Average council tax bills in Britain will rise by four times the rate of inflation from next month, pushing the standard property through the '1,000 mark for the first time, according to figures published today.

The unexpected 12% increase, the highest since the tax was introduced 10 years ago, will deeply embarrass ministers because it is twice the level anticipated by John Prescott's local government department three months ago.

There are wide variations: the average increase in England is 12.9%, but in Scotland it is only 4%.

With a rise in national insurance contributions also set to hit pay packets from April 1, ministers are bracing themselves for a backlash in forthcoming local elections as Tories and Liberal Democrats both accuse the government of taxing by the back door to fund education and social care.

Although the deputy prime minister has threatened to use Conservative-style powers to cap the budgets of high-taxing Tory authorities in the south - where the biggest increases are planned - the so-called double tax whammy could provide the beleaguered Tory leader, Iain Duncan Smith, with an unexpected lifeline. His political future largely depends on a reasonable Conservative performance in the May 1 local elections.

Sensing the chancellor's vulnerability, with people earning more than '30,000 annually to be taxed an extra 1% on their total income under the national insurance increases, Tory strategists are banking on a revolt by Blairite middle England once the rise hits home in four weeks' time.

The shadow chancellor, Michael Howard, gave a foretaste of the battle ahead yesterday when he claimed the 53 tax increases since Labour came to power had failed to produce the promised improvement in public services.

With the national insurance increase set to raise an extra '8bn, Mr Howard claimed the average taxpayer would be '229 a year worse off. Tories claim council tax increases will take a further '330 annually from pay packets.

In parts of the south-east, some town hall bills will rise by up to 20% although a 45% increase is planned in the south London borough of Wandsworth. By contrast, Redcar and Cleveland, in the north-east, will not be posting any increase at all for the third year running. But its average band D tax will still be around twice the Wandsworth level.

The new council tax figures, produced by the Chartered Institute of Public Finance and Accountancy (CIPFA) for the BBC's Today programme, confirm that town hall grants have been redistributed from the south to the Midlands and the north. Council tax raises only about a quarter of town hall spending, with the bulk coming from Whitehall.

The CIPFA figures put the average rise in Britain at 12% - up '116 on last year bringing the tax on the standard band D house to '1,080. In England, the average is up by 12.9% ('126) to '1,102. But in Scotland it is increasing by only 4% ('38) to '1,009.

Wales fares even better. Although its band D average is up 10%, or '77, householders will pay on average '839.

These variations are certain to fuel claims of Wales and Scotland gaining huge benefits from more generous Whitehall funding than England.

In England, part of the problem has been the introduction of a new formula for distributing the Whitehall grant, which was meant to simplify the process. Nick Raynsford, the local government minister, has acknowledged there is a now a "redistributive element", with what he calls a proper recognition of raising money in "more affluent areas".

Steve Freer, chief executive of CIPFA, says part of the problem comes from the government ordering English councils to "passport" resources directly to schools, with the implication that it has created a political rod for its own back.

With performance regimes in local government now so tight, he says the option of cutting services to balance the books is no longer attractive.

Ministers, however, claim that some southern authorities are deliberately "jacking up" spending to boost cash reserves because they have no elections this year.

Facing mounting attacks from the opposition, ministers might have no alternative other than to cap the spending of several Tory councils to show they mean business.

Guardian Unlimited ' Guardian Newspapers Limited 2001

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