The Government has pledged to set aside an extra £450m to help freeze council tax bills in England.

The support for local authorities means that taxpayers living in an average Band D home in England could save up to £72 on a 5% rise in council tax.

Eric Pickles, local government secretary, said: “The Coalition Government’s council tax freeze has cut council tax in real terms over the last two years.

“A third-year’s freeze will mean the combined effect is potentially worth over £200 to Band D residents. Freezing bills again will really help hard working families and those on fixed incomes, such as pensioners with their cost of living.”

It is estimated that a freeze in council tax in 2013-14 would represent a real terms cut of around 2% and a fall of 9% in real terms over the past three years.

The £450m will be made available, through a new grant scheme, to local authorities who decide to freeze or reduce their council tax next year.

If they do, councils, police and fire authorities will stand to receive £225m of funding in both financial years 2013-14 and 2014-15, equivalent to raising their 2012-13 council tax by 1%.

In addition, in 2013-14 the Government will propose to lower the local authority tax referendum threshold to 2%.

This would mean if a local authority seeks to raise its relevant basic amount of council tax by more than 2%, local people would have the right to keep council tax bills down through a binding referendum veto.

The Secretary of State for Communities and Local Government is set to release the full details on this in December.