GOVERNMENT plans to reform council tax were in “disarray” last night after it emerged that Tony Blair has decided to postpone the revaluation of property bands due in 2007.

John Prescott will announce next week that Sir Michael Lyons’s report into local government finance is also being delayed, prompting speculation that the reforms may be shelved until after Mr Blair steps down.

Sir Michael had intended to publish his recommendations for council tax reform in December, with implementation due to coincide with revaluation in April 2007.

It was widely expected that he would propose new tax bands — based on the revaluation figures — which would have hit the middle classes with higher-value houses.

But ministers have been stung by the political backlash from revaluation in Wales last April, which led to 33 per cent of homes being put on a higher band and only 8 per cent on a lower band.

Eric Pickles, shadow local government spokesman, said last night: “John Prescott's council tax plans are now in complete disarray, having set up an independent review into local taxation and now deciding to pre-empt its conclusions.”

Although some ministers have pointed out that regional variations in property increases are less marked than two years ago, several Cabinet ministers believe that revaluation in England would still be politically damaging. In July some ministers had already started playing down the extent of the reforms, promising transitional protection for those worst affected.

One source at Westminster said that senior ministers had argued that a campaign by the Tories on council tax and revaluation over the summer was now hitting home and something had to be done.

It also emerged that the administrative costs of revaluation would be £178 million, nearly double what they had expected.

On Tuesday, John Prescott will confirm that the property revaluation will be delayed for at least a year. Sir Michael is expected to produce an interim report in December and his full report in March or April.

Sir Michael refused to comment yesterday about the delays, but he is known to be annoyed that ministers have tried to interfere with his proposals. Earlier this summer he told local government leaders that he intended to press ahead with his recommendations even if they were unpalatable to ministers.

A spokeswoman for the Office of the Deputy Prime Minister refused to be drawn yesterday. “Any statement we make on that matter will be made at the appropriate time,” she said.

Tony Travers, a local government specialist at the London School of Economics said yesterday that the decision to postpone the reforms followed “alarm bells” ringing in Downing Street.

“Council tax is now potentially the most difficult problem the Government faces and likely to provoke a much stronger rebellion than either VAT or income tax,” he said.

Sir Sandy Bruce-Lockhart, the chairman of the Local Government Association, said: “This shows a remarkable inability by the Government to take hard choices, particularly where they need to be taken in the interests of the council taxpayer.”

Sarah Teather, a Liberal Democrat spokesman, said: “Council tax is in a desperate mess, bottling out of revaluation isn’t going to solve anything. By opting out of meaningful reform, the Government is letting down the millions of pensioners and low-paid workers who struggle month after month to pay their council tax bills.”

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