Regional mayors could be given control of a share of income tax to invest in their areas under plans set out by Rachel Reeves.
The Chancellor said the move would not increase the tax burden but would share existing tax revenues with regional leaders, rather than the Exchequer controlling the cash.
She said officials have been asked to draw up plans which would be set out at the budget in the autumn.
Giving the annual Mais Lecture at Bayes Business School in London, she said: “I have asked my officials to work with mayors and businesses to develop a road map for future fiscal devolution to be published at this year’s budget.
“This will set out plans to give regional leaders control of a share of some national taxes which have, for too long, been allocated by central government.
“They will look at income tax alongside other taxes, with reforms initially targeted at those places that have the greatest capacity to deliver them and the greatest potential to benefit.”
The Chancellor also set out plans for “city investment funds” backed by £2.3 billion of funding, focused on northern England and the West Midlands, giving regional leaders control of “long-term, self-sustaining capital” to invest, with a commitment to the retention of business rates.
