London mayor Sir Sadiq Khan will be handed powers to deliver the Bakerloo Line extension and a huge upgrade to Euston station as part of the government’s push for devolution, can reveal. 

Under new plans to allow mayors to retain income tax receipts generated locally and exploit finance schemes to fund infrastructure, Khan will be able to push ahead with projects on extending the Bakerloo Line, delivering the West London Orbital and expanding Euston station, according to sources familiar with the matter.

Stratford station will also be highlighted in Healey’s Budget as having the potential to become an international hub for travel, after the London mayor revealed in that he was exploring how cross-Channel train services could run from the station. 

Alongside John Healey’s Budget, a full policy paper on devolution will be published by the government. 

The effort to spread financial powers to metro mayors, which is referred to as the “biggest transfer of power out of Whitehall in a generation”, is one of Andy Burnham’s central levers to improve the UK’s growth prospects. 

Burnham and Healey’s devolution strategy details how mayors will be able to reap the benefits of growth created locally via retaining a higher share of rising local income tax receipts and a business rates supplement. 

The government will also allow tax increment financing, a public financing method that uses future revenues from property taxes on developments to pay for initial costs, to pay for regeneration projects and new infrastructure. 

Estimates suggest that around £10bn in extra borrowing capability from new tax powers will allow Khan to give the green light to major transport lines he has long advocated for. 

Devolution brings Khan’s Bakerloo Line dream to reality

Khan has previously urged governments to provide funding to extend the Bakerloo line from Elephant and Castle to Lewisham, while new cash would also create an additional station at New Cross Gate and build two new stations at Burgess Park and Old Kent Road.

The West London Orbital project would involve the creation of four new London Overground stations between Hounslow and Hendon.

Meanwhile, a £50m upgrade at Euston station has faced questions over funding ahead of plans to run HS2 through the terminal. New powers handed to the mayor will give Khan further power to raise and invest sums on infrastructure. 

“This is real devolution that we haven’t seen since the start of the mayoralty in its modern form,” a source close to the London mayor said. 

The Treasury has been approached for comment.