Advocates say there are flaws in the current council tax system

The Audit Commission says the government and regulators also put unusual costs on local councils.

But many councils did not look hard enough to save money instead of raising the burden on the taxpayer, it says.

The watchdog refuses to pin the blame on either side for the 12.9% average council tax rise in England this year.

The rises ranged from 57.3% in the London borough of Wandsworth to decreases of 3% in Harlow, Essex.

That came despite the government hailing a record 5.9% increase in grants.

Council tax explained In graphics

The commission's new report says there was a direct link between higher council tax rises and areas which did worse out of the way Whitehall redistributed cash.

"A general pattern emerges which shows that regions in the South with lower grant increases had higher average council tax increases," says the report.

And councils in the Midlands and the North with higher grant rises generally had lower tax hikes.

Among the "unusual spending pressures" faced by councils this year were the government's increase in National Insurance contributions, pressure to fund national targets in areas like schools and local priorities such as highways spending.

"Work by council auditors found the increases in spending in local government - which averaged 9% - justifiable; but they were not in all cases unavoidable," says the report.

"Peer pressure" on councils to keep council taxes down was weak because of the changes to way Whitehall shares out the money.

But council taxes were not affected by which political party was in power locally.

'No transparency'

Councils' reliance on central government for three-quarters of its funding means any spending over the grant produces even higher rises in council taxes, says the report.

Mr Prescott has warned he will cap high tax rises

Audit Commission chairman James Strachan told BBC Radio 4 both central and local government must bear responsibility for the rises.

"Both sides want to spend more money to provide better local systems, but when there is a disagreement on how to do this ... council tax increases can be completely out of proportion," he said.

This is because of the way central government makes up 75% of the funding of local government, Mr Strachan explained.

He recommended the government should introduce more transparency into how it calculates how much of the grant it gives to local government.

This report nails on the head any belief that councils have been frivolous, careless or politically motivated when taking hard decisions on council tax Sir Jeremy Beecham Local Government Association

"At the moment we don't know with precision how that is calculated," he said.

The report says it is too early to say whether this year's rises will be repeated.

But lower cost pressures and another grant increase give councils more flexibility to meet budget pressures without putting up council tax, says the report.

'Mixed blame'

The commission urges the government to allow councils to raise more of their own funds.

HAVE YOUR SAY My local council charges �900 per year to give me some of the worst rated schools in the country, street lights that don't work properly, and I'm still waiting for a wheelie bin after eight weeks! John, UK Send us your comments

And it says "public engagement" is likely to get a better balance between council tax rises and local services than ministers capping council taxes.

Local Government Minister Nick Raynsford said people should read the report as a whole.

"It identifies a range of contradictory factors, some of which are the responsibility of central government and some of which are the responsibility of local government," he said.

Mr Raynsford said the government was already doing much of what the commission recommended.

Fellow minister Phil Hope said a review of the balance between money raised locally and centrally in funding councils was under way and would consider whether "elements of a local income tax" could be used.

Rethink

But Local Government Association chairman Sir Jeremy Beecham said: "This report nails on the head any belief that councils have been frivolous, careless or politically motivated when taking hard decisions on council tax."

Conservative local government spokesman David Curry said that if local authorities had to raise money when central government demanded higher expenditure they had only one option and that was the council tax.

We have examples in the year we are talking about at the moment where the government has ordered local authorities to spend a great deal more money and not provided the grant David Curry Tory spokesman

"We have examples in the year we are talking about at the moment where the government has ordered local authorities to spend a great deal more money and not provided the grant," he told BBC Radio 4's Today programme.

"The main cause of council tax increases is the government and if you sent a jury out with this report and asked them to come up with a verdict they can come up with is 'guilty as charged' the government has got its fingerprints all over it."

Liberal Democrat local government spokesman Edward Davey said the council tax was now living on "borrowed time".

"Ministers have tried to run away from the blame for high council tax rises. This report has left them with nowhere to hide," he said.

Mr Davey warned that council taxpayers were due for more bad news next year. He predicted average bills would rise by at least 8%.