More than 133,000 appeals over the amount companies are being charged for business rates still have not been resolved, according to the Local Government Association.
It said more than one million businesses have challenged their business rates bill since 2010.
While councils do not set business rates or rule on challenges, local authorities still must set money aside in case an appeal is successful as they have to fund half the cost of any backdated refunds.
The LGA said councils have been forced to divert £2.5bn away from services over the past five years to cover the risk of business rates appeals.
Ahead of a debate in Parliament today on business rates, the LGA is calling on the government to take the financial risk from business rates appeals away from councils. That is something the Department for Communities & Local Government, as it was then known, had mooted as part of the Local Government Finance Bill before it was dropped.
Council leaders are also recommending a time limit for appeals, except in exceptional circumstances. In Scotland, for example, there is a six month time limit for businesses to appeal their valuation.
John Fuller (Con), vice chair of the LGA’s resources board, said: “Ongoing delays in tackling business rate appeals from 2010 are heaping further financial uncertainty and pressure on our local services at a time when every penny counts to give councils the best chance of protecting services over the next few years.
“It is right that a business is able to challenge their valuation if they genuinely believe it to be incorrect.
“Despite not setting business rates or ruling on appeals, councils are having to take billions of pounds away from already stretched local services, such as adult social care, protecting children and supporting businesses and boosting local growth, to cover the financial risk and uncertainty arising from this backlog of appeals. This is completely unfair.
“As we move towards a system where councils will keep more of the business rates they collect locally, communities need to be protected from the shifting of resources to address the risk of business rates appeals. With local government in England facing an overall funding gap that will exceed £5bn by 2020, this money is needed to fund vital services and help plug growing funding gaps.”