Neighbouring councils or even private organisations could also be free to compete with the local authority to process planning applications in a planned radical shake up of the planning process.

The proposals are designed to boost housebuilding and speed up the planning application process.

Developers will have the choice of whether to submit their plans to the local council, a competing council or a government approved organisation that would process applications up until the decision point.

Councils will also be able to offer the fast-track planning application service – either through competition pilots or potentially through devolution deals.

Decision-making on planning applications would remain with the local council to ensure decisions are taken locally and maintain the democratic link between local people and decision makers.

Communities Secretary Greg Clark said: “Council planning departments play a vital role in getting local housebuilding off the ground, but for too long they have had no incentive to get things done quickly or better, resulting in drawn out applications and local frustration.

“These proposals will be a boost for house builders looking to build much needed new homes for hard working families and first time buyers, and for local people looking to get a planning permission for home improvements through their local council quicker.”

Historically councils have had a ‘closed market’ in handling planning applications, with limited incentive for innovation and efficiency.

Research studies over the last three decades in the UK and abroad suggest there are cost savings of up to a fifth for competitively tendered or shared services.

A consultation on the competition pilots and fast track services will be published today and includes proposals to make any future increases in councils’ fees for processing planning applications dependent on their performance in terms of speed and quality of decisions.

Further details on how the pilots will run will be published after the consultation has closed.