Council tax bands could be revamped under new proposals

Local Government Minister Nick Raynsford said the Sunday Telegraph article was based on a report to the government and was not policy.

The plan to reduce the burden on poorer council payers had not been proposed or endorsed by the government.

He said ministers were "at the start" of a process with more thinking to do.

Outside body

"The Balance of Funding Review paper to be published on Tuesday is a report to government, not by government," said Mr Raynsford.

"That means it contains no government proposals - and any suggestion that we have opted for any particular course is just plain wrong.

"What has happened, as we pointed out yesterday, is that a proposal from an outside body has been treated as if it was either being put forward by the government, or had been endorsed by the government. Neither is right.

"All this paper includes is a range of options which need to be examined much further, but we are at the start of this process - and there is a lot more thinking to do."

'Stealth' tax

MPs will hear on Tuesday the results of the 18-month review of the way local government is funded.

Local councils feel very, very strongly that people just can't afford to pay at three times the rate of inflation Sir Sandy Bruce-Lockhart LGA chief says Blair must decide on council tax

The Sunday Telegraph reported council tax bills for the most valuable properties - worth more than �620,000 at current prices - could rise from their current level of �2,334 a year to �6,224 in three years.

For homes in the �310,000 to �440,000 bracket, charges could go up from �1,949 to �2,982, the paper said.

Those with homes worth between �170,000 and �230,000 would reportedly see them rise from �1,424 to �1,556.

Shadow local government minister Caroline Spelman accused the government of using the funding review - and the nationwide revaluation of properties planned for 2007 - to "increase council tax further by stealth".

'Desperately unfair'

"This will punish pensioners and hard-working families who have lived in their homes a long time, the value of whose homes have risen, but who are on modest incomes and cannot afford even larger tax bills," she added.

Andrea Lane, a spokeswoman for Help the Aged, said: "The whole council tax system is desperately unfair for those on fixed incomes, which is obviously most older people."

Liberal Democrat local government spokesman Edward Davey said: "Tinkering with council tax will not solve the unfairness of this hated tax.

"We need to scrap council tax for the American and European system of local income tax."

Sir Sandy Bruce-Lockhart, chairman of the local government association, accused the government of using local councils to underwrite its spending plans.

'Poll tax riots'

In an interview with BBC News Online, Sir Sandy said the government's three year spending plans unveiled last week by Chancellor Gordon Brown suggested local authorities would have to raise council tax by an inflation-busting 6.7% a year.

He said public anger about the tax was already "very strong" and he accused Mr Brown of promising extra spending on schools without giving councils enough central funds to pay for it.

"The poor old council taxpayer is picking up the bill and local councils feel very, very strongly that people just can't afford to pay at three times the rate of inflation," he said.

Council tax rebel and pensioner Sylvia Hardy warned further large rises in council tax could spark "poll-tax style" demonstrations.