Last week the Office of the Deputy Prime Minister (ODPM) admitted that he was not paying council tax on his grace-and-

favour apartment in Whitehall. The council tax on his official country residence, Dorneywood in Buckinghamshire, is paid by a charitable trust.

The Sunday Times has also established that Prescott is entitled to claim back the council tax on his home in Hull on parliamentary expenses. It means he is under no obligation to pay any council tax bills on his three homes out of his own pocket.

Last week senior officials at his department were given 48 hours to explain whether or not he was claiming back the money on his Hull property. They would only say that he "complies with the rules". This does not answer the question because Prescott would not break any rules if he did reclaim the money.

Opposition MPs said the anomaly should be investigated. Caroline Spelman, shadow secretary for the ODPM, said: "Hard-working families and pensioners will find it galling that the man responsible for the increases in their bills enjoys a hefty council tax exemption. He should now tell us exactly what that exemption is."

The Liberal Democrats said last night they would write to Sir Gus O’Donnell, the cabinet secretary, asking him to investigate Prescott’s non-payment of council tax on his apartment in Admiralty House, Whitehall, and to clarify the ministerial rules on the exemption.

The row comes as the government has warned that it is ready to cap councils if they implement council tax rises of more than 5% over each of the next two years. It has already delayed a promised revaluation of properties which, it emerged last week, would have reduced bills for 6.5m households and increased bills for 4.3m.

Prescott has benefited from a complex series of allowances that have reduced his liabilities. His grace-and-favour apartment, which has a market rental value estimated at £8,500 a month, was the venue for a dinner that brought about a temporary truce between Tony Blair and Gordon Brown.

By designating the flat as not being his "primary residence", Prescott can legitimately rely on the taxpayer to pay for the council tax through the ODPM. A property in council tax band H costs £1,236 per year in Westminster.

By contrast, other ministers who have apartments in Admiralty House — Geoff Hoon, the leader of the Commons, and Margaret Beckett, the environment secretary — personally pay the council tax.

Blair pays the council tax for his Downing Street flat from his own pocket. Brown has his council tax for his Downing Street apartment paid by the Treasury. A spokesman for Brown said he never stayed in the Downing Street residence and used it only for receptions. "He has a flat in Westminster and a home in Scotland on which the taxes are paid in the normal way," he said.

Prescott also has the use of Dorneywood. The council tax for the mansion is paid by the trust that looks after the home.

Under the system for parliamentary allowances, Prescott is entitled to claim back expenses — including the council tax — on his home in Hull provided it is not his main residence.

Even though he declares to the ODPM that the Hull house is his main residence, it was treated as a second home for the purposes of parliamentary expenses in 2002-3 and 2003-4. In those two years he claimed back £39,057 on the home in “additional costs allowances”, which can be used to meet mortgage interest repayments.

He is also believed to have claimed expenses in 2004-5 to help to pay for his Hull property.

A House of Commons spokesman said: “MPs are entitled to claim their council tax under the additional costs allowance and most do. We can’t comment on individual cases.”

Last week Prescott’s department said he paid his council tax on his home in Hull but refused to disclose whether he claimed it back on expenses.

The ODPM was also unable to explain last week why Prescott was not required to pay any council tax on his London flat in Admiralty House, even if only at the discounted second home rate, but said he complied with Cabinet Office rules. “We understand that this is not any different to the way this issue was dealt with under previous governments,” said a spokesman.

Norman Baker, the Liberal Democrat MP, said: “Mr Prescott should be pursued for non-payment of the council tax. It is quite clear he should be paying the council tax on his Admiralty House apartment and the rules should be tightened up.”

When Labour came to power, council tax on the average band D home in England was £688. It has risen to £1,214, an increase of 76%.

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