Plans to alter the way councils levy taxes will affect more first-time buyers, a conservative MP has warned.

The plans will also cause hardship for pensioners who will have already taken local taxes into account when planning retirement.

David Curry, the Shadow Secretary for local and devolved government affairs, warned yesterday that Labour's ‘panic’ over council tax will prevent more young couples stepping out onto the property-owning ladder.

The Shadow Secretary spoke out after Government ministers unveiled plans to replace the current eight-band system of council tax levies with a scheme linking the tax to regional property prices.

As a result owners of top priced homes in the south east would lose out compared with those owning cheaper properties in Labour strongholds in the north. An alternative plan based on local income tax has also not been ruled out.

The government are considering changes in the wake of the growing council tax revolt sparked by inflation-busting increases averaging more than 12 per cent, imposed after the government failed to provide sufficient funds to properly finance all the duties being imposed on local councils.

Mr Curry said: "This is a panic announcement that will not even address the government's recent council crisis until at least 2008. When it does, millions of people in London, the south east and south west will be hit by this new tax, while the proposals have no remedy for poor areas which will suffer a huge drop in revenue if the majority of houses fall into the new low band."

Commenting on proposals for a local income tax, Mr Curry told conservatives.com: "This would be an exocet straight at the heart of young couples starting out in life who are struggling to get on the property ladder and are worrying about saving for the future and paying off student debt."

"In addition, how will this affect pensioners who have saved all their lives and receive income from their investments?"