Prime Minister Andy Burnham and John Swinney have agreed to take forward work on handing more powers to Scotland following a devolution summit in Glasgow.
The two governments will now examine how further employment support could be devolved, particularly for young people, alongside plans to give Scotland’s regions greater control over innovation funding.
The agreement emerged from the first meeting of the UK Government’s National Economic Council dedicated to the nations, attended by Burnham, the First Minister and Welsh First Minister Rhun ap Iorwerth.
Speaking after the talks, Swinney said there was “progress” to be made and confirmed that he and the Prime Minister had agreed a way forward on further devolution involving the Department for Work and Pensions.
Burnham said discussions would now continue on two main fronts – reindustrialisation and employment.
He said: “We had a good discussion today on two fronts. One around reindustrialisation and the offer of more devolution of innovation funding to the regional level.”
The Prime Minister said decisions on what new regional structures might look like in Scotland would be for the Scottish Government rather than Westminster.
He added: “It’s about creating those structures at a regional level, and that’s a matter for Scotland and Wales to decide what that looks like in both countries.
“It’s not for me to impose or try to interfere there.”
Burnham said a Scottish regional structure could ultimately be backed jointly by Holyrood and Westminster, with more innovation funding then handed down to that level.
The second area of work will focus on employment support, with Burnham highlighting the number of young people currently out of work.
He said the governments would now look at arrangements for “further devolution of employment support, particularly for young people” in Scotland and Wales.
The talks represent the first sign of movement since Burnham used a speech in Lanarkshire earlier this month to call for a new model of regional devolution in Scotland.
He has argued that devolution should not simply mean moving power from Westminster to Holyrood, but should also result in decisions being taken closer to cities and communities.
Ahead of Friday’s summit, Burnham called the proposal the “next stage of devolution” and urged the devolved governments to work with Westminster on new models of regional empowerment.
He said: “Put politics aside and work in partnership with the UK Government to develop models of regional empowerment that ensure communities can use their own strengths to unlock their potential.”
The Prime Minister has repeatedly pointed to his experience as mayor of Greater Manchester, where powers over transport, skills and economic development were transferred from Whitehall.
Opening the Glasgow summit, he said Greater Manchester had been able to “set our own path” after gaining additional powers.
Swinney had previously said he was willing to discuss further devolution but insisted any changes affecting Scotland must respect the existing settlement and be agreed with the Scottish Government.
Before the meeting, the First Minister said it was an opportunity for Burnham to “turn words into action”.
The emerging agreement could also feed into the wider debate over how Scotland is governed locally, with proposals for stronger regional structures already being discussed as part of reforms to local government.
Burnham has said he wants Scotland’s cities and regions to have access to some of the same economic tools being made available to English regions.
The UK Government announced earlier this week that £1 billion would be invested in innovation clusters across the UK over four years, with ministers arguing that areas should be able to build economic strategies around their own industrial strengths.
Burnham said on Friday that he did not want Scotland, Wales or Northern Ireland to be “left behind” as the devolution programme develops in England.
He said: “Growth can’t wait. People need to see improvements in employment and in living standards in all parts of the UK.”
The talks did not include discussion of the Rosebank oil field, with Swinney telling reporters: “We didn’t talk about Rosebank.”