Blair says ministers will cap large increases in council tax

Tony Blair warned that there was "absolutely no justification" for big council tax rises this year as the Government confirmed it was considering a range of other taxes to replace the charge.

The Prime Minister said ministers were not afraid to use their capping powers against those councils which came up with double-digit increases.

Earlier, Nick Raynsford, the Local Government minister, revealed that he was examining all options on town hall financing, including a raft of small taxes such as local income tax and stamp duty.

Mr Raynsford said he would look at proposals from the cross-party Local Government Association for localised versions of road tax, sales taxes, tourist taxes and charges on utilities that dig up the road.

Council tax could be overhauled to make it fairer, a slice of income tax could be directed to councils and business rate "relocalised" instead of being dictated by Whitehall.

At his monthly Downing Street press conference, the Prime Minister said last year's average 13 per cent increase in council tax had been difficult to justify at a time when central government support for local authorities was increasing.

Mr Blair warned ministers were prepared to use their capping powers to prevent similar increases this year.

"We have made available even more cash and we have lifted some of the ring-fencing which should make it easier for local authorities and there really is no justification for high council tax rises. Absolutely no justification at all," he said.

"We have made it clear that we are prepared to use capping powers if necessary if there are unreasonably high levels."

On BBC Radio 4's Today programme, Mr Raynsford said the Government was examining different ways for bringing greater fairness and transparency to local government finance, including reforming or replacing council tax.

"We set up the balance of funding review some nine months ago. We have been doing very detailed work. Some two months ago, we identified a series of options which are very, very close to the options the Local Government Association has set forward," he said. "We want to look at all the options, including the possibility of reforming the council tax, or possibilities of replacement by other taxation," he said.

Mr Raynsford said that he understood the concerns of some businesses that councils might regain control over the level of the business rate - although he also pointed out that businesses' share of the taxation burden had declined in recent years.