Labour was accused of 'ruinous' policies last night after failing to prevent a record 5 per cent jump in business rates just as the British economy sinks deeper into recession.

Caroline Spelman, shadow communities spokeswoman, said the burden of rates would rise by £1bn this year in spite of the prospect of deflation by the autumn.

'Labour is dragging local firms down the road to ruin,' she said. 'It is the height of economic madness to be increasing taxes on local firms in the depth of a recession.'

The row in the Commons took place as a survey by the Local Government Association found four in five councils reported an increase in empty shops. The LGA has called for action to prevent high streets turning into 'ghost towns'.

Financial Times