At the annual conference of the Royal Town Planning Institute on Thursday, communities secretary Hazel Blears announced that the planning rules were to be changed to force councils to take into account the impact proposed developments would have on urban centres and existing shops.
Blears said the 'needs test', under which planning applicants had to demonstrate a genuine need for a particular scheme, was being ditched because it was "dysfunctional".
Only the biggest businesses were securing planning consents, she said. Too many applications submitted by small businesses were being rejected because of existing out-of-town developments in the area.
The impact test would be a much fairer system for smaller retailers in particular, she said, because applications would be judged on the impact they had on the local retail market and not how many players were already there.
"We believe small shops are the heart of town centres and local communities," Blears said.
"That's why I am taking action today to strengthen the planning rules so they better protect our small shops during the credit crunch and keep our high streets vibrant.
"The proposals we are about to bring forward should provide reassurance to the thousands of small shops up and down the country. We plan to give councils more scope to block large out-of-town developments that threaten the survival of mall shops."
Asda, the biggest opponent of the needs test, is unlikely to be happy with its replacement. However a spokesman refused to comment before seeing the full recommendations.
The move was given a cautious welcome by the ACS. "Whatever replaces the needs test needs to be as robust, if not more so," said Shane Brennan, public affairs director.
"Two large supermarkets are being built every week in the UK." A consultation will run for 12 weeks and end on 3 October. A final revised planning policy statement is expected early next year.