BUSINESSES have cautiously welcomed landmark changes to how business rates are collected but have warned councils not to see companies as a "cash cow" to fill funding gaps.

Chancellor George Osborne has announced a major shake-up to business rates in a speech to the Conservative Party conference allowing councils to retain all tax raised locally rather than sending it back to Westminster.

The changes, which would grant a multi-million pound boost to Sussex councils, also give authorities the powers to cut rates while councils with elected mayors would also be able to raise them.

The chancellor also revealed plans to sweep away planning rules to speed up the redevelopment of brownfield sites.

Mr Osborne said the plans would allow “money raised locally, spent locally, every council able to cut business taxes, every mayor able to build for their city's future, a new way to govern our country".

The changes would bring considerable extra revenue into councils with Brighton and Hove City Council set to double the £52.8 million it currently receives.

Councillor Geoffrey Theobald, Conservative group leader, who is attending the conference, said he “warmly welcomed” the Chancellor’s announcement having long argued for the change.

He added: “This now gives us a huge incentive to work proactively with developers and potential investors to bring forward new schemes and developments in the city.”

Council leader Warren Morgan was more circumspect on the proposals.

He said: “While any new funding from government is welcome, we are concerned that this change may not take effect until 2020, by which time we will be facing a huge funding gap with increasing pressure on our services.”

The proposed changes were also welcomed at Worthing, which collects £31.1 million in rates but retains just £2.6 million, and Adur councils, which collects £17.5 million in business rates but retains £1.8 million.

Daniel Humphreys, Worthing Borough Council leader, said: “The Chancellor’s announcement is a positive move towards ensuring that money raised locally is spent locally, and that the power to set appropriate business rates lies with those closest to the electorate.”

Gavin Stewart, executive director of the Brighton and Hove Economic Partnership, said: “On the face of it, it looks like positive news with local money staying local.

“The problem is at the moment is that the money that comes back to the city does not get spent on business issues, it goes to fill the black hole in social care.

“But the question is what does this mean in real terms and what else is going to be cut elsewhere?”