'City deals' will give major cities more power over local infrastructure spending, Government says

The eight "largest and most economically important" English cities outside London - Birmingham, Bristol, Leeds, Liverpool, Newcastle, Nottingham, Sheffield and Manchester – will be granted new powers to control local budgets and invest in growth in exchange for a commitment to more efficient spending and stronger, more accountable local leadership arrangements, the Government said.

Deputy Prime Minister Nick Clegg described the new arrangements as "groundbreaking".

"Everyone in these eight core cities will feel the benefits – from young people looking for jobs, to businesses looking to expand," he said. "Over the coming months, we are transferring more and more power from Whitehall to these cities. They are the economic powerhouses of England – so it makes sense that the cities decide for themselves how to boost their local economies."

The eight cities were invited to bid for the powers that best reflected their individual needs at the end of last year. The Greater Manchester arrangement, which will see its existing local authorities brought together in the form of a "combined authority" able to take more strategic decisions with regards to public spending, was concluded in March.

The Government said that Leeds and Sheffield each planned to form new Combined Authorities involving smaller local councils, covering West and South Yorkshire respectively, while similar plans involving the seven authorities across the Newcastle economic area were also underway. Liverpool and Bristol have voted in directly-elected mayors, while the Local Enterprise Partnership in Greater Birmingham and Solihull had already established "strong private sector leadership and decision-making". Nottingham has also created a new private sector-led governance structure.

The powers devolved by the Government will allow some cities to establish self-sustaining investment funds to spend on local priority projects, reducing their dependence on central government grants. Manchester has been granted powers to 'earn back' tax from the Treasury; while Newcastle, Sheffield and Nottingham will be able to use tax incremental financing to fund critical infrastructure through the anticipated increase in business rates.

In addition Birmingham, Bristol, Leeds and Sheffield have been granted the power to set their own transport budgets while Manchester, Leeds and Sheffield will take on responsibility for commissioning and managing franchise arrangements for local and regional rail services.

Councillor Keith Wakefield at Leeds City Council said the announcement was "hugely significant" for the 11 local authorities that made up the region.

"This deal ... gives us the opportunity and the means to transform our transport system so that travel to other city regions becomes easier and faster," he said. "A better transport system will mean high productivity, lower costs and more jobs. It will also enable us to create a single economy across the Pennines. I'm looking forward to working with the other local authorities in the city region to attract investment, exploit exports and create a thriving economy."

Sheffield is to take control of its own skills budget, allowing the city to better respond to what businesses need from the local workforce, while new "apprenticeship hubs" in Bristol, Manchester, Leeds, Newcastle and Nottingham will allow local authorities to develop their own incentive schemes to encourage businesses to take on apprentices.

Councillor Julie Dore of Sheffield City Council said that its arrangement with the Government would result in 4,000 new apprentices across the region by 2016. "There will also be 2,000 more employees with the necessary skills to help our businesses and the City Region's economy grow," she said.

In Nottingham, the city's new 'Creative Quarter' was crucial to its plan to become "a city that designs and makes things once more", according to Councillor Jon Collins.

"This is a significant step forward and a bold statement that Nottingham is prepared to think differently to effect change," he said. "This Deal provides a platform for the next generation of Nottingham entrepreneurs to carve out their future, create opportunity and jobs and lead Nottingham to an exciting new future."