Nick Raynsford has named the six councils facing capping due to excessive council tax rises - the first use of such powers since 1998.
Mr Raynsford outlined the government's plans to MPs
They are Nottingham, Herefordshire, Telford and Wrekin, Torbay, Fenland and Shepway.
The local government minister said council tax will rise by an average of 5.9% this year.
For the first time, a number of police and fire authorities are also affected for setting "excessive budgets".
Local government leaders have said that capping is expensive and unnecessary, costing councils £7m to recalculate home owners' tax bills.
The BBC has learnt that some councils may be forced to issue lower bills this year, while others will be instructed to set lower budgets in 2005.
CAPPED LAs: BAND D BILLS
Telford & Wrekin: £1,144
2004/05 bills pre-capping
Those local authorities facing capping want to introduce council tax increases of up to 28%.
Penalties are also likely for Cumbria, Northamptonshire and West Mercia police forces and the Nottinghamshire, Bedfordshire, Durham, Essex and Herefordshire and Worcester fire brigades.
The Deputy Prime Minister John Prescott is due to speak in justification of the sanctions on councils.
"We have been fair with local government. Every council has had a real terms increase in grants and we expect reasonable council tax rises in return.
"In some cases councils are proposing unreasonable increases. We cannot allow these rises to go ahead and we will protect council tax payers in these areas," Mr Prescott is expected to say.
Last month he announced that average Band D council tax bills will rise by 5.9% in the coming year.
The figure is above inflation but far lower than previous rises, which went up by 12.9% in some areas.
This resulted in a number of protests by pensioners who said their increased bills outstripped the rises in their pensions.
Sir Jeremy Beecham, chairman of the Local Government Association, has said that the electorate should be left to decide the level of council tax in their area through the ballot box, and not the government.
The government is concerned over council tax rises
He called for reforms in the way councils collect taxes and that they have more control over their income: "Capping amounts to a government admission that too much of the pressure of increased spending is on public services.
"Education and social services spending has been placed on an inflexible property tax that doesn't grow as the rest of the economy grows."
Philip Hammond, the Conservative shadow local government minister, said that capping will not properly address the issue.
He said the planned re-introduction of capping was a "sorry story of fiddled figures and broken promises" after Labour said in opposition it would not use such powers.
"The underlying driver of soaring council taxes are fiddled local funding from Whitehall, and a never-ending torrent of burdens, targets, and red-tape.
"Re-billing could lead to cuts in front-line services. Perversely, the very act of central government intervention via capping weakens local accountability," Mr Hammond said.
A council tax hike of 28% does not mean the whole bill will have increased by that amount.
Instead the 28% refers to the increase in the part of the bill that pays for council services and not for things like the fire service.
For example, if you live in Shepway, the local authority has put its bill by 28.4% but the bill sent to a Band D household will have increased by 9.7% on the previous year.
Bring back poll tax, what was wrong with it? We ALL walk the streets and want our bins emptied regardless of where we live.
Gregory Kirby, Greenwich, London
I'm glad to see Telford & Wrekin capped - not only have we seen wastes of council tax on renaming our town to the Borough of Telford & Wrekin, (think of the stationery costs alone) but as a consultant in the town, with T&W as one of my clients, I see first hand the wasteful policies they have. Their internal market is ridiculous, and enables external bodies to 'buy' services from one department, and recharge these services (plus a percentage) to another department that needs a task completing. Ridiculous.
TD, Telford & Wrekin
John (below) has hit the nail on the head! It is totally unfair and unrealistic to expect the local council taxpayer to directly pick up the tab for edicts from Whitehall. By all means have local administration of central policies, if that is the way this bunch want to operate, BUT provide them with 100% of the funding needed so that if then the local politicians feel the overwhelming urge to 'gold plate' even further, the local electorate are left in no doubt where the blame really lies.
Brian Wood, Bournemouth UK
Unfortunately, this Government is always demanding more from Local Authorities by the performance targets they set, but never provides adequate resources to cover these costs. On one hand the Authority is fined for failing to meet these targets and threatened with capping if it raises the Council Tax by too much. What's worse is at the time of setting the Council Tax the Authorities have no idea of where the capping level is likely to be set, which inevitably leads to them cutting back even more on their service levels, so that they won't be capped.
As a member of the Labour Party I protested against rate capping in the eighties. The basis of the argument was that local governments should be allowed certain levels of autonomy. If local council tax payers don't like what is happening they should work night and day to remove their local councillors at the ballot box. I think the same argument still applies today. How sad it is to see Blair's government blighted by the worst aspects of Thatcherism.
Ian Bowater, Los Angeles, USA
Last year our local council increased the Council Tax by 19%, no capping there. Why can't the local tax be set every 2 or 3 years and the local electorate asked to vote on what should or should not be included in the proposed budget, that way the electorate get what they want, either better services at a cost or reduced services and lower Council Tax, or is this taking democracy to far?
Keith, , Walsall, West Midlands
The local authority provides goods and services and members of the community should pay for them in accordance with their probable use of them. What nonsense to suggest that the public, the customers, should pay according to their income. If that approach were to be extended to other providers would the next suggestion be different prices for a bottle of milk, depending upon your income, or perhaps higher train fares for those commuting from more affluent areas?
Telford and Wrekin have the lowest Band D council tax in the West Midlands. They should not have been capped. This is a council that has received the highest accolade as an excellent council. The capping means that level of services provided can now be only reduced. The fire and police should be held more accountable as their increases are far too high.
Peter Taylor, Telford
Good to see Hereford capped! The waste and extravagance has to be seen to be believed, and the lack of services is dreadful. Hopefully many incompetent staff will go.
Either the government should leave local councils alone, or they should accept the logic of their position, and put in place a system where a cap can be put on national government expenditure. Seriously though, they should pay in full for everything they REQUIRE local authorities to do, and leave council tax to pay for the "optional extras".
So, the government wants to crack down on councils that put up taxes outrageously and then spend in a profligate manner. Will it also be turning the screw on Gordon Brown, who has for several years been acting in much the same way?
Steve Ormrod, Poole, England
Council tax should be income based, Along with pensioners and people claiming benefit, it's the people who work just over the salary threshold who suffer the most, they can't do anything about it.