In a landmark initiative aimed at decentralising power from Westminster, Prime Minister Andy Burnham has announced that mayors of city regions across England will receive a share of income tax revenue for the first time. This move, part of a broader strategy to empower local leaders, will also enable them to retain portions of business rates collected within their jurisdictions. While specifics regarding the allocation are yet to be finalised, the government plans to reveal further details during Chancellor John Healey’s inaugural budget presentation this autumn.
A Shift Towards Local Empowerment
Burnham’s proposal is rooted in a steadfast commitment to “bring power home” to every corner of the nation. “Under our plans, more of the taxes raised in a community will stay in that community,” he asserted, highlighting his vision for a more equitable distribution of resources. Currently, the UK stands out internationally for its centralised tax system, with a mere 5.8% of national taxes collected at a local level—far below major economies like France (20.4%), Japan (36%), and the United States (45.7%).
Historically, mayors in England have heavily relied on central government grants, but Burnham’s tenure as Greater Manchester mayor saw him advocate for a significant shift towards local tax revenue control. The proposed changes are set to begin in April 2027, when strategic authority mayors will start retaining some business rates, followed by the retention of income tax revenues from April 2028.
Concerns Over Implementation
Despite the ambitious vision laid out by Burnham, critics have raised concerns over the lack of detail in the announcement. Conservative shadow chancellor Sir Mel Stride described the initiative as “very short on detail,” questioning whether the proposed changes would generate real financial benefits for mayors without additional sources of funding. Stride warned that economically weaker areas could suffer under this new framework, potentially undermining Burnham’s stated goals.
Additionally, Reform UK’s home affairs spokesman Zia Yusuf called for a more comprehensive devolution of powers, particularly regarding the housing of illegal migrants, urging Burnham to genuinely listen to local communities’ concerns.
A New Era for Local Governance
The government is also exploring the creation of an equalisation system to ensure that areas with lower tax revenue can still receive necessary financial support. This approach would require ministers to justify why certain powers should remain with Whitehall as part of a “local first” principle, thereby reinforcing the drive towards devolution.
The reforms, which are being drafted by No 10 North in Manchester, follow a series of policy announcements during Burnham’s initial weeks in office, addressing pressing issues such as the cost of living and social care reform. Reactions among regional mayors have been mixed; Labour’s Tracy Brabin from West Yorkshire expressed optimism that local income tax shares would enhance public service funding, while Conservative Ben Houchen of Tees Valley suggested that tax cuts would be preferable, though he remains open to the prospect of retaining a share of local income tax for community benefit.
Why it Matters
Burnham’s devolution strategy represents a significant shift in the UK’s political landscape, challenging the entrenched centralisation of power that has characterised governance for decades. By reallocating tax revenues to local authorities, the initiative not only aims to bolster regional economies but also to foster a sense of accountability and transparency in how public funds are utilised. As the details unfold, the success of this ambitious reform will hinge on its ability to equitably uplift all regions, rather than exacerbating existing disparities. As such, the coming months will be crucial in determining whether Burnham’s vision translates into tangible benefits for the communities he seeks to empower.
