Councils are to be given the power to charge utility companies up to £2,500 a day to dig up roads as part of an effort to cut the number of unnecessary traffic jams, the Government has said.
Ministers hope the plans will cut congestion on the roads as engineers will be forced to carry out work quicker and when the roads are quieter.
Under the lane rental scheme announced by Transport Minister Norman Baker on Thursday, utility companies will be charged a fee if they carry out work during rush hour when they cause the most disruption.
The pilot scheme will operate in one city and two other areas and councils can apply to be part of it.
In a statement, Mr Baker said: "Lane rental would involve the local authority applying a daily charge where street works obstruct traffic at the busiest times, providing a clear financial incentive for works to be carried out in less disruptive ways.
"Lane rental charges would need to be targeted on those streets where works cause the greatest disruption, and would need to provide a genuine opportunity for works promoters to avoid charges by carrying out their works at less disruptive times."
Mr Baker said permit schemes for utility companies were working well but the Government wanted to look at further options.
However, he insisted the charges must be "proportionate" to the costs of congestion. Revenue raised from the scheme must be used by councils to pay to reduce further road work congestion.
He added: "It is incredibly frustrating to find vital roads being dug up in the middle of the rush hour or, even worse, traffic lanes closed when no one is even carrying out any work.
"This disruption is not only inconvenient but very expensive, with roadworks-related congestion costing the economy an estimated £4 billion a year, which is why we are taking firm action."
© 2012 Press Association