Town Halls, including Richmond's, that set low Council Tax bills are to be "punished" by losing millions of pounds of funding, The Telegraph has revealed today.

New rules have been introduced by Deputy Prime Minister Angela Rayner, under which local authorities that set low council tax will receive less in government grants than those with high bills.

Her department has claimed that it would be wrong for the Government to "reward places that have been able to keep council tax levels low".

Ms Rayner has been accused of "classic socialist redistribution" over the move, according to The Telegraph.

It could mean that councils that run their areas more economically have to impose savage cuts to services.

The move also effectively kills off the possibility of areas choosing to be low tax on principle.

The Conservatives said the new rules would encourage all councils to raise bills in April by the maximum amount – 5 per cent, or £109 for the average Band D home.

Town halls will decide in the next few weeks by how much they will put up their bills.

In Richmond Upon Thames, the Council Tax bill Band D 2024/25 is £2,264, which equates to 104.3% relative to average and 5.7% change on 2023/24.

Amid expected increases in bills, about a dozen councils have asked for permission to delay local elections in May because they are going through reorganisation.

Kevin Hollinrake, the shadow communities secretary, said: "Labour's plans will devastate councils that have worked hard to keep taxes low and services efficient.

"It is a classic socialist redistribution from areas that have worked hard to keep bills down to councils who may have not. It could mean tens of millions of pounds being taken from thrifty councils and given to spendthrift ones.

"By punishing responsible councils and rewarding those who raise taxes, this Government is actively encouraging higher bills for hardworking families.

"This proves yet again that Labour's idea of fairness is filling their pals' boots in areas they represent with taxpayers' cash raised in areas that they don't."

Council tax rose much more sharply under Labour between 1997 and 2010 than under the Conservatives.

Under Tony Blair and Gordon Brown, there was no maximum limit on council tax rises.

But Lord Cameron brought in a law to make councils freeze their bills.

For the past few years, a maximum council tax increase of 5 per cent has been allowed.

This means that "under the last period of Labour rule, council tax rose by 93 per cent, compared with 51 per cent under the Tories," says The Telegraph.

Beyond the threshold on increases, local authorities have flexibility to set their own council tax rates, with some keeping it low to persuade people to move into the area. But the new rules will make this harder.

Councils that set low rates of council tax include a number in London, such as Wandsworth (£497 a year), Westminster (£502) and Hammersmith and Fulham (£915).

Outside the capital, the lowest bills among county councils are those issued by Essex (£1,523) and Hampshire (£1,533).

At present, Whitehall hands out grants to local authorities, taking into account how much is being raised by council tax.

However, in the new local government finance settlement, published before Christmas, Ms Rayner's Ministry of Housing, Communities and Local Government said that Whitehall would set its grant based on a national average of where they think council tax should be set, not the actual level.

That means that if council tax is set lower than Whitehall thinks it should be, local authorities will receive less cash – and that they will be rewarded for increasing council tax.

Richmond Council has been contacted for comment.