The Government has rejected proposals to hand town and parish councils a share of business rates to boost their role in economic development.

The DCLG had been asked to consider the idea, submitted by Sevenoaks Town Council via the Sustainable Communities Act and supported by more than 400 local and national bodies.

But in a letter, communities minister Stephen Williams said funding generated by business rates ‘is required to help deliver the services for which the principal local authorities and major precepting authorities are responsible’.

Cllr Ken Browse, chair of the National Association of Local Councils, said he was ‘bitterly disappointed’ by this decision but ‘not entirely surprised’.

He continued: ‘They’ve failed to take advantage of a golden opportunity to recognise and boost the economic development role of grassroots councils, and of town councils in particular. Our important part of local government has long argued for more radical reform of business rates, including during the resource review in 2011 and 2012, when the current Government again said no.??

‘While the minister says parish and town councils “have a key role to play in our vision for localism”, this obviously does not include local economic development.

‘Our councils will feel let down as this is increasingly the kind of activity they are supporting and funding from their resident levy, the precept, measures welcomed by local businesses. The Government needs to think again.’

Sevenoaks Town Council has the option to challenge the decision, which could lead to it being referred to the secretary of state for reconsideration.