Shoplifters facing on-the-spot fines could have the penalties written off if they promise to behave.
Retailers have criticised the new guidance on shoplifting
Fines of £80 or £50 will be deferred if the offender agrees to be bound by an Acceptable Behaviour Contract (ABC).
The British Retail Consortium (BRC) has criticised the scheme for treating criminals "like naughty schoolboys".
Shadow Home Secretary David Davis said it watered down criminal justice but the Home Office said it was a different tool to help police tackle the problem.
The penalty will be cancelled if the person behaves during the ABC which can last as little as three months.
Police were handed powers to give a Penalty Notices for Disorder (PND) in 2004 for offences such as stealing goods worth less than £200, being drunk and disorderly and wasting police time.
Mr Davis said: "It is bad enough such serious crimes are effectively being punished with a glorified parking ticket. Now we learn the government won't even bother to collect the fine."
The BRC said the move undermined the system of dealing with shoplifters even more.
BRC director general Kevin Hawkins said: "Shoplifting is a crime, pure and simple, and it should be treated as one."
The BRC recently said the introduction of fixed penalties had led to a big increase in shoplifting.
A Home Office spokesman said: "Deferred PNDs sit alongside Acceptable Behaviour Contracts. They are both tools for police and local authorities to use to promote a change in an individual's behaviour.
"Breaching the terms of an ABC can have serious consequences. The next step may be the issuing of an ASBO for example."
The Home Office issued new guidance on the use of PNDs and ABCs following a 12-week consultation.