Powers to set business rates will be devolved to local authorities, Chancellor George Osborne announced today.

Speaking at the Conservative Party Conference in Manchester, Osborne said councils would be allowed to keep the £26bn rates bill collected from businesses under “the biggest transfer of power to our local government in living memory”.

“Any local area will be able to cut business rates as much as they like, to win new jobs and generate wealth. It’s up to them to judge whether they can afford it,” he added.

But Association of Convenience Stores chief executive James Lowman warned that financially-squeezed councils could be tempted to increase business rates.

“The Chancellor’s decision to devolve business rate setting powers comes as government is supposed to be considering responses to a large scale review of the business rates system, of which we have heard nothing yet,” he said.

“One of the consequences of locally set business rates will be that local authorities under financial pressure may be tempted to increase business rates to foot the bill which is why business owners need certainty through a clear national framework.

“We urgently need to see more details of the chancellor’s plans, and we need reassurance that local shops and other businesses will not see higher rates bills as a result of this policy.”