Millions to be hit by big council tax rise

Millions of householders could face large hikes in council tax in three years' time because the Government has announced every home in England will be revalued to reflect property price rises.

A number of new tax bands are also likely to be created, including a new "premium" rate for the growing number of homes worth more than £1m.

Nick Raynsford, the Local Government Minister, said the revaluation exercise, the first since the tax was introduced nine years ago, would be carried out in 2005. The plan, which was immediately welcomed by town hall leaders but attacked by the Tories was set out in the new Local Government Bill published by Mr Raynsford yesterday.

The Bill also included powers to allow John Prescott, the Deputy Prime Minister, to introduce new council tax bands and shift the overall burden of taxation from low-value homes to more expensive ones.

Critics accused Mr Prescott of planning a fresh "stealth tax" because the Bill makes clear he will not need further primary legislation to create new bands. With house prices having doubled or even trebled in many parts of the country over the past decade, millions of people could face paying higher rates of council tax in any revaluation. London and the South in particular have seen substantial rises, but many cities will be hit.

Mr Raynsford announced the Bill will also ensure further revaluations will occur every 10 years. The changes "will keep council tax fair and up to date", he said yesterday.

To ease its political impact, the first revaluation will be delayed to come into effect in 2007, well after the next general election. However, opposition parties are guaranteed to use the rises announced in 2005 to attack the Government.

When the council tax replaced the poll tax in 1993, it was based on 1991 house values. But the original tax bands, with an "average" Band D home worth between £66,000 and £88,000, are now seen by ministers as hopelessly out of date. Its top band remains at £320,000 or more.

Many Labour councillors claim the tax is regressive and have long campaigned for new "Robin Hood" bands to ensure the tax burden is shifted from the poorest to the richest.

A spokesman for the Office of the Deputy Prime Minister said: "A concern about the fairness of council tax is bands are not fine-grained enough to reflect differences in the top and bottom of the market."

But Eric Pickles, the Shadow Secretary of State for Local Government and the Regions, called it "a vindictive and premeditated move".

Neil Kingham, Economic Policy Director of the Local Government Association, which represents all English councils, welcomed the plan, saying the tax would be discredited if it failed to reflect rises in house prices.