Retailers' leaders have urged Gordon Brown to resist calls to return to local authorities the power to set business rates.

In its submission to the Treasury ahead of the Chancellor's pre-Budget statement, the British Retail Consortium said moving to a localised system of business taxation would cause rates to escalate as councils gave in to the temptation to increase business rates to boost income.

The BRC fears a proposal for such a step may be made by the Lyons review into local government funding, which reports later this year. The Local Government Association has lobbied the review to recommend councils be given the powers to set rates locally.

BRC head of property and planning Paul Browne said: "Retailers already pay £5bn a year in rates and contribute 25% of all rates receipts, but are struggling under other occupancy costs, with the likes of rent and utilities on the rise. It means there's now a lack of alignment between increases in costs and turnover.

"Because only people can vote, not businesses, stores are a soft target and are seen as a cash cow by local authorities.

"Back in the 1970s and 1980s, when rates were set locally rather than nationally, there was great disparity across the country."