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Proposals for a supplementary business rate, as recommended by the Lyons review, could see the re-localisation of rates introduced "through the back door", the Confederation of British Industry (CBI) has claimed.

Speaking at a conference to consider the implications of the government-commissioned review, CBI director general Richard Lambert said that businesses would only accept the proposals providing safeguards were in place, including the need for firms to have a vote on whether they wish to pay for new infrastructure projects.

The government announced earlier this week that it would consider proposals put forward by former council chief executive, Sir Michael Lyons, for the introduction of a supplementary business rate as part of his review of local government finances.

But Mr Lambert warned that if accepted, the proposals would undermine efforts by the chancellor to make the UK's tax regime more competitive and "trust" between businesses and local authorities.

"There's a big risk that business will be seen as a cash cow for local government," warned the CBI chief.

Mr Lambert said that if businesses were to accept the proposals for a supplementary business rate, they would need to be given a vote about whether they wished to fund new infrastructure projects, which would also need to be financed by all those who subsequently benefited, including through measures such as increased public transport fares.

He added that any money raised would also have to be ring-fenced for a specific purpose and collected for a limited period in order to prevent councils abusing the power.

"Councils must make a clear case for any proposed new levy as there would be no surer way for local government to lose businesses' trust than for levies to become the
norm rather than the exception," he said.

Commenting on the proposals for a supplementary business rate earlier this week, local government minister Phil Woolas said: "We agree that a local supplementary rate could provide welcome flexibility for local communities to raise additional resources to invest in themselves and strengthen their local economies."

Mr Woolas went to say that the government would be considering "what the best options may be, working closely with business, local government and other stakeholders, and ensuring that local businesses have a proper say in the development of plans for a supplement by local communities".