Ministers accused of panic after delaying council tax decision

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Ministers were accused of panic yesterday after they delayed a decision on the future of the council tax until after the next general election.

Ministers were accused of panic yesterday after they delayed a decision on the future of the council tax until after the next general election.

Stung by public anger over above-inflation increases in recent years, the Government set up a review of how the unpopular tax could be overhauled or even replaced.

Yesterday Nick Raynsford, the Local Government minister, said the review had found there were strong arguments for combining a reformed council tax with measures to raise more cash locally.

But he provoked anger when he told MPs he was establishing a second inquiry into town hall finance that would not report until the end of 2005, six months after the likely date of the next election.

The current charging system, under which homes are placed into one of eight bands according to their value, has been little changed since its introduction in 1991.

An option being considered by ministers is increasing the number of bands at the top and the bottom of the scale. That could mean payments would treble for families in the most expensive properties, with bills falling or even being wiped out for those in the lowest-value homes. Next year, all English and Welsh homes will be revalued, with the result that many will move up at least one band in 2007.

Philip Hammond, the Tory local government spokesman, claimed ministers were "burying" plans for rises in the tax by setting up a new working party.

He said: "The Government has panicked in the face of growing public outrage in the levels of the council tax."

Edward Davey, for the Liberal Democrats, complained ministers had "no intention of coming clean on their council tax hike until after the general election".

Yesterday's report, the Balance of Funding Review, concluded the council tax should be "retained but reformed" to help people on low incomes and to reduce the impact of revaluation in 2007. It also set out a series of practical problems with replacing the levy with the Liberal Democrats' preferred policy of a local income tax.

Mr Raynsford said a fresh initiative on improving the take-up of council tax benefit was planned and confirmed the Government was considering introducing regional banding to compensate for the disparity between property prices in different parts of the country. But he added: "Press speculation that the Government is planning a council tax shake-up that will lead to huge rises in council tax is simply untrue. Any suggestion we have opted for any particular course of council tax reform is just plain wrong."

The new inquiry will be chaired by Sir Michael Lyons, the local government expert who advised the Treasury on relocating civil service jobs.

One submission to yesterday's report came from the New Policy Institute think-tank, which proposed increasing to 10 the number of council tax bands. Householders in properties worth £170,000 or more would face higher council tax, - for example, those in homes worth £620,000 would see their annual payment leap from about £2,300 to £6,200. Below £170,000 charges would be cut.

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