Chancellor Philip Hammond has pledged up to £260m for the Borderlands Growth Deal in his Spring Statement.
The money will augment £85m over ten years recently promised by the Scottish government.
Scottish secretary David Mundell said the announcement “won’t get much attention today, but transformational long term for our communities across the borderlands”.
Lord Jim O’Neill, vice chair of the Northern Powerhouse Partnership, added that the money “will help to address the vast economic potential of the borderlands, traditionally held back by geographical challenges and historic underfunding”.
Spanning the border between England and Scotland, the Borderlands Growth Deal covers Dumfries and Galloway Council, Scottish Borders Council, Northumberland CC, Cumbria CC, and Carlisle City Council.
Among its chief interests is extending the Borders Railway – which runs from Edinburgh to Tweedbank – south to Carlisle.
Lord O’Neill said that he hoped the funding announcement “is the beginning of renewed progress on devolution across the Northern Powerhouse”, which covers the North of England, and called for “significant amounts of money” to be made available for devolution deals across the area.
“I hope other areas can show the same persuasiveness to enable the government to show it is serious about rebalancing the economy and creating opportunities for young and for businesses,” he said.