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Business leaders have reacted with dismay after a committee of MPs recommended that councils should have the power to levy additional taxes on local firms in order to fund improvements such as transport and infrastructure projects.

The British Chamber of Commerce (BCC) claims that proposals for a supplementary business rate would leave enterprises in England with an extra tax bill totalling £1.5 billion if every local authority opted to introduce it.

But MPs today backed plans put forward earlier this year as part of the Lyons review of local government finance, claiming that allowing councils to vary business rates in their individual areas would be a "positive step towards financial devolution" and allow them to take a stronger role in helping to build distinctive identities for their communities.

However the communities and local government select committee acknowledged business concerns about the potential cost of the proposals, stressing that if the government introduced such a scheme it would have to set "basic parameters" under which the supplementary business rate would operate.

Restrictions should include a requirement for councils to secure the agreement of the local business community before introducing a supplementary levy, including by ballot if necessary, MPs stressed in a report released on the issue.

The parliamentary committee also recommended that the rate and duration of any additional business rate introduced to fund local improvements would need to be "clearly defined at the outset".

Commenting on the publication of the report, committee chair Dr Phyllis Starkey MP said that supplementary business rates would be "a significant step forward in terms of liberation and local empowerment".

She said that parliamentarians understood that some members of the business community were concerned at returning some control of business rates to local authorities, but stressed that "protections and safeguards" recommended by MPs would "do much to alleviate businesses concerns and to reduce the possibility of negative unintended consequences".

However the BCC has claimed that there is no need for local authorities to introduce further taxes on businesses because schemes are already in place to allow enterprise to contribute to infrastructure projects.

"If the government is determined to bring one in we absolutely believe that business must have a vote in order to ensure that projects are well managed, have a clear timescale and that the money is spent effectively," the BCC's head of policy, Natalie Evans, told BBC Radio Five Live.

"Giving councils a blank cheque is not acceptable," she added.