The people of Wales will vote in a referendum to decide whether to take control of powers over income tax, Prime Minister David Cameron and Deputy Nick Clegg have announced.
Mr Cameron and Mr Clegg said Wales would be given a new ability to borrow and have control over stamp duty revenues.
This is part of the package of measures giving more responsibility to Cardiff Bay.
The leaders of the Westminster government said decisions about Wales' future had been taken by Whitehall for too long and it had "suffered" as a result.
Under the new measures a referendum will allow the Welsh to decide on whether to take up some powers over income tax, as has already happened in Scotland.
Under the Scottish system, due to come into force in April 2016, the UK Treasury will deduct 10p from income tax.
It will give MSPs the power to decide how to raise the shortfall, opening up the possibility of lower or higher rates in different parts of the UK.
Setting out the reasons for the changes in a joint article for the Western Mail, Mr Cameron and Mr Clegg said Wales had suffered from lower living standards.
Wales has also suffered higher unemployment and greater levels of child poverty even at times when the British economy had been doing well.
Setting out how they wanted Wales to share in the economic recovery, the two men said they wanted young people in Wales to "know that there's a future for them - that they don't have to move to London or go abroad to get on in life and achieve their dreams".
Mr Cameron and Mr Clegg will meet Welsh First Minister Carwyn Jones to discuss the new devolution settlement.