Government plans to enable councils in England to keep a share of business rates have been met with caution by the National Association for Voluntary and Community Action (Navca) which is concerned it could lead to less local support for the voluntary sector.

Last year, central government collected and redistributed £19m of business rates through a complex grant, leading the system to be described by the Organisation for Economic Co-operation and Development as one of the most centralised in the world.

Announcing the Local Government Finance Bill reforms, which would cut out this centralised process giving councils direct income from business rates, the Department for Communities and Local Government advised that national charity discounts and rate relief will continue to be supported in the proposals, meaning there will be "no adverse change" for civil society organisations such as amateur sports clubs or charities.

But Peter Horner, policy officer at Navca said that business rate retention "may increase inequality".

"There is still a danger that many councils with the highest levels of deprivation could see their income fall. 

"We are also concerned that the proposals do nothing to incentivise support for charities and may result in local authorities having less reason to ensure a strong and vibrant voluntary sector. Indeed there is no recognition of the significant contribution that charities can make to local growth through employment and training and by levering new investment," he said.

Business rates are levied on all non-domestic properties in England. Proposals for the new business rates retention scheme were first published in July and introduced to the House of Commons on Monday (19 December) with the aim of encouraging local authorities to promote business development. Communities Secretary Eric Pickles said that the potential for growth in business rates "means more to invest in local services". Within the proposals the government states there will be no change in the way business rates are calculated, the way properties are valued or the way business rate levels are set.