Labour ministers are exploring plans to hand business rates holidays to small businesses across more than 280 "Pride in Place" neighbourhoods.
It comes as the Government attempts to counter Reform UK's growing electoral momentum.
Treasury officials and ministers at the Ministry of Housing, Communities and Local Government have been holding discussions over a targeted tax relief scheme for enterprises operating in the designated areas.
The neighbourhoods, each due to receive £20million in funding over 10 years, were selected using measures linked to deprivation and community cohesion.
Many of the constituencies are currently represented by Labour MPs but are projected to be vulnerable to Reform UK at the next general election.
Government sources said Sir Keir Starmer views the Pride in Place programme as one of the defining policies of his premiership.
The wider initiative represents a £5.8billion investment programme, with funding announcements delivered in several phases.
Each selected neighbourhood is overseen by a board made up of local representatives, although sitting MPs retain veto powers over the appointment of board chairs and maintain influence over spending decisions.
The boards are permitted to purchase abandoned public houses and vacant retail units before converting them into community-run facilities
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Funding can also be directed towards transforming unused land into parks and sporting amenities, with spending decisions made at a local level.
Earlier rounds of selections were based primarily on deprivation statistics, although the methodology was revised ahead of the March announcements.
Updated criteria included survey responses measuring whether residents believed people in their neighbourhood worked together to improve the local area, with only communities ranking in the bottom fifth qualifying for support.
The May local elections dealt a significant setback to Labour across many of the targeted neighbourhoods.
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Reform have hit back at the rumoured proposals
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Of the 99 Pride in Place locations which went to the polls, Reform UK secured victories in more than half.
Labour's representation fell sharply from around two-thirds of contested seats to approximately one in seven.
Most of those losses came directly against Reform UK candidates.
The process used to identify Pride in Place areas has also attracted criticism after ministers altered the deprivation criteria ahead of this year's local elections.
Fresh guidance is expected to require more funding to be spent with local suppliers, while some political representatives on decision-making boards could be replaced by business leaders.
Reform UK criticised the initiative in strongly worded terms.
Sources within the party described the funding as "meaningless" and "a few small bungs while illegal immigration runs rampant and taxes rise even further".
The Government defended the programme and said: "Our £5.8billion Pride in Place programme is supporting communities across England including helping businesses by revitalising high streets and putting power into the hands of local people."
The proposed measures would mark the first time tax reductions have been considered as part of the initiative.
Targeted business rates relief already exists through freeports and investment zones, which offer exemptions lasting between five and 10 years.
However, the latest proposal would focus support on small urban neighbourhoods with populations of several thousand residents rather than larger industrial or technology developments.