LAST April David Cameron made a final plea to voters, who were then about to decide whether their cities should have elected mayors. “Britain stands on the brink of exciting democratic change,” cajoled the prime minister. “This is a once-in-a-generation chance to change the way we run our country.”

Voters firmly rejected excitement. Of the ten big cities holding referendums last May only one, Bristol, plumped for an elected mayor. That crushing defeat seemed to stop the government’s drive to devolve power from Britain’s overmighty central state. In some ways Westminster seems to have slipped back into centralism. Eric Pickles, the local government secretary, issues diktats about rubbish collection. Nick Boles, the planning minister, harries local authorities to open up more land for building. But change is coming nonetheless. The governance of Britain’s cities is quietly being transformed, in a process that may amount to something more radical than was boldly promised last year.

The first change is that Whitehall is granting local authorities greater power over borrowing and spending. The “city deals” that do so were originally connected to elected mayors, but they are going ahead anyway. The first wave of deals, involving the eight biggest English cities after London, was announced last summer. Agreements with a further 20 smaller cities will be signed this month.

Even modest investments in local infrastructure, such as tram routes and suburban railways, are currently approved in London and paid for out of central taxation. Business rates (property taxes levied on firms) are put into a central pot and redistributed according to need. Under the city deals, Greg Clark, the cities minister, wants local authorities to keep any growth in their business-rates revenue. They can borrow against this “uplift” to build critical infrastructure, which, in theory at least, ought to provide enough revenue over time to repay the loan. This funding method, known as tax-increment financing, is common in America but has never been tried in British cities.

It could transform how they operate. “At the moment, £10 spent on boosting the economy is £10 less to spend on essential services,” says Alexandra Jones, director of the Centre for Cities, a think-tank. Guaranteed a share of the proceeds, councils should favour projects that create jobs and tax revenue. They may even become more willing to loosen planning restrictions, which keep land prices in most British cities extremely high. As part of their deals, most cities have created “enterprise zones”, which feature radically simpler planning rules.

Mr Clark describes this as a “policy of subversion”. By devolving power gradually, city by city, the government has overcome the objections of civil servants that local councils cannot be trusted with freedom. Decent city governments can be liberated to do their own thing, even as Whitehall tightens its grip over weaker ones. Hence Manchester, which has the best leadership of any big city outside of London, has the most comprehensive deal whereas Liverpool’s is fairly modest.

In Birmingham money raised against future business rates is already being put towards the redevelopment of Paradise Circus. This large area near the city’s grandiose Victorian council building is currently home to a grubby shopping plaza featuring a discount pub, a mobile-phone accessories stand and the city’s widely loathed brutalist central library. By redeveloping the library and the area around it, the council has convinced several private businesses to invest too. This, it hopes, will eventually bring in enough extra tax revenue to cover its costs.

To pay for the redevelopment under the terms of the city deal, Birmingham’s city council has had to work with its neighbours. The next project it has planned is near the city’s airport, in the nearby borough of Solihull. This is the second big change in city government. As they seek to gain more responsibility over their finances, Britain’s local authorities–all individually too small to cover a whole metropolitan area–are finally linking together to provide stronger leadership.

Londons in the provinces

The emergence of truly metropolitan government is clearest in Greater Manchester. There, ten local governments have formed a combined entity covering the urban and suburban sprawl. This authority now controls the entire transport budget—rather like the Greater London Authority—and is run by a cabinet appointed by its members. It has borrowed £1.2 billion ($1.9 billion) to invest in transport infrastructure, to be repaid with taxes “earned back” from the Treasury: the amount remitted will depend on how much the local economy grows. Several other large cities, including Bristol, Leeds and Sheffield, are considering a similar arrangement.

This revolution could go further. Lord Adonis, a prolific Labour Party thinker, argues that the next step on from combined authorities should be the creation of “metro mayors”, with cities getting a London-style leader in charge of several local authorities. More powers could be devolved, too. Lord Heseltine, a Tory grandee, proposes putting fewer conditions on central- government funding. Sir Albert Bore, Birmingham’s leader, would like a system whereby the city council would share the savings from lower welfare bills.

Anything that boosts the economic performance of British cities is welcome. Thanks to the government’s fiscal squeeze, most urban local authorities are extremely short of cash. More freedom would help them respond. In the 19th century, when depression hit Manchester, its leaders opted to build the world’s largest ship canal to attract more trade. Birmingham built an aqueduct from Wales that still serves the city. Central control since has done British cities no good: a dose of Victorian ambition might be their saviour.