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Sir Sadiq Khan could have his spending powers significantly boosted as Andy Burnham prepares to hand mayors a share of income tax revenue.
The new Prime Minister is set to give mayors the extra cash to pay for local infrastructure, investment, job creation and growth projects.
Under extensive devolution plans, expected to be unveiled next week, Mr Burnham will outline greater freedoms for England's 14 regional and metro mayors, the Sunday Times reported.
Local leaders will be given a share of income tax revenue but are not expected to get new tax-raising powers.
Mayor of London Sir Sadiq Khan applauds during a speech by Andy BurnhamPATraditionally the Treasury has controlled the distribution of local funding from Westminster.
But this model has been blamed by regional leaders for failing to get money into the regions and where it is needed most.
A government source told the Times: "For too long, governments have acted as if the answer to every problem sits somewhere in a Whitehall filing cabinet.
“Power should sit as close as possible to the people it affects, because the people best placed to solve a problem are usually the people living with it every single day.”
Details of the plans remain unclear, including whether there will be any "equalisation" measures in place to ensure that poorer regions outside the capital are not punished by the policy.
Mr Burnham, the former mayor of Manchester, has previously faced accusations that he is “anti-London” and will distribute money away from the capital and into northern areas.
But during his Labour leadership acceptance speech promised to be a PM for every corner of Britain and vowed “good growth in every postcode” in the country,
Sir Sadiq said this week: “I think [Mr Burnham] is having really good first few days.”
He added: “And I'm hoping over the course of the next few days and weeks, you'll see more policies from Andy showing he understands the challenges individuals, families and businesses face, and respond to that accordingly.”
Prime Minister Andy Burnham launched No10 NorthPAThe devolution changes are expected to be led by No 10 North in Manchester, which Mr Burnham launched this week along with a host of cost-of-living spending plans.
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The Prime Minister and his new Chancellor John Healey are already under pressure to say how they will sustain the raft of support packages they announced for bus passengers, energy billpayers and pub goers.
The Resolution Foundation has estimated that the pledges will cost a total of more than £2 billion in 2029/30, while reports suggest the PM is also planning interventions on social care, defence and young people this week.
Kevin Hollinrake, chairman of the Conservative Party, said: “Where’s the money coming from, Andy? We’re all dying to know.
“It is all well and good for the Prime Minister to promise to fix the issues facing our country, but how is he going to pay for them? So far, he has failed to convincingly explain how he will pay for the policies he has already announced.
“We can only conclude that more tax rises are coming down the track that families simply cannot afford.”