The ACS has urged local authorities to resist chasing short-term profits, after the government passed new legislation that rewards councils with cash if they deliver business growth and job creation.

Councils have previously sent revenue from local business rates to the Treasury, which redistributed the money across the UK. But the Local Government Finance Act (LFGA), which was made law last week, will allow councils to retain a cut of 50% of business rates generated above a certain threshold to spend locally. The threshold will be calculated on a regional basis.

The ACS warned that the move might encourage councils to give the green light to big development schemes such as supermarkets, which would generate greater revenue but could damage the long-term future of the local high street.

“This act is the right thing, but there is a risk,” said ACS public affairs director Shane Brennan. “Councils could think, ‘If we allow this supermarket to be built this year, then in year two and three we will get so many hundred thousand pounds of rates.’”

“Our concern is that councils will think short term, and start taking decisions based on short term revenue benefits rather than on long-term growth. We want them to deliver general, broad-based growth as a result of the LGFA.”

The government said the LGFA would give councils “stronger incentives to create and support local jobs and local firms”. It has estimated a £10bn boost in economic growth by 2020 as a result.