The Treasury has launched a “radical” overhaul of business rates in a bid to make life better for the UK’s struggling retailers.

The system has been in place since 1988 and industry pressure groups say it is outdated and unfairly penalises small local businesses.

The review was first announced in December’s Autumn Statement along with new measures coming into force next month. It is thought that changes could streamline the system but will not reduce taxes paid to the HMRC by retailers.

Labour says it will go further than the Tories, pledging wholesale changes to the system of business rates if it wins the general election in May. Many see this as part of an effort to win over sceptical business voters.

The Tories accuse Ed Miliband of being “anti-business”. A recent YouGov poll seems to show that leaders of big businesses agree. Just 18% of those answering the poll said a Labour government would be good for the economy.

Shabana Mahmood, shadow exchequer secretary to the Treasury, said: "Labour will take immediate action by cutting and then freezing business rates for 1.5 million small business properties.

“We will also devolve to city and county regions 100 per cent of the additional business rates revenue generate by growth. This is part of our wider plan to devolve economic power and £30 billion of funding over a parliament.

“Labour’s better plan goes much further than anything David Cameron and George Osborne are offering.”

Responding to the review, businesses said changes were urgently needed.

John Cridland, CBI director-general, said: “The current system of business rates is outmoded, clunky and regressive and it's holding back the high street. That’s why we’ve been calling for a wholesale review of the system.

“The package of measures already announced in the Autumn Statement that will come into force from April will help ease the pressure on hard-pressed retailers.

“But this review provides an opportunity to go much further and we’ll be making the case for removing the smallest firms from paying business rates completely, linking rates to CPI rather than RPI and introducing more frequent valuations.

“This would go a long way to achieving a more competitive business rates regime that incentivises business investment and supports the high street.”

Last week the Federation of Small Businesses announced Ed Miliband as the “first of three senior keynote political speakers” at its national conference on 20 March.