Thus, the Treasury conveniently found an extra £600 million in grant to support next year’s council spending. Nick Raynsford, the Local Government Minister, has aggressively threatened to cap high-spending councils. Most recently, Gordon Brown announced a £200 windfall for most pensioners to help to pay their council tax. These initiatives together, have probably been sufficient to keep the issue out of the headlines for a few weeks.

In recent years, council tax increases have generally averaged 6 or 7 per cent, with the grim exception of 2003-04, when they jumped 13 per cent in England. The cumulative effect of local taxation rising at several times the rate of inflation year after year has produced a groundswell for reform. The Government has appointed an official inquiry, headed by the Whitehall troubleshooter Sir Michael Lyons, to review the possibilities of radical change.

The problem is that councils set virtually the only visible tax now paid in Britain. While council tax rises at just over 4 per cent in 2005-06, the yield of income tax will increase by 9 per cent and corporation tax by almost 30 per cent. Overall UK taxation is projected to jump by 8 per cent. Mercifully for central government, because virtually all its taxes are hidden in the price of goods and services, or are deducted from income at source, no one can work out what they are paying. Stealth rules.

Local government, by contrast, must annually raise its tax rate. Worse still, when periodic revaluations of the council tax base occur, many householders face inexplicable increases in their local taxation merely because their properties have relatively increased in value. A revaluation takes effect in Wales this April and in England in 2007.

Millions of households facing a jump in council tax simply because of a revaluation will be a nightmare for whichever party wins the election. The Liberal Democrats are already committed to “axe the tax” and replace it with local income tax.

The Conservatives and Labour would both keep council tax, although the Tories have implied that they will make the revaluation fairer. Labour must rely on the Lyons inquiry, which may suggest having more council tax valuation bands and/or having different bands of value in each region, more readily reflecting property price differentials.

Either a new local tax will have to be found or permanent steps will have to be taken to ensure that council tax rises no faster than inflation. Both these options have so far evaded successive governments.

What is now clear is that the annual exercise of ministers applying sticking plaster solutions to the council tax cannot go on.

• Tony Travers is a local government expert at the London School of Economics

  PARTY VIEWS

  LABOUR tried to defuse the row over council tax by giving pensioners a £200 refund this autumn to pay for soaring bills. But homeowners will be stung again in 2007 when properties are revalued. In the longer term a property tax is likely to be retained, probably with higher bands.

  THE CONSERVATIVES have promised to halve council tax bills for pensioners over 65 up to a maximum of £500 and to adjust revaluations in different geographical areas without using higher bands.

  THE LIB DEMS have come up with the most radical idea of scrapping council tax altogether and replacing it with a local income tax. They would also cancel house revaluation and relocalise business rates.

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