Treasury officials have begun talks with Birmingham about agreeing a major funding deal similar to the £1.2 billion package agreed with Greater Manchester, Chancellor George Osborne has revealed.
Mr Osborne welcomed the announcement that local authorities in the Black Country and Birmingham are to create a combined authority, pointing out that the Manchester deal was only approved because 10 local councils joined forces to create a "Greater Manchester" body.
And he dropped a heavy hint that he wanted the Black Country and Birmingham to agree to create a directly elected mayor, again following in Manchester's footsteps.
The Chancellor was speaking to the Birmingham Post at Westminster following the announcement earlier in the month of a historic deal with Greater Manchester which will allow the region to take control of a £500 million skills budget, a new £300 million housing fund and build a £450 million tram scheme funded from the proceeds of economic growth.
In return, they agreed to create an elected mayor to oversee the ten authorities.
MPs including Black Country MP Margot James (Con Stourbridge) have pressed Mr Osborne to begin talks on a similar deal with Midland councils.
Asked whether talks had begun, Mr Osborne said: "My team are talking to Birmingham. I am willing to work across party lines to get what is right for Birmingham and the West Midlands.
"It's really interesting how the authorities are now talking about coming together in a more combined way. Of course, what happened in Greater Manchester followed the creation of the combined authority and the effective working of that combined authority.
"And that has not happened to the same extent in Birmingham and the West Midlands. But there is now real progress on that front, which we are engaging with."
He added: "Certainly what is available for Manchester is the kind of thing that will be available to Birmingham and the surrounding areas. And that's the conversation we want to have.
"There is no one size fits all model. But I am saying that if you want a really big transfer of powers to a big metro area then I think an elected mayor is part of that package."
He added: "I am a believer in improving and strengthening the civic leadership of these cities... I think cities of sufficient size - metro areas – do better when they have directly elected mayors.
Mr Osborne also announced plans to draw up a long-term economic plan for every region of the country before his Budget statement, likely to be in March next year.
He warned that London "threatens to dominate our economy more and more" if action is not taken to boost the rest of the country.
The Chancellor said: "I think we address it not by pulling London down as some would suggest, but by building the rest up."
Mr Osborne said he planned to develop economic plans for every part of the country between the Autumn Statement, on December 3, and his Budget statement next spring.
"Between the Autumn Statement and the Budget we are going to be setting out long term economic plans for different parts of the country – specific plans for the South West, the Midlands, the North West and across the whole country – so that we really have specific and tailored set of things that reflect the strengths of different parts of the country and the need for specific transport improvements, the science, the learning we can bring to those areas.
"I will be travelling across the country to set out those long term local economic plans for the different parts, and bringing it all together in the budget before the General Election."