Manchester to get greater powers
Cities could be given greater freedoms and more powers under plans being set out by the Government, with Manchester the first to benefit, George Osborne said.
Ministers hope the reforms, which include an elected "metro mayor" for the whole of the Greater Manchester region, will allow cities in the north to become an economic powerhouse to rival London.
As part of the reforms the post of police and crime commissioner for Greater Manchester Police - established by the coalition Government - would be scrapped and replaced by the new elected mayor.
Mr Osborne said: "This is a massive moment for the north of England and our plan to build the Northern Powerhouse.
"After several months of private discussions with local representatives from all three parties, I have reached agreement with the civic leaders of Greater Manchester to create the first metro-wide elected mayor outside of London.
"This will give Mancunians a powerful voice and bring practical improvements for local people, with better transport links, an Oyster-style travelcard, and more investment in skills and the city's economy.
"I want to talk to other cities who are keen to follow Manchester's lead - every city is different, and no model of local power will be the same.
"The Northern Powerhouse is becoming a reality. We plan to make major investments in northern transport and science, now we have agreement on the first metro area mayor.
"This is what we've achieved in just a few months. Giving cities power is part of our long term economic plan to reduce the decades-old gap between north and south, London and the rest."
The Government will legislate to enable the changes, with the potential for the mayoral election to take place in 2017.
The Greater Manchester Combined Authority (GMCA) eventually hopes for full devolution of all £22 billion of public spending in the city.
GMCA vice chairman Sir Richard Leese said: "Greater Manchester has been in the vanguard of the national devolution debate.
"It was clear that an over-centralised national system was not delivering the best results for our people or our economy.
"We are extremely pleased that we can now demonstrate what a city region with greater freedoms can achieve and contribute further to the growth of the UK.
"Our ultimate ambition is for full devolution of all public spending in Greater Manchester, currently around £22 billion a year, so that we either influence or control the whole amount.
"We recognise that this cannot happen overnight and there needs to be a staged approach based on evidence that devolution delivers increased economic growth and better public services.
"But today's settlement is a huge move forwards and a road map for the future."
Mr Osborne told the BBC the plans were "one of the biggest changes to civic governance in out country's history" and would help bridge the north-south divide.
"It is a big step towards creating that northern powerhouse so that the cities in the north have powerful voices, have control of their own budgets, make sure that local people have their voices heard.
"These are all major steps towards redressing what I think is a big imbalance in our country, that gap between north and south which has been with us for decades."
The Greater Manchester mayor will be given control of a £300 million housing investment fund, strategic planning powers and responsibility for a reformed "earn back" deal which allows the city to receive up to £30 million a year for the growth generated by its economy.
Responsibility for policing will pass to the metro mayor, in the same way that the mayor of London performs the role in the capital.
Greater Manchester Police and Crime Commissioner Tony Lloyd said: "Too many people are put off politics by the irrelevance of a Westminster parliament a million miles from their own lives.
"I am bound to welcome the transfer of powers, responsibilities and resources to Greater Manchester and bringing important decisions closer to home.
"For this to work it's important that all areas of Greater Manchester benefit, and not just the city itself.
"I will continue to work alongside the council leaders to negotiate with central government the best deal for our region but we must ensure that what is agreed is democratically accountable to the people across Greater Manchester and carries legitimacy in their eyes."
Shadow communities and local government secretary Hilary Benn said: "The Tories will tell you that everything has been fixed and the country is on the right track.
"But people in towns and cities across the country are feeling the pain of the longest cost-of-living crisis in a century.
"Labour has radical plans to pass an English devolution act and transfer £30 billion over five years from the centre back to city and country regions to boost economic growth and to give them 100% of the additional business rates revenue generated by growth to invest in building further success in our regions.
"Communities are crying out for more powers, but the Tories are playing catch-up on devolution and failing to push real power down from Whitehall.
"David Cameron and George Osborne have also hit the areas of the country with greatest need, including our major cities, with some of the biggest spending reductions while a handful of the wealthiest local authorities have been given more money to spend. Only Labour is offering devolution, financial reform and a fair deal for England."
Campaign for Better Transport spokesman Stephen Joseph said: "There's a very welcome consensus that action is needed to give our big cities high-quality public transport networks.
"It won't matter to most passengers whether that comes from elected mayors or from transport operators working together more closely. They just want to see investment in better bus, rail and tram networks.
"We look forward to details from operators and authorities about timescales and fares, and will be keen to work with all of them to get the real improvements promised."