Ministers are considering replacing the council tax with a mixture of property levy and income tax, it is reported.
Replacing the council tax is just one of the proposals
According to The Sunday Telegraph, the plan will be floated in coming weeks.
One un-named minister told the paper Tony Blair feared the tax "could become another fuel-tax protest unless something radical is done".
"It would be madness to go into the (general) election with council tax as it is. It is already unsustainable," the minister added.
The paper said local government minister Nick Raynsford
would float the plan in the next few weeks, when the government publishes interim
results of a review of the tax.
Rises on way
A spokesman for the Office of the Deputy Prime Minister said the review of
local authority funding was due to report in the summer, adding that the story
was "pure speculation".
Many council tax bills are set to rise again this year, following an average rise in bills of 12.9% last year.
Last year's rises have already sparked demonstrations in many parts of the country.
Many of those have been staged by pensioners who want the system scrapped and replaced with one based not on property values, but on ability to pay.
But 65 authorities planning big rises have been warned to rethink the hikes or be penalised by a government tax cap.
Mr Raynsford has warned that any council who plans to increase council tax by more than 5% could be capped.
In September 2000, farmers and hauliers organised a protest against fuel tax that nearly brought the UK to a halt.
Oil refineries were picketed to prevent the delivery of supplies to petrol stations, and there were go-slow convoys on motorways.
A rush for fuel sparked havoc at garages and there was also panic buying in the supermarkets.
The next general election is expected to be called next year.