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Taxpayers in England and Wales are losing out on services worth £1.5m a month because of "outdated" licensing laws, councils say.

The Local Government Association said a 2011 parliamentary act giving authorities the ability to charge pubs, clubs and shops more for licences should be implemented straight away.

The provision is not due to come into force until 2014.

The government said it would bring in the changes "as fast as possible".

Under the current system, councils charge a nationally set rate for processing licensing applications.

The LGA found this did not reflect the variation in costs for inspections and other checks, depending on the size and type of premises.

It was costing councils £1.5m a month in lost revenue which could be spent on services such as libraries, bin collections and street cleaning.

The LGA urged ministers to bring in the rule changes passed by Parliament in the Police Reform and Social Responsibility Act now, rather than in 2014, as planned.

Mehboob Khan, chairman of the organisation's safer and stronger communities board, said: "Councils want to support good local pubs but cannot be expected to continue picking up the tab for licensing fees which are outdated and not fit for purpose.

"There is common ground among councils and the industry on the need for reform, along with a growing body of opinion that nationally set fees are unfair, and some even say illegal, but the government continues to drag its feet and break its promise to allow locally set fees."

He added: "It is unacceptable that local authorities are being hit with funding cuts on one hand and then left with no choice but to waste vital money which could be spent on filling potholes, paying for libraries, caring for the elderly and protecting children."

The Home Office is hoping to make the changes by next summer.

A spokesman said: "The government has acted swiftly to give local councils much stronger powers to tackle irresponsible premises and cut red tape, including enabling them to impose a levy on businesses which sell alcohol late at night.

"The introduction of locally set licensing fees affects a wide range of businesses and community groups and we need to get it right. The government remains committed to introducing locally set licensing fees and will progress this as fast as possible."