Liberal Democrats have accused the government of "playing with people's fears" amid reports of possible council tax reform.

Monday's newspapers claimed that deputy prime minister John Prescott is considering a "hybrid" of property and income tax to replace the existing local authority charge.

However, officials at his department described such reports as "speculation" ahead of a review of local authority funding expected in the summer.

A series of protests have been held against above-inflation increases in the tax, which have led Prescott to warn that he will use capping powers against local authorities.

Rises

The charge has risen by 70 per cent since Labour came to power in 1997, while a survey earlier this month showed that 70 per cent of county councils planned increases of more than five per cent this year.

Nevertheless, the prime minister has ruled out the option of replacing it with just a local income tax, as proposed by the Liberal Democrats.

"I do not myself think - although of course we look at this with an open mind - that local people would like to have their income tax decided by local authorities," he told MPs last week.

However, speaking on Monday, Liberal Democrat local government spokesman Ed Davey urged a quick response to public anger at council tax rises.

Fears

"Ministers are playing with people's fears by dribbling out bits of information about possible council tax reforms," he said.

"They underestimate the very real loathing of the tax, and the anxiety felt by people who are trying to pay large increases year after year.

"Rather than leaks, nods and winks to newspapers, ministers must tell Parliament exactly what they propose - and soon.

"Labour has ignored council tax unfairness for too long. It's time they ended the confusion and presented their proposals in full."

Not perfect

Downing Street refused to confirm or deny the reports but warned it was unlikely that ministers could resolve local finance.

"Everyone should admit that there is no perfect solution to the council tax issue," said the official spokesman.

"There is a review going on. It is better to wait for that review. There are various options.

"The prime minister does not believe that replacing council tax with an income tax is a viable option."