Gordon Brown, the Chancellor, has delayed plans to impose big increases in council tax until next year, after concerns were raised over the danger of a damaging backlash.

Sir Michael Lyons has almost finished an inquiry into local government finance that is due to be submitted to ministers next month. But The Times has learnt that it will not be published until February, at the earliest, and that ministers may decide to delay the Government’s response.

Sir Michael is also said to be reconsidering an option that would widen and increase the number of council tax bands, which could add several hundred pounds to household bills.

His report, which will now go to Gordon Brown and Ruth Kelly on December 21, is expected to recommend a series of local charges for services such as waste collection and a tourist tax for bed and breakfast accommodation. It may also suggest reforms to the business rate, despite opposition.

Any postponement would mark the fourth time that ministers have ducked the issue since the first review into town hall finances was set up in 2003 by Nick Raynsford, then a local government minister. Since then council tax has increased each year.

Since Labour took office in 1997 the average annual council tax bill has shot up from £525 to £1,053, prompting a new capping regime and a wave of protests by pensioners.

Local government experts have blamed Mr Brown for the latest delay, claiming that he had obstructed the proposals because they were politically unpalatable. Tony Travers, a local government expert at the London School of Economics, said that the delay indicated a loss of nerve at the top.

The uproar after Sir Peter Burt’s proposals to impose an individual property tax in Scotland, doubling bills for some homes, had convinced ministers they could not enter into such radical reforms. Ministers in England and Scotland distanced themselves immediately from the model.

“Labour and Conservative frontbenchers regard the poll tax [scenario] as their worst nightmare and would do anything to avoid a repeat of the damage inflicted on Mrs Thatcher by the policy,” Mr Travers added.

Sir Michael’s report will inform the spending review next summer but Mr Brown and Mr Blair may be reluctant to publish the Government’s response before the local election campaign, which starts in April.

“The later the Lyons report is published the easier it will be for ministers to delay decisions even about modest reforms,” Mr Travers said.

Lord Bruce-Lockhart, chairman of the Local Government Association, was astonished by the delay. He said: “Sir Michael has told the LGA [that] he would submit this before Christmas and we expected it to be published immediately. There is no possible reason for further delay. Council taxpayers cannot afford to wait any longer.”

Although Sir Michael rejected initially the idea of extending council tax bands, because they did not improve fairness, he has reopened the option recently . It is understood that a working paper has been drawn up that discusses new bands and extending the ratio between bands. At present, the amount of tax paid in the highest band, H, is three times that paid at the lowest band, A. The new paper is said to discuss ratios of 1:5 and 1:7, that could, theoretically, push top bands up by at least £500.

Sources close to the Lyons inquiry confirmed that the area was being looked at again but said that no new work had been commissioned.

Rate of change

1989
April 1 The poll tax is introduced in Scotland by Margaret Thatcher, leading to a mass non-payment campaign

1990
March 31 Riots in London, above, two days before the introduction of the tax in England and Wales. The riots contribute to the downfall of Margaret Thatcher

1991
March 21 Environment Secretary, Michael Heseltine, replaces the poll tax with the council tax, saying it “should reflect people’s ability to pay and be seen to be fair.”

2003
January 13 per cent increases in council tax — the biggest ever. Pensioners take to the streets, above, in protest
March Nick Raynsford, the local government minister, announces an inquiry into town hall finance

2004
July Sir Michael Lyons begins an inquiry into local government funding

2005
September The Government extends the inquiry and widens Sir Michael’s brief. John Prescott delays a revaluation of properties
October The average council tax in England rises above £1,000. It has soared by 121 per cent since its introduction 12 years ago

2006
November The Lyons review is deferred again