Local leaders across England are on the brink of a significant shift in power dynamics as Andy Burnham prepares to unveil a groundbreaking devolution plan this Friday. This initiative promises to liberate regional mayors from what has been described as the “death grip of the Treasury,” allowing them to retain a portion of the income tax and business rates generated in their areas. This marks a pivotal moment in the ongoing struggle for regional autonomy, potentially transforming how local governments finance vital projects.
Mayors to Gain Financial Independence
Under the proposed reforms, mayors will be able to retain a share of the income tax collected in their regions starting in 2028, along with substantial business rates, projected to amount to tens of millions by April 2027. While these funds will replace existing grants rather than add to them, local leaders are heralding this development as a transformative step towards reducing reliance on central government funding.
Oliver Coppard, the Labour mayor of South Yorkshire, expressed optimism about the plan, stating, “It’s really important because it gets us out of the death grip of the Treasury and gives us that long-term certainty around income.” The ability to access and manage these funds independently is expected to provide local authorities with the leeway needed to invest in essential projects such as public transportation, housing, and job creation.
A Shift in Power Dynamics
Burnham, who is positioning himself as a champion of devolution, has described this initiative as “the biggest transfer of power from Westminster in a generation.” His vision is clear: local leaders must have both the authority and the resources to address the unique needs of their communities without the constraints imposed by Whitehall.
The introduction of a “local first” principle will require ministers to justify any decision to retain powers in London, thereby encouraging wider devolution across various sectors. This could extend to areas such as education and healthcare, where mayors might gain oversight akin to that of police and crime commissioners. This shift aligns with the government’s broader strategy to downsize the civil service and decentralise decision-making, with one in five civil servants currently stationed in the capital.
Financial Implications and Challenges Ahead
One of the most revolutionary aspects of this proposal is that it would enable combined authorities to secure 30-year loans against their projected income. This financial flexibility could unlock transformative infrastructure projects that have previously faced barriers due to the restrictive one-year funding settlements from central government.
Henri Murison, chief executive of the Northern Powerhouse Partnership, highlighted the potential impact, stating that this change “completely transforms” what combined authorities can achieve. For instance, mayors could now finance vital transport initiatives, such as a proposed underground station at Manchester Piccadilly, without needing prior Treasury approval.
However, the specifics of how much revenue mayors will retain from income tax and business rates remain uncertain, with ongoing discussions between officials and the Chancellor, John Healey, expected to clarify details in the upcoming autumn budget.
The Risk of a Two-Tier System
Despite the enthusiasm surrounding the proposed changes, concerns linger about the potential for exacerbating regional inequalities. Experts from thinktank IPPR North have warned that hastily implemented fiscal devolution could lead to a “two-tier England,” leaving areas without mayoral authorities—such as Humberside and parts of the south—at a disadvantage.
The government is already exploring ways to ensure that economically disadvantaged regions are not left behind. However, with many areas lacking the necessary infrastructure to form mayoral authorities, millions of residents could be excluded from the benefits of increased financial autonomy.
Since 2024, only Greater Manchester and the West Midlands have had the privilege of retaining all business rate income generated within their jurisdictions. In Greater Manchester, this amounted to £100 million in the first operational year, with a portion allocated to local authorities and the mayoral authority for community projects.
Why it Matters
This devolution plan represents a significant turning point in the governance of England, one that could redefine the relationship between local authorities and the central government. By empowering mayors with financial autonomy and decision-making capabilities, the initiative has the potential to catalyse economic growth and improve public services across regions. However, careful implementation will be crucial to ensure that the benefits of this newfound power are equitably distributed, lest we risk deepening the divides that currently exist in the country. The stakes are high, and the coming weeks will be critical in determining whether this ambitious agenda can truly reshape the future of regional governance in England.
