Croydon's Labour council leader has warned that devolution measures proposed by Chancellor George Osborne could leave the council "hopping around on one leg with our hands tied behind our back".

Mr Osborne announced plans yesterday that would allow councils to keep 100 per cent of local tax receipts by 2020, and give them powers to cut business rates.

In exchange, the Government would stop paying councils its revenue support grant, which local authorities currently rely on to help fund services.

Council leader Tony Newman said cutting the revenue support grant could mean less money flowing into council coffers, even with increases in direct tax revenue.

He said: "While we welcome greater flexibility around the business rates and a move towards devolution, we have to see the detail to ensure this doesn't result in less money coming to services.

"There is potential that in the detail it could still amount to a loss. If devolution means we're actually hopping around on one leg with our hands tied behind our back, that's not greater flexibility."

Mr Osborne's proposal includes scrapping the Uniform Business Rate (UBR), a move pitched as giving councils ultimate freedom to set rates that will promote economic growth.

In October last year Croydon Council asked the Government for devolved tax powers, including greater control over business rates, in the hope of generating £5.25bn for the borough's economy.

Concillor Tim Pollard, leader of Croydon's Conservative group, said the changes would only cause councils problems "if you do a bad job in terms of making your community a bad place to do business".

He added: "What's behind it is a genuine attempt to make sure that council's strike the balance between spending money on residents and where they get their income. There will be a variety of different tactics council's can adopt.

"It's what local government has been asking for a long time. You can't complain when you get what you have been asking for."