An influential committee of MPs has warned that local councils are not using existing discretionary rate relief powers.

The Communities and Local Government Select Committee report revealed that the ability to reduce rates without a corresponding power to increase them was unpopular with councils. Local authorities were unlikely to use a power to lower business rates, it added.

The report into 100% retention of business rates by local councils concluded that the new system, set to begin in 2020, must work in a way that ensures that areas with limited ability to generate growth through rates revenue do not lose out.

Association of Convenience Stores chief executive James Lowman said: “We welcome the committee’s report and the ongoing debate about the structure of business rates system to enhance business growth and investment.

“ACS wants to see more councils using existing discretionary rate relief powers to support local businesses, and this must continue to be 50% funded by central government.”

The report set out numerous ‘issues for consideration’ for the government, including allowing councils to raise the uniform business rates for certain sectors, and the introduction of a transaction levy for online retailers.

Lowman added: “Councils should not be given more powers to raise business rates, and local shops and other businesses cannot be left to pick up the tab as other sources of local authority funding decline.

“We welcome further debate about how internet retailers should pay their fair share, as they currently have a huge advantage over high street businesses facing big rates bills.”