In a major breakthrough, the Government says the £30m-a-year devolution deal for South Yorkshire can go ahead even if Barnsley and Doncaster decide to join a wider agreement after 2022.
The deal, which was originally drawn up with George Osborne in 2015, collapsed two years later after the two councils pulled out in favour of the proposed One Yorkshire plan favoured by other political leaders in the region.
But in March Doncaster, Barnsley, Sheffield and Rotherham, with Sheffield City Region mayor Dan Jarvis, finally reached an agreement where the two breakaway councils would rejoin the devolution deal until the end of the current mayoral term in 2022.
At this point, councils who do not want to remain part of the deal can join an alternative arrangement, such as One Yorkshire, and those that remain will benefit from the same powers as before.
Previously, the leaders of Doncaster and Barnsley councils, Mayor Ros Jones and Sir Steve Houghton, had been unwilling to support the arrangement if it did not allow them to pursue a Yorkshire-wide devolution deal.
And in the House of Lords, Minister Lord Bourne said Minister have now indicated that "they are ready to progress their deal along the lines they have proposed and, recognising the strength of the Yorkshire identity, to consider a localist approach to devolution elsewhere across Yorkshire".
Responding to a question by Lord Kirkhope of Harrogate, he said: "We are very pleased with the progress being made in relation to Sheffield.
"My right honourable friend the Secretary of State has written to the Sheffield City Region leaders indicating that we are prepared to allow councils that do not see their future in that city region to join an alternative, wider Yorkshire devolution group after 2022—subject to satisfying the usual tests."
Without the agreement of Doncaster and Barnsley, the deal was not previously able to be implemented in full and metro mayor Mr Jarvis was unable to utilise the promised powers and funding.
The development will raise hopes that Yorkshire will soon start to get more control over funding and decision-making after years of deadlock where areas such as Manchester and the Tees Valley have agreed devolution deals.
But the Government has previously said a One Yorkshire plan - where a single mayoral authority is created for the region of 5.2 million people - does not fit its criteria because it is too diverse.
Northern Powerhouse Minister Jake Berry suggested earlier this year that he might consider smaller 'city region' deals in Yorkshire.
Lord Kirkhope said in the House of Lords: "Although I am delighted that at last there is progress on devolution, I hope my noble friend will acknowledge that the economy of Yorkshire is equivalent to that of Scotland, and that 75 per cent of those who reside in Yorkshire identify with that enormously important brand, as do all our national and international contacts.
"Therefore, there should be no delay in allowing One Yorkshire to proceed, even if it does so in parallel with the Sheffield City Region."
Liberal Democrat peer Lord Newby said: "The Minister says that the Government are taking things forward in a meaningful way. They are not actually taking things forward in respect of any part of Yorkshire whatever, bar Sheffield.
"On what basis do the Government feel that they can continue simply to turn down the expressed wishes of virtually every local authority in Yorkshire for a One Yorkshire deal?"
Lord Bourne replied: "We are looking at the prospects and possibilities for all of Yorkshire. Discussions are going on with officials about the way forward. I am sure the noble Lord will welcome what has happened in Sheffield, as I know many other Members will.
"That is very welcome and it is within the context of looking at the wider Yorkshire position that we are moving things forward, which is to be welcomed."