From Birmingham to Liverpool, recent battles over tram schemes and regeneration funding serve as a clear reminder that England’s cities lack financial power.

Big economic development decisions are taken by Whitehall ministers and unelected regional quangos. Policymakers agree cities need more powers, but there’s no consensus on how to devolve.

England’s biggest city-regions need more financial powers to promote economic growth. Devolving regeneration, transport and skills budgets to the city-regional level in Greater Manchester and Greater Birmingham, overseen by directly-elected city-region mayors, would offer a bold experiment in financial devolution.

But why should economic development functions and funding be devolved? The evidence shows that scale matters. Major regeneration projects, transport schemes and skills initiatives have a wide-ranging impact. Local authorities are too small, and regions too big, to deliver a step change in economic growth.

City-regions more closely match functional economic areas – and therefore offer a better chance of achieving results. Regional development agencies, learning and skills councils and other quangos should let go of functions that city-regions are best placed to deliver.

In order to promote economic growth, city-regions need both tax and spend powers. This could be achieved by creating ‘city-region contracts’, negotiated between local actors and central government.

These would devolve regeneration, transport and skills budgets from central and regional government bodies. At the same time, city-regions should have modest revenue-raising powers, such as the option to add a 5% supplement to business rates to be spent on transport improvements.

Financial devolution would also deliver better urban leadership. Currently, all but the most devoted city politicians set their sights on national office, and good local officials are hard to retain. This isn’t the case in countries where cities have the power to control their own destiny.

In England’s two largest city-regions, Greater Birmingham and Greater Manchester, devolved city-regional economic development budgets would top £600m per year. This level of devolution requires a radical change in accountability – and directly-elected city-region mayors are best placed to make it work.

Mayors pass four key tests: they have democratic legitimacy, ensure clarity, develop strategic visions, and take tough delivery decisions. As the London example has shown since 2000, directly-elected mayors with economic development powers can take important investment decisions and promote growth.

Financial devolution must be selective, with the biggest city-regions first. Five other large urban areas – Liverpool, Newcastle, Leeds, Sheffield and Bristol – could follow.

But smaller cities and towns, outside the big city-regions, need to accept that they will not get the same powers. Devolution cannot move at the same pace for all areas, because this would hold our biggest city-regions back. Different places need different degrees of financial autonomy, proportionate to their economic importance.

Yet smaller cities and towns also need more financial flexibility. Establishing ‘economic development contracts’ within local area agreements would give local authorities greater discretion over regeneration spending. This would help to unlock a range of existing powers – from wellbeing to prudential borrowing – and overcome barriers to growth.

So what next? The forthcoming local government white paper, the Lyons Inquiry and the comprehensive spending review are not yet set in stone. It’s time to broaden the debate, and to challenge ministers to give city-regions the power to grow. A bold experiment in financial devolution is needed.