Burnham's devolution gamble: city mayors to get slice of income tax

Prime minister unveils radical shift away from Whitehall

Prime Minister Andy Burnham is preparing the biggest transfer of power away from Westminster in decades by handing England's regional mayors a share of income tax revenue for the first time.

The move, part of Burnham's flagship devolution agenda, would also allow strategic authorities to retain some of the business rates raised in their areas and gain greater control over housing, transport and skills policy.

Burnham said the reforms would fulfil his promise to "bring power home" and end what he sees as Britain's over-centralised model of government.

"Under our plans, more of the taxes raised in a community will stay in that community," the prime minister said, arguing that local leaders are better placed than Whitehall to drive economic growth.

Local leaders to keep more of what they raise

Metro mayors are expected to begin retaining part of their business rates income from April 2027, with a share of income tax revenues following in April 2028.

The exact amount has yet to be decided and will be set out in Chancellor John Healey's first autumn Budget.

Government sources say areas that successfully grow their economies could ultimately receive larger tax revenues, creating stronger incentives for local growth rather than dependence on central government grants.

Officials insist the reform will not alter income tax rates. The basic rate of 20 per cent and other national tax bands will remain unchanged, with the proposal focusing solely on where part of the revenue is spent.

Britain an international outlier

Supporters of the plan argue the UK has one of the most centralised systems in the developed world.

According to OECD figures, only 5.8 per cent of national tax revenues in the UK are collected and controlled locally, the lowest proportion among G7 nations.

That compares with 20.4 per cent in France, 36 per cent in Japan and 45.7 per cent in the United States.

Burnham has long advocated greater fiscal powers for local government, dating back to his time as Mayor of Greater Manchester, where he repeatedly argued that regions should rely less on Whitehall grants.

Fears poorer regions could lose out

Critics say the announcement raises more questions than answers.

Conservative shadow chancellor Sir Mel Stride accused the government of producing a headline-grabbing proposal with little detail behind it.

He warned that unless new money is found, the Treasury could simply redistribute existing funding, potentially leaving areas with weaker economies worse off.

A government equalisation system is expected to accompany the reforms to ensure poorer regions continue receiving financial support, although ministers are still working through how that mechanism would operate.

Think tank Re has proposed allocating mayors 2.5p from every pound raised through the basic rate of income tax within their areas.

'Local first' becomes guiding principle

The devolution package forms part of Burnham's wider "local first" doctrine, under which ministers will be expected to justify why powers should remain in Whitehall instead of being transferred to local authorities.

The plans are reportedly being developed through No 10 North in Manchester, with a full policy paper due alongside the autumn Budget.

The proposal has drawn support from some regional leaders. West Yorkshire Mayor Tracy Brabin said local retention of tax revenues would allow regions to improve public transport and strengthen employment and skills programmes.

Tees Valley Mayor Ben Houchen backed greater local control but said he would rather see taxes cut, adding that if given a share of income tax he would seek to return money directly to residents through rebates.

Whether Burnham's devolution revolution becomes a genuine transfer of power or merely a reshuffling of Treasury funding may depend on the details still to come.

SOURCE

HUH!

If I'd known this was his policy before he stood on Labour's manifesto at the General Election I never would have voted for th....

Oh - wait a minute...

3 minutes ago, JonnyF said:

HUH!

If I'd known this was his policy before he stood on Labour's manifesto at the General Election I never would have voted for th....

Oh - wait a minute...

I’d be more than a little surprised if you vote at all.

Precisely what’s wrong transferring budgets, and inevitably power, from Whitehall to the regions?

Apart that is from the fact devolving power and budgets to the regions was in the 2024 Manifesto and you therefore might have missed your chance to vote on the matter.

28 minutes ago, JonnyF said:

HUH!

If I'd known this was his policy before he stood on Labour's manifesto at the General Election I never would have voted for th....

Oh - wait a minute...

Here you go Jonny, you obviously forgot to read it.

https://labour.org.uk/wp-content/uploads/2024/06/Change-Labour-Party-Manifesto-2024-large-print.pdf