next financial year.

Cabinet members are proposing to set aside £3million for the site in a bid to tackle the ongoing problem of residents shelling out for burials outside the borough on land owned by other local authorities.

Relatives of residents who are buried in Wanstead, City of London Cemetery or Hainault can currently claim a £225 subsidy from the council to help pay for the burial.

A spokesperson for the council confirmed it was in advanced negotiations to purchase a site outside the borough to cater for residents of Tower Hamlets, adding: “We want to work with all faith communities to ensure the land is fit for their needs.”

Other proposals agreed upon by Mayor Lutfur Rahman’s cabinet last week include a further £1m cash injection for the community faith buildings scheme, after religious groups were invited to apply for funding from the initial £2m kitty at the end of last year.

A £1m pot to deal with the coalition government’s welfare reforms - due to come force in April - was also announced, along with £800,000 to clean up the borough’s streets.

Cabinet members also agreed to set aside £355,000 for improvements to shopping and commercial areas, including Brick Lane, Roman Road and Bethnal Green market.

Mayor Lutfur Rahman said: “I hope our focus on protecting vulnerable residents and investing in – rather than cutting – valuable services, will give local people some hope in these bleak times.”

The proposals are due to be voted on by full council next week, with the deadline for agreement on the final £1.2bn budget set for March.