In a groundbreaking move aimed at decentralising power in England, Prime Minister Andy Burnham has announced that mayors of city regions will receive a share of income tax revenue for the first time. This initiative is part of Burnham’s broader objective to shift authority from Westminster to local leaders, promising a more equitable distribution of funds across the nation.
A New Era for Local Governance
Burnham’s announcement marks a significant shift in the UK’s local governance framework. Alongside the income tax share, regional mayors will also be permitted to retain a portion of business rates generated in their districts. This change is intended to empower local authorities with increased control over essential services, including housing, transportation, and skills development.
The specifics of this revenue-sharing arrangement, including the exact proportion of taxes that mayors will receive, are yet to be finalised. More details are expected to emerge when Chancellor John Healey presents his inaugural budget later this autumn.
Economic Concerns and Criticism
Despite the optimistic outlook from Burnham, critics have voiced concerns about the lack of concrete details surrounding the plan. Some fear that regions with underperforming economies could be left behind, exacerbating financial disparities rather than alleviating them.
Burnham, however, remains steadfast in his belief that this initiative will “make good” on his commitment to “bring power home” to every community across the country. He asserted, “Under our plans, more of the taxes raised in a community will stay in that community,” positioning the reform as a vital step towards economic growth.
Historically, the UK has been one of the most centralised countries regarding tax revenue collection, with only 5.8% of national taxes raised at the local level—significantly lower than other G7 nations. Burnham’s administration aims to address this imbalance, allowing metro mayors to have a more direct stake in their local economies.
Implementation Timeline
The rollout of these changes is set to begin with metro mayors retaining some business rates by April 2027, followed by the income tax share implementation in April 2028. Importantly, the existing income tax rates will remain unchanged, ensuring that local leaders can benefit from growing their economies without altering the tax burden on residents.
Treasury sources have hinted that mayors could see an increase in their financial resources if they successfully expand their local economies and tax bases. Suggestions from think tanks, such as Re:State, propose that mayors could receive 2.5p for every pound raised by the basic income tax rate in their jurisdictions—a promising avenue for local funding.
Divided Opinions Among Mayors
Reactions to Burnham’s plan have been mixed among regional mayors. Tracy Brabin, Labour’s mayor of West Yorkshire, has praised the initiative, stating that it will allow residents to see the tangible benefits of their contributions. “This will enable us to deliver on our ambitious plans including vital improvements to public transport, providing better skills and employment support,” she noted.
Conversely, Conservative mayor Ben Houchen of Tees Valley expressed a desire for broader tax cuts, but indicated that if he were to receive local income tax revenues, he would implement a rebate scheme to benefit local residents.
Why it Matters
Burnham’s initiative represents a pivotal moment in the evolution of local governance in England. By granting regional mayors a share of tax revenues, the plan not only aims to strengthen local economies but also seeks to redefine the relationship between central and local government. As discussions unfold, the impact of this policy will be closely scrutinised, with the potential to reshape the financial landscape for cities across the nation. In an era where local challenges require tailored solutions, this move could be a decisive step towards more responsive and accountable governance.