The new powers will allow councils to raise funds against expected increases in business rates created by new developments.

Clegg confirmed plans for Tax Increment Financing during the keynote speech to his party’s conference today.

The move follows years of lobbying by trade bodies like the British Property Federation.

BPF chief executive Liz Peace said: “We are delighted that government has taken such a far-sighted step to ensure that new infrastructure – which will be vital to rebuild the UK economy – can be delivered, even at a time when public funding is scarce.

“Ministers should be congratulated for offering industry what would appear to be absolutely brilliant news, although obviously the devil will be in the detail.

“A huge amount of work and expertise has gone into lobbying for TIFs, over a campaign lasting many years. We look forward to working with government to ensure that the emerging TIF regime is workable and effective.”

Full details of how the scheme will work will be outlined in next month’s Comprehensive Spending Review.

Clegg said: “We will be giving local authorities the freedom to borrow against those extra business rates to help pay for additional new developments.

“Our leaders in Sheffield say it could allow the redevelopment of derelict mines in the Don Valley; our leaders in Newcastle believe this could help them create a new science park; in Leeds they argue the Aire Valley could be transformed.

“But whether in Newcastle, in Sheffield, in Leeds or indeed in every city in the UK. What matters most is that finally, they will be in the driving seat, instead of waiting for a handout from Whitehall. Local people, local power, local change.”