Birmingham and the Black Country should form a "city region" with control over housing and transport and the power to impose taxes, an influential inquiry has concluded.
A report published today calls for the creation of a "senate" of local council leaders to help Birmingham and its neighbours compete with London and the leading cities of Continental Europe.
The authors included Lin Homer, who was chief executive of Birmingham City Council while the inquiry took place.
Local Government Minister David Miliband welcomed the findings as a "useful contribution to this debate".
Other members of the inquiry included the leaders of Manchester and Liverpool city councils, and the chief executive of Sheffield City Council.
The investigation was set up by the New Local Government Network. Ministers had wanted to create nine directly- elected regional assemblies in England, but the idea has proved unpopular with voters.
More recently, Mr Miliband has been on a tour of Britain's major cities, including Birmingham, to ask how the Government could help them join the "premier league" of European cities.
The report warned that Birmingham ranks 56th among European cities for income per capita.
This places it behind not only Paris, Rome and Berlin, but also Lyon, Hamburg, Munich, Hanover, Parma, Florence and Strasbourg, among others.
It has a GDP per capita of 22,069 euros, or £14,890, while Munich has a GDP per capita of 61,360, or £41,390.
City regions would have authority over transport, economic development and planning. They would grow out of existing partnerships, such as the West Midlands Passenger Transport Authority, which represents the seven metropolitan councils of the West Midlands.
The report says: "These city regions could be led by an executive committee of leaders drawn from local authorities determined by lifestyle and demographic patterns.
"Forming a 'senate of leaders', this body would offer strategic overview and policymaking power over a range of functions . . . relating to democratic reflection of contemporary lifestyles and economic development."
And Birmingham could be one of the first places to become a city region.
The report says: "For now, radical reform is only realistic in a few areas - with the areas around Manchester, Birmingham and Liverpool being the more obvious contenders."
However, city regions must be formed voluntarily, not imposed by the Government, the report says.
It adds: "Consideration should be given to city regions being able to generate their own tax revenue contribution towards transport infrastructure."
City regions would also have control over some of the money for economic development currently spent by the regional development agency Advantage West Midlands.
The report urges Ministers to ask Sir Michael Lyons, another former Birmingham City Council chief executive, who is conducting a review of local government, to consider the creation of city regions.
Mr Miliband said: "Our cities have really turned the corner in the last 20 years. The debate on how to take them forward is vital to the future of this country. I welcome NLGN's report as a useful contribution to this debate."