Critics believe there is a crucial flaw in George Osborne's 'devolution revolution' plan

Critics have warned that George Osborne's proposed "devolution revolution" could actually widen the gap between the richest and poorest parts of the country.

The Chancellor promised the biggest shake-up of local government funding "in living memory" the Conservative Party conference on Monday, by announcing that councils are to be handed control of business rates.

Under the plans, councils will be given responsibility for £26bn of business rates and the freedom to cut tax to encourage local investment by companies.

Mr Osborne told the Tory conference in Manchester:

I am embarking on the biggest transfer of power to our local government in living memory. Attract a business, and you attract more money. Regenerate a high street, and you'll reap the benefits. Grow your area, and you'll grow your revenue too.

However, critics warned on Monday night that the move could make some parts of the country worse off, because some authorities are much better positioned to attract business investment than others, including TUC general-secretary, Frances O'Grady (above), who cautioned:

By devolving business rates without any national safeguards, regional inequalities will get wider. The communities that most need investment are often those with the weakest business revenue base.

Andy Burnham, the shadow Home Secretary, tweeted:

Melanie Leech, chief executive of the British Property Federation, said:

The fact some local authorities have a much higher tax intake than others could lead to rate distortion across the country and have knock-on effects on growth, leaving some local authorities struggling to keep up.

However, the Local Government Association and other organisations like the Chartered Institute of Public Finance and Accountancy welcomed the move to allow business rates to be determined by local people.

More: George Osborne has revealed he is a fan of gangsta rap