Supporters of localism should welcome ambition of the local finance Bill, while questioning the role of tariffs and top ups, leading sector think-tank the Local Government Information Unit (LGiU) has claimed.

Responding to the Bill, which was debated during its second reading in Parliament on Tuesday, Dr Jonathan Carr-West, director of policy at the LGiU said the proposals ‘could effect radical changes to the political geography of the country'.

‘Giving locally elected councils real powers and incentives to shape local economies is a crucial step toward re-energising local democracy and a long overdue recognition of the key role that local councils have in economic development,' Dr Carr-West said.

However, voicing concerns that cash support given to councils with lower business rate yields may not retain its value over time, he warned of a ‘permanent hierarchy between rich ‘tariff councils' and their poor relations, the ‘top ups'.

‘It is essential for local government to have confidence that these proposals will provide them with a stable foundation at a time of financial uncertainty.'

Seeking to calm concerns of ‘polarisation' - raised on behalf of authorities from more deprived areas - communities secretary Eric Pickles said he ‘understood the reluctance to reform' and was ‘hardwiring fairness into the new system'.

Writing for the conservativehome website, Mr Pickles claimed places like Liverpool, Doncaster, Durham and north and south Tyneside whose growth in business rates outstripped the national average would have benefited had reforms been in place five years ago.

But a separate briefing issued by the Local Government Association argued councils should keep all the growth from business rates, reiterating criticisms that the Treasury would continue to derive surplus ‘set-aside' money from town halls after 2015.

Branding set aside a ‘tax on local authorities' and an unjustified form of central government control, the paper claimed the measure would discourage councils from growing business rates.