In a landmark move aimed at bolstering local governance, Prime Minister Andy Burnham has unveiled plans to share income tax revenue with city-region mayors across England. This initiative marks a significant shift in power dynamics, promising to decentralise fiscal authority and enrich regional economies. As the country grapples with the challenges of economic disparity, this proposal could redefine the relationship between local authorities and Westminster.
A New Era of Local Governance
For the first time, regional mayors will be entitled to a share of income tax revenue. Burnham’s strategy seeks to transfer financial power from Westminster to local leaders, a step he describes as fulfilling his commitment to “bring power home” to every postcode in the nation. Alongside this measure, mayors of strategic authorities will also retain a portion of business rates collected within their jurisdictions, granting them increased control over crucial public services such as housing, transport, and skills development.
The specific percentage of income tax to be allocated to the mayors remains under discussion, with Chancellor John Healey expected to provide further details during the autumn budget. Critics, however, have expressed concerns regarding the plan’s feasibility and the potential for economically weaker regions to miss out on financial support.
Local Leaders Weigh In
Speaking on BBC Radio 4’s *Today* programme, First Secretary of State Louise Haigh emphasised that investment will not be contingent upon the presence of directly elected mayors. “We won’t be imposing mayors on areas that don’t want them,” she stated, instead advocating for the establishment of strategic authorities that would enable collective decision-making by local councils. This could benefit regions without a mayoral structure, such as Lancashire, where councils will collaborate to manage regional challenges.
The proposal aims to address the UK’s highly centralised tax system, which has been a point of contention in British politics. According to the OECD, only 5.8% of national taxes are collected at the local level in the UK, significantly lower than countries like France (20.4%) and Japan (36%). The current reliance of mayors on central government grants has prompted calls for reform, which Burnham is keen to promote as part of his broader devolution agenda.
Moving Towards Economic Independence
Under the proposed reforms, English metro mayors are anticipated to begin retaining some business rates by April 2027 and will receive a share of income tax from April 2028. This shift aims to replace traditional grants with revenue from local taxes, aligning funding more closely with local economic performance. Treasury insiders suggest that as mayors enhance their local economies, they could potentially secure more resources to invest in community development.
While the exact mechanics of tax distribution are still being finalised, think tank Re:State has recommended that mayors be allocated 2.5p for every pound raised from the basic rate of income tax in their areas. The Conservative opposition, however, has voiced scepticism about the initiative. Shadow Chancellor Sir Mel Stride has called the proposal “short on detail” and warned that it could disadvantage regions with weaker economies, contradicting Burnham’s stated objectives.
Reactions from Across the Spectrum
The response to Burnham’s announcement has varied among regional leaders. Labour’s Tracy Brabin, Mayor of West Yorkshire, hailed the move as a way to ensure that local residents can directly benefit from their contributions to the economy. She stated, “This will enable us to deliver on our ambitious plans including vital improvements to public transport, providing better skills and employment support.”
Conversely, Ben Houchen, the Conservative Mayor of Tees Valley, expressed a desire for broader tax cuts while remaining open to utilising any potential income tax share to establish a rebate scheme for residents. This illustrates the diverse perspectives on the proposed reforms and the complexities involved in implementing such a significant shift in local governance.
Why it Matters
Andy Burnham’s initiative to devolve tax revenue to regional mayors is not merely a political maneuver; it represents a critical juncture in the ongoing struggle for local autonomy and economic equity in the UK. By enabling local leaders to retain more financial resources, this plan could catalyse substantial improvements in public services and infrastructure, ultimately leading to a more balanced and prosperous society. As the details unfold, the success of this approach will depend on its ability to genuinely empower local communities and address the disparities that have long plagued the nation.
