Ministers seeking to head off a council tax uprising have warned 31 local authorities their budgets will be cut unless they scrap large rises planned for this spring.
Nick Raynsford, the Local Government Minister, confirmed he had written warning letters to the councils that are poised to put up bills by more than 5 per cent.
Yesterday, Tony Blair said there was "absolutely no justification" for major increases this year, following the criticism over last year's record-breaking 13 per cent average hike. The Government is considering a range of potential reforms to the way local authorities raise money, including reform of, and even possible replacement of, the council tax.
Mr Raynsford's letter expresses "concern" at the planned increases and adds that taxpayers would find it "hard to understand" how such rises could be justified given the extra millions poured into local government by Whitehall.
On the BBC Radio 4 Today programme, Mr Raynsford confirmed he was threatening to cap possible spending increases by a string of councils.
Although he did not name the guilty town halls, they are thought to include Brighton and Hove, Islington, North Yorkshire and Northumberland. They are spread across England and Wales and controlled by all three political parties.
"I have written to 31 councils from whom we have got information suggesting they may be contemplating increases in council tax of above 5 per cent. I have got capping powers. We will use those powers if necessary," Mr Raynsford said.
However, he said he hoped that such an extreme sanction would not be necessary.
"This is just a preliminary letter and I hope, as a result of it, councils that are considering a large increase in council tax will moderate their proposals."
Responding to Mr Raynsford's comments, David Curry, the Tory local government spokesman, said that the council tax crisis was of the Government's own making.
"It is now panicking and waving the big stick of the threat to cap, which is something it said it would not do. It has piled spending demands on councils without providing the funds to pay for them," he said.
"We think councils should set the lowest tax level possible while maintaining services to a level the public expects.
"However, the Government simply has to recognise that councils don't raise council tax for the sheer pleasure of watching the taxpayer wince but to meet the year on year spending requirements forced on them by the Government."
The whole issue of council tax has been burning away at regional level but burst on to the national agenda when average rises earlier this year shocked ministers into action.
Pensioners in particular feel their income is being hit hard by the charge and today a mass march in Westminster will underline their anger.
Council leaders have been sceptical about previous government threats, but ministers clearly hope that the letter, which was sent on Wednesday, will prove just how seriously they take the issue.
Sir Jeremy Beecham, the chairman of the Local Government Association, said he was opposed in principle to capping. "I am disappointed that capping is being considered at all," he said.
Mr Raynsford hinted for the first time yesterday he was set to adopt proposals to increase the amount in business rate paid by companies to councils.Reuse content