The ODPM announced the U-turn as part of a package of measures to reform the inspectorate, which has seen decision times soar to a year since the deadline was reduced to three months in September 2003.
The change will affect appeals submitted after mid-January. The government will also give the agency £1 million to recruit inspectors and clerical staff.
The inspectorate has already set up a task force to deal with the backlog of cases. It will be restructuring to place 15 per cent more staff in front-line services. It will deal with appeals geographically or in sessions rather than chronologically as it does now.
Local authorities will also benefit from the changes. Developers will have to wait 13 weeks, instead of eight, before they can appeal against non-determination of major applications.
Planning minister Keith Hill said the measures would have an immediate impact. He expected to see a substantial reduction in the inspectorate's backlog by next March.
In another major development, the ODPM has launched a further round of consultation on planning fees, with the aim of recovering the full cost of processing applications. Fees for householder applications will rise from £110 to £135. The maximum fee for large-scale development will increase from £11,000 to £50,000 - a rise of 355 per cent.
The ODPM said that a significant number of responses to the fees consultation that ended last week complained that the proposed increase for major applications of 17 per cent was not high enough.
But Pierre Williams, spokesman for the House Builders' Federation said: "These are massive increases, proposed before we see an increase in efficiency."
Deputy prime minister John Prescott launched the Planning Advisory Service this week to help local planning authorities to improve plan-making and development control. The service encompasses the Advisory Team for Large Applications (ATLAS) to help unblock major schemes.