Pickles said a centrally run "safety net fund" would provide support should a council's income drop below a set baseline, protecting areas which suffer a downturn.
Pickles, said: "The current flawed system of government handouts to local authorities encourages a begging bowl mentality, with each council vying to be more deprived than its neighbour.
"Our reforms will allow councils to stand tall, and reward them for supporting local jobs and local firms. All councils, including the least prosperous, have the opportunity to gain from this system.
"These new laws and reforms deliver an opportunity for a £10 billion boost to the wider economy, and more business rate revenues for councils. Councils will have a strong incentive to go for growth, generating more money to support frontline services, help pay off the deficit and still protect vulnerable communities."
A report by the Centre for Cities, published last year, argued that the reforms should allow councils to retain up to 60 per cent of business rates generated in their area, in order to incentivise the development needed for economic growth.
However, Centre for Cities chief executive Alexandra Jones welcomed the announcement. She said: "This will provide a real incentive for local government and planning authorities to bring forward new development to allow growing businesses to expand and new businesses to come to England."