When it was introduced in 1991, council tax did not have a particularly tough act to follow.

The unfairness of its predecessor, the one-size-fits-all poll tax or Community Charge, made it arguably the most unpopular domestic policy of the Thatcher era.

But 12 years on, the weaknesses of a tax based on property values are being felt by those who can least afford them.

Most people in Sussex are for the first time paying four-figure sums this year after average annual increases of 12.9 per cent.

Bills in Brighton and Hove have rocketed by 16.4 per cent this year, up £151.25 for an average Band D home.

Many pensioners own Band D homes but the increase in pensions has fallen far short of this rocketing rise in tax.

While the Liberal Democrats announced plans to scrap the "unfair" tax at the Brighton Centre, tales of genuine hardship were told outside.

Hundreds of elderly people waved Axe the Tax banners on the steps of the conference hall.

Proposing the motion on council tax, Ed Davey, the party's shadow to deputy prime minister John Prescott, said: "We need to send a powerful message to the Government.

"It's a message literally millions of people want us to send.

"It's a message the pensioners, from Brent East to Brighton, want us to send and it's a message anyone who cares about fair taxes wants us to send - scrap council tax."

Mr Davey went on to say that as the only major party wanting to axe the tax, the Lib Dems must act as the voice of pensioners and the low-paid wanting change.

He said: "The whole system is riddled with unfairness. It's frankly astounding that after six years of a Labour Government, the state takes relatively more in tax from the country's poorest than it takes from the richest."

The party unveiled its campaign after delegates voted to replace council tax with a local income tax of up to 3p in the pound.

Lib Dem councillors now plan to table a series of motions at local council meetings to bolster their case.

The Government has been stung by criticism of soaring bills and could order local authorities to hold referendums if they wish to impose council tax rises of twice the inflation rate.

Ministers are looking at "all viable options" after Local Government Minister Nick Raynsford said town halls must be more efficient.

Among the protesters was Joy de Souza, from Rottingdean, a member of Telscombe Town Council.

She said some pensioners were going cold in winter so they could afford to pay council tax.

Coun Paul Elgood, leader of the Lib Dem group on Brighton and Hove City Council, said there had been huge rises in the last three years.

He added: "There could be a rise of 20 per cent next year, which older people will not be able to afford."

Former East Sussex County Council leader David Rogers raised the issue at a meeting of the county cabinet before going along to the demonstration.

He said: "What we need is a fair tax for local services such as a local income tax."

Former Brighton mayor Sheila Schaffer praised pensioners who demonstrated against high rates of council tax.

But she said: "The real answer must be a much higher basic pension. Then there would be no need for many concessions."

Mrs Schaffer, secretary of the Brighton, Hove and District Pensioners' Association, said people living alone, many of them old, already received a discount on council tax, as did those on benefit.

Mrs Schaffer saw some merit in local income tax but said it might be better to give councils more disrection about tax-raising generally.

She said: "Local income tax would still need some central control and redistribution, otherwise the richest authorities would get the most money."

The Lib Dems claim that pensioners could be left short of cash while the Government tries to set up its controversial new pension credit scheme.

Households across Sussex suffered long delays when the Treasury introduced a new tax credit for families earlier this year.

Now Ministers are bringing in a similar scheme for pensioners next month.

The Lib Dems have discovered only 1,500 staff have been taken on to process applications for the benefit scheme over the phone.

They claim each application is expected to take 20 minutes and, with 6.8 million people eligible, it could take up to eight months to deal with the influx.

Speaking at the party's annual conference, pensions spokesman Steve Webb said: "Designing an application process which will take up to eight months to complete is ludicrous.

"Christmas will have come and gone, as will have Easter, as will any confidence in the Government's ability to design a workable pension credit.

"For all this complexity, the Government would better serve pensioners by increasing the pension, especially for older pensioners who are often the most needy."

The new pension credit system will replace the current minimum income guarantee and will incorporate a reward for those who have saved for their retirement.