Labour’s latest budget unveils the most extensive devolution programme in a generation, extending mayoral authority to ten new regions and aiming to cover 90 % of England’s population by the early 2030s. Chancellor John Healey described the move as “the biggest wave of devolution in a generation, driving good growth in every postcode delivered to the British people by this Labour government.” The plan will create a total of 22 regional authorities, up from the current 12, each led by a directly elected mayor who will retain a share of locally generated tax revenue.
Expanding Mayoral Powers
The new devolution agreements are in their final stages and will establish mayoral authorities in Devon, Plymouth and Torbay, Hertfordshire, Lancashire, Leicester, Leicestershire and Rutland, Stoke and Staffordshire, Surrey, Thames Valley and Wessex. Kent and Medway, together with Cornwall, will adopt slightly different models under the proposals. Once the arrangements are in place, the country will be served by 22 regional mayors, a significant increase that reflects the government’s ambition to bring decision‑making closer to communities.
From April 2028, each mayoral authority will receive a uniform basic‑rate income‑tax share generated within its borders. Mayors will not determine tax bands, but they will keep the proceeds to fund local infrastructure, transport and housing. An initial bespoke allocation will be provided, followed by a performance‑linked component that rewards authorities for growing their local economies. The Treasury has signalled that an equalisation adjustment will be introduced to curb any widening disparity between richer and poorer regions.
In parallel, every mayor will be empowered to levy an “overnight visitor levy” – commonly known as a tourist tax – by March 2028. This new revenue stream is intended to support hospitality and cultural projects while managing the impact of tourism on local services. The changes mark a shift from the historic 50 % split of business rates with Whitehall to a model where local tiers retain a progressively larger share.
Tax Reforms and Funding
Commercial property taxation will also be restructured. Starting in 2027, mayoral authorities will directly benefit from a 20 % share of retained business rates, plus an additional 20 % of any growth in those rates. Local councils will retain at least 70 % of their business‑rate income, a figure that will rise to 100 % by 2030. The gradual increase is designed to bolster cash‑strapped local budgets and reduce reliance on central government grants.
The budget also allocates £285 million to mayors and local leaders for investment in flagship projects. Notable recipients include the Black Country Metro extension in the West Midlands and the reopening of Doncaster Airport in South Yorkshire. London Mayor Sadiq Khan confirmed that the capital’s portion will be directed toward delivering the West London Orbital, a key transport link intended to improve connectivity across the suburbs.
Unlike countries such as Germany, Spain and the United States, where 30‑35 % of tax revenue remains at the regional level, the UK currently shares only about 5 % of its tax receipts with local areas. The new programme seeks to narrow that gap, though regional administrations will still lack the authority to raise or lower tax rates; that power remains with central government, which will continue to set national tax policy.
Regional Impact and Projects
The devolution push is being championed by Greater Manchester Mayor Andy Burnham, who has long argued that local leaders are best placed to shape growth strategies. The ten new mayoral positions will bring governance closer to voters, allowing policies to be tailored to specific economic conditions. For instance, the Thames Valley authority will focus on balancing housing development with environmental preservation, while the Wessex region will prioritise renewable‑energy infrastructure.
The introduction of a uniform basic‑rate income‑tax share is expected to incentivise competition among regions, as mayors seek to attract businesses and talent to increase their revenue base. However, the equalisation mechanism will cushion any disparity, ensuring that less affluent areas do not fall behind. The visitor levy, meanwhile, is projected to generate an additional £150 million annually, which can be reinvested in local tourism facilities and cultural programmes.
Critics have raised concerns about the complexity of transitioning to a system where mayors control multiple revenue streams. The government has responded by pledging extensive support during the implementation phase, including technical assistance and capacity‑building workshops. The aim is to create a robust framework that can sustain long‑term growth without compromising fiscal responsibility.
Why it Matters
This unprecedented devolution programme reshapes the balance of power between Whitehall and local communities, promising to deliver “good growth in every postcode” through tailored economic strategies. By handing mayors control over income‑tax receipts, business‑rate growth and tourism levies, the government is effectively decentralising fiscal decision‑making for the first time in a generation. The reforms not only address historic under‑investment in regional Britain but also set a new benchmark for local accountability, potentially narrowing the economic divide that has long characterised the United Kingdom.
