Nick Raynsford has pledged to reform the council tax system, but has kicked detailed decisions into the long grass.

The local government minister told MPs on Tuesday that there were "strong arguments" for shifting the balance of funding for councils towards more local taxation.

However he denied that the government was planning any large increases in council tax bills.

And an independent inquiry, led by Sir Michael Lyons, will report back on detailed reform options by the end of 2005.

Conservative spokesman Philip Hammond said the government was going to "bury" its proposals until after the next general election.

Raynsford, announcing the findings of an initial review launched in April 2003, said council tax should be retained but reformed.

"It has important advantages as a local tax," he insisted.

But he acknowledged that help would be needed for those on low incomes, with "particular care" to protect people on low incomes living in high value properties.

Raynsford said the government's aim was "to avoid significant changes" in council tax bills.

And he floated he possibility of local councils gaining powers to set business rates - a move being resisted by organisations such as the CBI.

The minister said the review had helped to "narrow down the options" for future reform.

"It provides a sound platform from which to go forward," he said.

"It is clear that council tax is far from perfect and that changes are needed."

But suggestions of large tax rises "are simply untrue" and claims that government had already decided on its favoured approach were "just plain wrong".

The Liberal Democrats said Raynsford's statements showed that "ministers can't decide on council tax".

"With council tax revaluation and house price inflation, millions will see bills go through the roof under Labour's tinkering," said local government spokesman Edward Davey.

"Today's delay and dither means more years of council tax and more years of unfairness and public protests.

"It's time Labour opted for fairness and heeded our call to scrap council tax altogether."