Birmingham City Council has set out its own plan for ending the recession, by allowing the nation’s big cities to take the lead.

Council leader Mike Whitby said: “The government has been bold in rescuing the banks. They must be as bold in giving the cities the freedom and the resources to secure prosperity in the future.”

As the government published its Pre-Budget Report, the city set out its own plan for getting the economy moving again.

Coun Whitby’s proposals focused on giving local authorities far more autonomy to raise funds and decide local economic policy.

Suggestions included giving city regions – big cities such as Birmingham working in partnership with their neighbours – responsibility for economic development, regeneration and transport, and allowing them to keep funds from income generated by public transport

He said councils should also be allowed to raise their own money through “Accelerated Development Zones”, where authorities are rewarded for attracting new businesses to an area by being allowed to keep the extra business rates raised.

Councils should also be allowed to provide mortgages to residents, he said.

Coun Whitby said: “The cities are the key to our national prosperity – the places where most jobs are created and where science, innovation and learning will create the new industries of the future. But for too long they have been hobbled by an over-centralised system which forces them to go cap in hand to government to fund essential infrastructure projects.  

“We welcome the government’s small steps towards devolving powers and the additional funding promised in the Pre-Budget Report.  But their response to the issues is nowhere near radical enough for the challenges we face.  

“The case for devolving to local government is made stronger by a recession, not weaker.  Only local government has the knowledge to respond quickly and effectively to specific local needs, the passion to care what happens locally and theaccountability to offer leadership to localcommunities.”

The chancellor’s statement was welcomed by Ian Austin (Lab Dudley North), the minister for the West Midlands, who said it would benefit the 376,315 small and medium-sized businesses in the region.

He said: “The government has set out a programme that takes immediate action to meet short-term priorities to support families and businesses in the region, along with a balanced fiscal programme to ensure a stable and sustainable future.”