The north-east and the Tees valley will be offered powers in return for agreeing to be run by directly elected mayors

Two more city-region devolution deals, covering the north-east and the Tees valley, are to be announced by the chancellor, George Osborne.

The regions will be offered devolved power in return for agreeing to be run by directly elected mayors.

Osborne will claim the announcements show his northern powerhouse concept is being picked up by Labour-led councils and changing the democratic face of the English state, even if there is continued Labour opposition at national level.

The new deals follow agreements reached by the Treasury with Greater Manchester and Sheffield. They do not appear to match the previous deals in terms of scale, but the Treasury says they represent a “significant financial boost, with the north-east in line to receive £30m a year over the next 30 years, and Tees valley receiving at least £15m a year over the same period.”

In addition, the two mayors will have the power to raise the business rate, so long as it has the support of the local business community. The mayoral elections will take place in 2017.

The Treasury said the north-east deal provides for the transfer of significant powers over transport, strategic planning, employment and skills from central government to the region.

It enables the North East Combined Authority to create an investment fund focused on supporting the region to compete in international markets, with an initial allocation of funding for capital financing of at least £30m a year for 30 years. It paves the way for further devolution over time, and for the reform of public services, including health and social care, to be led by the north-east.

The Tees valley deal also provides for the transfer of significant powers for employment and skills, transport, planning and investment from central government to the region. It also enables the Tees Valley Combined Authority to create an investment fund, through a 30-year initial allocation of funding for capital financing of at least £15m a year.

In addition, Tees valley will have access to the local growth fund and will benefit from new enterprise zones, subject to the current bidding round.

Both deals require support from each of the local councils within their respective regions, as was the case with the deals for Sheffield and Greater Manchester. It is not necessarily certain that the constituent councils will all back the deals.

Osborne said: “Our devolution revolution is gathering an unstoppable momentum, and I am delighted that again the northern powerhouse is leading the way.

“These historic agreements are thanks to the hard work and vision of the civic leaders of both the north-east and Tees valley, who have worked with me to embrace a once-in-a-generation opportunity that will change the shape of local government for ever in their regions.

“The old model of trying to run everything in our country from the centre of London is broken. It has led to an unbalanced economy and made people feel remote from the decisions that affect their lives. It has not been good for our democracy or our prosperity.

Kevan Jones, the Labour MP for North Durham, accused the government of leaving councils with no choice. In the Commons, he said: “It is obvious why the Government want mayors. In certain areas ... they are hoping to break up the powers of locally elected Labour local authorities in the hope that, if they have an elected mayor, they will either get an independent or someone who claims to be independent but is actually a member of the Conservative party.”

He said ministers hoped to ensure mayors were blamed for spending cuts, which would in fact be imposed by the government at Westminster. Local people should be given a choice about whether they want a mayor or not, he added.

Unless the north-east accepts an elected mayor, no devolution will take place,” he claimed. “That is a take-it-or-leave-it provision; it is an imposition by any other name. [James Wharton, the minister for the northern powerhouse] should admit that he wants to impose an elected mayor on the north-east irrespective of what local people or local politicians want.”

The deal with the North East Combined Authority covers seven councils: Durham, Gateshead, Newcastle, North Tyneside, South Tyneside, Northumberland and Sunderland.

Tees Valley Combined Authority covers the area hit hard by the closure of the Redcar steel works. The five constituent local authorities are Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-On-Tees.