Regional mayors will get a share of income tax revenue in what the Government says is the biggest transfer of power, funding and responsibility from Westminster in a generation. The new system will give local leaders more freedom and flexibility to keep the revenue generated in their regions without being told by Whitehall how to spend it.
From April 2027, mayors will retain a greater share of business rates and from spring 2028 they will receive a share of income tax revenue. It is not yet clear what percentage of income tax the mayors will receive, but further details are expected during the autumn budget.
Prime Minister's promise
Prime Minister Andy Burnham said: “I said we'd take power out of Westminster and carry it into every postcode in the country. Today, we make good on that promise. Under our plans, more of the taxes raised in a community will stay in that community. Soon, every local leader will have the power and resources to improve public transport, build homes and create jobs. I know what it's like to be ignored by politicians in Westminster. I'm not going to make that same mistake now I'm PM.”
The plans will see local leaders given stronger planning and regulation powers, control over funding and employment support for young people, and back local industries and businesses to create jobs. The government claims part of the proposals would also get local transport schemes, trams and metros built faster and approved more quickly by removing barriers in Whitehall.
Greater Manchester as a template
Mr Burnham’s blueprint for government appears to be shaped by his tenure as mayor of Greater Manchester. He was one of several local leaders who, along with the Manchester Evening News, had campaigned for an underground station at Piccadilly, which would allow for direct train routes, support future growth like a revived Manchester-Birmingham line, and serve as a hub for three new Metrolink tunnels. The previous government was concerned about the higher costs, with civil servants arguing in favour of an overground train line.
Mr Burnham and Bev Craig, Manchester City Council leader, refused to accept it. After much wrangling a new Liverpool-Manchester line got the go ahead earlier this year. The plan for the Liverpool-Manchester route promises to cut journey times between the North West’s two biggest cities to as little as 35 minutes and increase the number and frequency of trains - something Mr Burnham says could turn Piccadilly Station into the ‘King’s Cross of the North’.
Devolution for areas without a mayor
It is unclear yet how the plans would work for places without a mayor. It is understood that these proposals could serve as an incentive for other regions to pursue greater devolution and elect a mayor. Mr Burnham hopes more areas across the UK will want the ‘benefits of devolution’. The Manchester Evening News understands this is not new money. Instead, the new system could replace the grants distributed by the central government to Mayoral Strategic Authorities in England. The Integrated Settlement model operates in two mayoralities – Greater Manchester and West Midlands.
Greater Manchester Combined Authority and the ten surrounding local authorities already retain 100 percent of business rates, another sign that Greater Manchester is serving as a template for the rest of the country. The Prime Minister is attempting to end a ‘Whitehall-first’ culture and hand back powers to local leaders. As part of this devolution shake up, the Civil Service is also expected to shrink and become more ‘strategic’.
Reactions from experts and opposition
Dr Sarah Longlands, chief executive of the Centre for Local Economies (CLES), an independent think tank and charity, said: “This is big. Burnham is not messing around when it comes to shifting where decisions about money – and therefore power – lie. Every community will benefit from more local decision making. This is a wholescale reengineering of the Westminster model in the interests of everywhere in the country. When it comes to this scale of devolution, we need a strong fairness mechanism to be built into the system to ensure that nowhere races ahead while others are kept behind.”
Earlier this week, The Times reported that the Reform and Conservative mayors are planning to use fiscal devolution to offer tax rebates to residents in their areas. Ben Houche, mayor of the Tees Valley region, told the Times: “If the Tees Valley is handed a slice of local income tax and business rates generated locally, I’ll create a new rebate scheme to put money back into people’s pockets and let families keep more of the money they earn.” But a Government source said it might not be technically feasible to do this, as mayors don’t know how much tax each individual pays.
Greater Manchester's growth
Greater Manchester has had the greatest range of devolved powers for the longest period, and has seen some of the highest levels of growth in the country. The transformation has seen metro mayors in areas like Liverpool City Region and West Yorkshire follow in Greater Manchester’s footsteps, for example rolling out similar bus franchising programmes.
Implementation and key figures
The reforms will be driven largely by the team in No10 North, in Manchester, which Mr Burnham said will be responsible for ‘accelerating devolution’. The office will be run by Louise Haigh, the First Secretary of State, who has long been an ally of Mr Burnham. Angela Rayner, Secretary of State for Housing, Communities and Local Government, is also said to be spending much of her time in the new northern headquarters.
She said: “This is the first step in our plan to rewire this country and build a better future, where power is no longer hoarded in Westminster but is put back in the hands of local people – where it belongs. Our devolution revolution is about bringing an end to the begging-bowl culture of the past, and instead making sure our local leaders have the tools they need to drive the change that communities have been crying out for. We need every region to be firing on all cylinders if we want good growth in every postcode, and we will do everything in our power to make that a reality.”
Conservative and Reform reactions
Not everyone has welcomed the announcement. The Conservatives have expressed doubt that the tax reforms could help regions across England to flourish. Sir James Cleverly, the shadow local government secretary, said: “Andy Burnham is right to want to encourage growth in all communities. But his top-down Manchesterism will lead to higher taxes, with no guarantee of better outcomes for local people. Devolution cannot be imposed from above – it can only work if it’s done in co-operation with local people. But Labour’s regionalist approach takes power away from local communities, sidelining local councils and ignoring local identities. What works in Manchester won’t be the same for Essex, Cornwall or Cumbria.”
Zia Yusuf, Reform UK home affairs spokesman, said the Prime Minister should 'fully devolve the power to stop the housing of illegal migrants in local communities by the Home Office'. He said: “Andy Burnham says he wants to devolve power and actually listen to local people. If he was listening, he would know that they do not want unvetted illegal migrants dumped in their areas.”
