Business chiefs are calling on John Healey to hand Lord Sadiq Khan new financial powers to unshackle key transport projects in London.

Ahead of the Budget on October 28, they appealed to the Chancellor to allow City Hall to keep more of the huge sums in business rates raised in the capital.

They also argued that the Mayor of London should be given new powers to borrow against future revenue from transport and other schemes.

They stressed that this could kick-start funding for developments such as the Bakerloo line extension and West London Orbital, creating more than 20,000 jobs and paving the way for 36,000 new homes.

John Dickie, chief executive at BusinessLDN, said: “What matters most in this Budget is maintaining fiscal stability, so keeping a tight grip on spending and avoiding tax increases that undermine Britain’s competitiveness.”

However, he also emphasised: “The plans to rewire the state through greater devolution have great potential.

“They promise an improvement in delivery of public services and crucially give local leaders the ability to drive forward the infrastructure, housing and education that their communities and businesses need.

“Allowing more of the tax revenues raised locally to be retained locally will be key to enabling and incentivising decision-making that drives and unleashes growth.”

Lord Khan is already in talks with the Government about creating a Business Rate Retention Zone to raise funds for a £20 million plan to open Stratford International Station in east London for cross-Channel rail services.

The business group, which represents more than 170 major employers in the capital, believes that city-regions with a proven track record, such as London and Manchester, should be empowered to borrow against future revenue streams without requiring case-by-case approval from the Treasury.

Such a reform would encourage investment in growth-boosting infrastructure, it argued.

In its Budget submission, BusinessLDN also urged the Chancellor to:

* Boost London’s housing market by cutting stamp duty on new homes by capping it at 1% for all first-time buyers and downsizers

* Encourage the hiring of young people including through an employer National Insurance contributions holiday and increased Employment Allowance for firms that take on unemployed 18-24-year-olds

* Press ahead with a third runway at Heathrow and the extension of the Docklands Light Railway to Thamesmead

Mr Healey has faced last minute calls not to target banks in the City with a £2 billion-a-year tax rise as he seeks extra funds to ease the cost of living for millions of households struggling to pay their bills.

However, the Chancellor, who was hit by a blow with inflation rising to 3.5%, was expected to press ahead with the raid on the Square Mile.

He has ruled out increasing capital gains tax.

He is also not expected to lower the threshold for properties caught by the “mansion tax” from £2 million to £1.5 million, a levy which will hit London particularly hard.