Local councils currently have to subsidise planning applications.

Research by Arup in February 2009 revealed that fees were approximately 10% below associated costs. The survey showed an overall average cost of £619 per application and an average fee of £563.

Councils have been unable to recover the true costs of applications because of a fixed fee charging system set by central Government.

Local authorities and developers have argued for greater flexibility in the system so there is enough revenue to cover the costs.

Under new proposals – set out today in a consultation – local councils will be given the power to set their own fees to cover costs. They will not be able to make a profit on fees but they will be able to recover the actual cost of submitting an application from those benefiting.

Decentralisation Minister Greg Clark said: “Having a system where Whitehall dictates to local councils what planning fees they can charge is very unfair for local taxpayers around the country who are left paying for the shortfall where fees don’t cover costs.

“Letting councils set their own fees is a much fairer system for both the applicant and the local taxpayer and will ensure there is flexibility in the system to recover the actual costs of applications.”

David Cook, Chief Executive at Kettering Borough Council said: “The current system of nationally set fees means that, typically, councils don’t recover the full costs of processing large commercial planning applications.

“This cost has to be met and thus results in an extra burden on local council tax-payers. The proposals in the consultation should address this.”

Simon Loomes, Strategic Projects Director at The Portman Estate added: “I welcome the consultation on decentralising planning application fees to the local level. It is essential that local authorities are properly resourced to respond in a proportionate and timely way to applications which in the main represent economic progress.”

If proposals on decentralising planning fees are taken forward following consultation, local authorities will be able to set their own fees from April 2011.