TORY plans to beef up the powers of the region's directly-elected mayors should include allowing them to hike business taxes, a study says today.

David Cameron is also urged to permit the mayors to balance their budgets over a four-year cycle - giving them greater flexibility to raise and lower council tax.

Meanwhile, an elected mayor of Newcastle, and of other 'city-regions', should be handed an automatic peerage to sit in the House of Lords, the New Local Government Network (NLGN) think-tank said.

The move would tackle the chronic "under-representation" of figures from outside the South East of England - and even allow them to introduce their own private Bills, the NLGN said.

And candidates should be chosen using a US-style "primaries system", to allow people who are not members of any political party to stand.

Under the NLGN model, Ray Mallon (Middlesbrough), Stuart Drummond (Hartlepool) and Linda Arkley (North Tyneside) would enjoy powers to: * Introduce a 'supplementary business rate' of up to four pence in the pound, with the funds raised to be spent on economic development.

* Balance their budgets over a four-year period, allowing them greater financial flexibility to raise and lower council tax.

* Appoint, and dismiss, the chief executive of their local authority.

The NLGN model said mayors needed to be far more powerful than they currently are, so "it is clear to everyone where the buck stops".

The beefed-up responsibilities were necessary to prevent them having "less power than the Mayor of Moscow under Stalin" - a complaint often made by ex-London mayor Ken Livingstone.

The report concluded: "Mayors, with their local mandate, are well placed to be granted wide-ranging delegated powers to help transform the way communities and citizens are served."

The Conservatives have pledged a mass 'Referendum Day', with compulsory polls in England's 12 biggest cities, including Newcastle. Other towns and cities will be urged to join in.

The powers to be granted by a future Tory government are yet to be fully fleshed out, but will include housing, planning, regeneration and - possibly - transport.

The mayor would also abolish the city council's highly-paid chief executive, to enjoy "hands-on power" to hire and fire staff, decide how the council was run and direct spending.

However, the Tories face a tough fight to persuade residents in other North-East towns to vote for a mayor. Under Labour, polls have been lost in Darlington, Durham City, Sedgefield and Sunderland.

Arguing for a guaranteed seat in the Lords for Newcastle's mayor, the NGLN pointed out that more than 40 per cent of current peers were from London and the South East.