Council tax revolution

Millions of homeowners would be exempted from paying any council tax at all under revolutionary plans being drawn up by the Tories.

Mr Willetts was today pledging, in a speech to the Conservative conference, to tackle the unfairness of a system which in London hits large numbers of pensioners hardest.

But while he refused to give detailed commitments, the Evening Standard understands that the party is looking at moves to scrap council-tax benefit, currently unclaimed by millions.

The money would be redistributed to help fund a simpler scheme to relieve householders beneath a low income threshold of paying the tax.

With the Tories already promising to scrap the pension credit, and to link the basic state pension back to earnings instead, Mr Willetts wants to ensure financial help with council-tax bills actually goes to those who need it.

Up to ?770 million of the present benefit is left unclaimed each year - a 30 per cent take-up rate, which is the lowest for any state benefit. Some 1.7 million pensioners miss out on a rebate that could in many cases see their bills wiped out completely.

Ministers have promised to make the system easier, but the Tories are now convinced a full replacement scheme is the best way to use the money. By helping the poorest, they also hope to shrug off Tony Blair's charge that they are only interested in tax cuts for the rich.

The plans will appeal, too, to the invaluable "grey vote". Under one option being considered by Mr Willetts, anyone on income support or other benefit would receive an automatic rebate without any need to fill in forms or go through complicated means testing. He would also raise the entitlement threshold to cover not just the very poorest, but also those on modest incomes. Some pensioners now spend more than a third of their household income on their council tax bill.

Age Concern and other charities have repeatedly called for an end to means testing for council-tax benefit, and private polling by the Conservatives confirms that the issue could be a huge vote-winner with pensioners.

The Tories are wary of scrapping council tax itself as this would be fraught with complexity.

But they know voters have blamed Labour for soaring bills in recent years, with a record 13 per cent rise last year triggering widespread criticism.

Deputy Prime Minister John Prescott last week repeated his demand that no council should put up bills by more than "low single figure" percentage rises, but in many areas bills have gone up to ?1,500 a year for average homes.

Panic over the issue prompted Gordon Brown this year to use the Budget to promise a one-off ?100 council-tax payment to all four million households with someone over 70.

Mr Willetts said the poorest pensioners today are those who do not receive the means-tested benefits they are entitled to. "There are now 1.7 million people who are entitled to pension credit but do not receive it," he said,

"This isn't an accident. The Government has always known that many pens ioners are put off claiming means-tested benefits by their complexity, while others simply find meanstested benefits demeaning."