Angela Rayner has refused to rule out Labor introducing an unlimited increase in council tax just months after claiming the party had no plans to increase the tax.

Currently, councils will not be able to increase this rate by more than 5 per cent without the support of voters in a local referendum.

However, even if council tax bills were increased by 5 per cent in cash this would still mean a £100 increase in April, well above current inflation.

On Friday, the Opposition accused Labor of planning another “stealth tax” after the Deputy Prime Minister and the Department of Housing and Local Government refused to get rid of the referendum cap.

This has led to concerns that council bills could skyrocket in April if it announces the move in December.

The Local Government Association (LGA) is asking ministers to remove the 5 per cent cap and allow unlimited council tax increases. This is also the case in Labour-run Wales, where council taxes have risen much faster than in England.

England’s councils face a £2.3bn funding black hole next year, with the figure set to rise to £3.9bn by 2026, the LGA has claimed.

They added that one in four councils will need an emergency bailout in 2025 to avoid bankruptcy.

The decision on the referendum must be made by the end of 2024; but previously Chancellors had included it in their budgets. Rachel Reeves released her first budget on Wednesday.

A government spokesman said: “We do not comment on speculation about tax changes other than financial matters and have been clear that future decisions on council tax will be made in the spending review and local government funding agreement.”