Labour could penalise high earners by replacing council tax with a new local income tax, a shadow Cabinet minister has suggested.

Andrew Gwynne, the shadow Housing secretary, said the party would consider ideas such as a local income tax as it looks at ways to overhaul council tax and boost town hall coffers.

Any new charge would be on top of income tax which is levied by the Treasury in bands of 20 per cent, 40 per cent and 45 per cent for the richest.

Mr Gwynne said the party wanted to reform council tax because the annual charge – which pays for local services like bin collections and street cleaning – was “not fit for purpose”.

Asked on the Andrew Marr Show if it could be replaced with a new land value tax, he said: "We have not made up our minds on what that will be".

Asked if the party could introduce an “extra income tax” Mr Gwynne said: "It might be that council tax can be reformed.

"There are lots of other examples of how local authorities raise revenue across the country. We need to have a genuinely open mind and open discussion about this."