Prime Minister Andy Burnham is set to grant regional mayors across England greater financial autonomy by allowing them to retain a portion of income tax and business rates collected within their jurisdictions. This move, aimed at empowering local authorities and fostering economic growth, represents a significant shift from the current system, where strategic authorities in England rely heavily on central government grants.
The Prime Minister, who pushed for greater control over tax revenue during his tenure as Greater Manchester mayor, has placed devolution at the heart of his plan for government, arguing that metro mayors are best positioned to drive economic growth across the country.
Under the proposed framework, mayors are expected to begin retaining some revenue from business rates starting in April 2027, followed by a portion of income tax revenue from April 2028. The government intends for these local tax revenues to eventually replace existing Whitehall grants. While specific details remain under development, the Prime Minister emphasized that the policy serves his pledge to "bring power home" to "every postcode in the country," noting that "more of the taxes raised in a community will stay in that community" under his administration.
The government is currently establishing an equalisation system to ensure that regions where less tax is collected continue to receive necessary financial support. Ministers will be expected to justify why powers should remain in Whitehall rather than being devolved, under a "local first" principle.
Chancellor John Healey is expected to provide further details regarding the exact proportions of tax to be devolved during his autumn budget. The reforms are being spearheaded by the "No 10 North" office in Manchester, with a comprehensive policy paper scheduled for publication alongside the budget announcement. Treasury sources indicated that the reforms could benefit mayors who successfully grow their local economies and expand their tax bases.
While one think tank, Re:State, has suggested the government should allocate mayors 2.5p in every pound raised by the 20p basic rate of income tax in their areas, the government has confirmed that the underlying tax rates—such as the basic rate of 20% on income from £12,571 to £50,270—will not change as a result of these reforms.
Reaction to the proposal has been mixed among metro mayors. West Yorkshire Mayor Tracy Brabin welcomed the initiative, stating it would allow regions like hers to "deliver on our ambitious plans including vital improvements to public transport, providing better skills and employment support." She added that it means "people will be able to see and feel the real benefit of their hard work and where that money is going." Conversely, Conservative Mayor for Tees Valley Ben Houchen said he would prefer the government to cut taxes, though he noted that if he were handed a slice of local income tax, he would "create a new rebate scheme to put money back into people's pockets."
Critics have raised concerns regarding the lack of specificity in the current announcement. Sir Mel Stride, the Conservative shadow chancellor, argued that the plan lacks detail and warned that areas with weaker local economies could be disadvantaged. "Unless Burnham is going to launch another tax raid elsewhere, borrow even more, or make cuts to central government grant, there is no new money being announced here," Stride said. Additionally, Reform UK home affairs spokesman Zia Yusuf criticized the focus, arguing that the Prime Minister should "fully devolve the power to stop the housing of illegal migrants in local communities by the Home Office."
The power to raise and control tax revenues is currently highly centralised in the UK, making the country an outlier by international standards. The reforms follow a policy blitz during Burnham's first two weeks in Downing Street, which included announcements on the cost of living and a speech on his plan to overhaul social care. In a major speech on devolution in June, Burnham said he would "oversee the biggest rebalancing of power our country has ever seen" if he became prime minister.
Burnham wants to give more powers to metro mayors, such as Steve Rotheram and Kim McGuinness (pictured here)
