Birmingham residents could enjoy lower council tax bills as a result of revaluation, an official inquiry has revealed.
But the investigation, by former Birmingham City Council chief executive Sir Michael Lyons, warned that householders in London would face higher charges.
The findings will cause a headache for the Government, which is seeking ways of reforming local funding to end the annual controversy over soaring council tax bills.
Ministers have already ruled out replacing the council tax with a local income tax.
Sir Michael was appointed by the Chancellor Gordon Brown and Deputy Prime Minister John Prescott to examine ways of reforming local government.
But his interim report, published yesterday, will make awkward reading for Ministers, who have suggested introducing a new council tax bands, on top of the eight existing bands, so that bills more accurately reflect property prices.
Sir Michael's report showed 35 per cent of West Midland householders would pay less under this system. Higher
bills would be sent to 13 per cent of households.
But in London, the picture was reversed. Council tax would increase for 40 per cent of residents, and fall for only 12 per cent.
Even if no new band was introduced, the West Midlands would benefit from a national revaluation of properties.
Bills would fall for 21 per cent of households residents, and increase for only 11 per cent.
But revaluation would mean higher bills for 35 per cent of London households, and lower bills for only 11 per cent.
The discrepancy is a result of property values shooting up in the capital at a much faster rate than the rest of the country.
Sir Michael's findings could increase the pressure on Ministers to consider new regional property bands - in which a property in Birmingham is considered to be more valuable for the purpose of calculating council tax than a property in London which is actually worth much more.
Every property is currently placed into one of eight bands based on its value, with the highest bills sent to the most expensive homes.
However the last valuation took place in 1993, and there is concern that bills are based on data which is long out of date.
Sir Michael was initially due to produce his report by the end of this year but his remit was extended in September, when the Government put plans to revalue all the homes in England for council tax purposes on hold following intense criticism from Conservatives.
Yesterday he called for a debate about "some hard choices". He said: "How can we get the right balance between national standards and local variation?
"How can we most appropriately balance what the public want and what they are willing to pay for, and in doing so how can we manage pressures more effectively?"
The Office of the Deputy Prime Minister said: "The Government welcomes Sir Michael's publication as a contribution to the debate on the function of local government and how it is funded."
Sir Michael also criticised the "confusion and complexity" of Whitehall-driven targets, suggesting they could be adding to the pressures on town halls.