A five pence mandatory charge for single use carrier bags will be introduced from autumn 2015 in England.
Following the example of Wales, Northern Ireland and shortly Scotland, England will introduce the fee when people require single use carrier bags in stores.
However, small businesses with less than 250 employees will be exempt from the charge. It is expected that the businesses will follow the Welsh model under which retailers voluntarily give the profits to charity.
The Government also intends to incentivise the use of biodegradeable bags and a new high standard for these products will be developed with manufacturers.
Bags that meet this standard will be exempt from the charge.
Deputy Prime Minister Nick Clegg announced the measure at the Liberal Democrats’ annual conference in Glasgow.
He said: “Plastic carrier bags blight our towns and countryside. They take hundreds of years to degrade and can kill animals.
“This is not a new problem. We’ve waited too long for action. That’s why I am drawing a line under the issue now. The charge will be implemented sensibly – small businesses will be exempt.
“We will discuss with retailers how the money raised should be spent, but I call on them to follow the lead of industry in Wales and donate the proceeds to charity.”
Conservative Peer and Environment Minister Lord de Mauley added: “We have all seen the effects of plastic bags caught in trees and hedges or ending up in rivers where they harm animals.
“Introducing a small charge for plastic bags will make people think twice before throwing them away. Year on year, the number of bags issued by retailers has been rising. Without a charge, the problem could escalate out of control and see our environment and animals suffer enormously.
“There are also plans to incentivise businesses for bringing biodegradeable plastic bags to market in England. Provided the bags meet the required criteria, these could be exempt from a charge.”
Last year, over 7 billion carrier bags were given out by supermarkets in England.
Similar charges in Ireland, Wales and Switzerland have led to an 80 per cent reduction in the number of bags used.