GOVERNMENT claims of £110m savings in business rates could be made redundant unless it changes the “out-of-date” tax system, a business group has warned.

The North East England Chamber of Commerce (NEECC) has criticised the government’s levy review for falling short in its ambition.

However, ministers say the changes will cut bills by £110m every year and make payments fairer for companies across the region.

Marcus Jones, Local Government Minister, added the moves will ensure tariffs are more accurately aligned to fluctuations in the property market.

But the NEECC says while firms may see bills fall, the magnitude of any relief faces being diluted, adding the existing tax system is far too complicated.

Ross Smith, the organisation’s head of policy, told The Northern Echo: “Although individual circumstances will vary, it seems likely the overall trend will be for businesses in the North-East to see bills go down relative to other parts of the country.

“However, through a combination of the way inflation is calculated, the government’s scope to fix the overall amount it receives, and the fact these reductions could be phased in slowly, many businesses may find the positive effect of this watered down.

“What’s still needed, and well overdue, is a fundamental reform of a tax system that is out-of-date, over-complicated and bears little relation to businesses’ ability to pay.”

But Mr Jones said bills will go down by 11 per cent in the North-East, before inflation and transitional relief, adding that relief, worth £3.4bn, will mean any bill increases will be phased in over a five-year period.

He added: “This government is cutting business rates yet local firms also need to be confident the rates they pay are accurate and fair, no matter where they are in the country.

“These updates will give them that reassurance.

“We are committed to helping all businesses flourish and, as we make the system fairer, nearly three quarters of companies will see no change, or even a fall, in their bills.

“But for the small minority of businesses that do face an increase, we’re putting in place £3.4bn to provide vital support.”