A TRAM system for Tees Valley moved a step closer today when ministers signalled its local authorities would get the go-ahead to form a 'mini-government' Five councils - Darlington, Hartlepool, Middlesbrough, Redcar and Cleveland and Stockton-on-Tees - are on course for permission to pool their budgets.

The so-called 'multi-area agreement' (MAA) would give the councils more muscle to press ahead with their priorities for regenerating the Tees Valley 'city-region'.

At stake, is the question of how more than £600m will be spent over ten years on the priorities identified in a 100-page strategy last year - including better housing, buses and roads.

But top of the list is the 30-year-old dream of building a Metro-style light rail scheme across Teesside.

Trams would link Saltburn to Darlington, serving major sites including Durham Tees Valley Airport, with new track laid alongside existing rails.

They would run every 15 minutes, knocking 11 minutes off the existing journey. Future plans could bring extentions to Hartlepool and Nunthorpe.

However, the MAA would only be the first step towards building the £140m Tees Valley Metro system, a business case for which is already with the department of transport (Dft).

The Dft has said it would require a "local contribution" of around ten per cent - about £15m - either from local councils, or other agencies.

The MAA will allow the local councils to pool their budgets and spend them more efficiently, but is unlikely to provide the missing funding by itself.

Separate government plans for local councils to rasie tens of millions through a supplementary business rate on local firms will not become law before 2009.

Nevertheless, the clear signal that the MAA will be approved by the deadline of June next year delighted the Tees Valley Joint Strategy Unit, which brings together the five councils.

John Lowther, its director, said: "This reflects the positive response to the city-region economic strategy and ten-year investment programme we submitted to ministers just over a year ago "It will allow us to pool resources for an integrated regeneration, transport and housing renewal programme to improve our economic performance."

Those plans also include building 5,000 new homes and improving a further 2,700, in areas - such as in South Bank, near Middlesbrough - identified as suffering from "market failure".

The city region also hopes to end the 'free-for-all' on local buses by exploiting looming legislation to gain 'London-style' powers to decide routes and fares.

The Tees Valley sub-region - along with Tyne and Wear, including northern County Durham - is among 13 that have submitted proposals for an MAA to Communities Secretary Hazel Blears.

Ms Blears said: "By strengthening city-regions, we are giving local leaders real tools to spread prosperity and improve quality of life for all."