£60m 'wasted' on shelved revaluation of properties for council tax

Ministers denied the money would be wasted, but the disclosure that millions have already been spent by the Valuation Authority is bound to enrage homeowners. The embarrassing U-turn over the revaluation, which will require a change in legislation, was seen as a move by the Chancellor, Gordon Brown, to defuse a potential council-tax timebomb if, as expected, he takes over the premiership from Tony Blair. Householders were also relieved by the decision to postpone the revaluation, which was due in 2007 and could have led to bills soaring in housing "hot-spots".

David Miliband, the Local Government minister, also announced that a review of the council tax system by Sir Michael Lyons is being widened and delayed to coincide with Mr Brown's comprehensive spending review in July 2007.

That will enable Mr Brown to boost support for hard-pressed pensioners before reforms to the council tax system are introduced in the run-up to the next general election. The Lyons review was ordered by the Prime Minister after a council tax strike by pensioners in the West Country.

Mr Miliband said the Government would be reinforcing advice to pensioners to seek council-tax benefit. The uptake of the benefit, he said, was disappointingly low at about 55 per cent. He defended the decision to delay the Lyons review, saying it would give Sir Michael more time to take into account changes to local council funding, including more direct funding of schools.

Government insiders said Mr Miliband and Sir Michael had privately agreed to expand the remit for the review after Mr Miliband became concerned that reforms to local government needed to be included.

One source said the Lyons review would now take into account a radical programme of reforms of local government, including more devolution and plans to create "city regions" with local authorities in conurbations such as Manchester, Oldham, Trafford and Salford banding together for transport, planning and school services.

"We are bound to be accused of a shambles, and there will be red faces, but in the long run, this provides the Lyons review with a platform to make some sensible proposals which are going to have a dramatic effect on the whole of local government," said the source. "If we had not expanded his remit, we risked making him look pretty silly. The postponement of the revaluation of council tax and giving him a bigger remit is a golden opportunity for radical reforms."