Ramos Leo
The government, led by Prime Minister Andy Burnham, is facing a significant backlash over its ambitious plan to allow regional mayors in England to retain a proportion of income tax and business rates. This proposed fiscal devolution, heralded by Burnham as "the biggest shift of power out of Whitehall and Westminster" to regions across the UK, is expected to be phased in, with mayors beginning to retain revenue from business rates from April 2027 and receiving a portion of income tax from April 2028. Under the current system, English strategic authorities and their mayors primarily receive their funding through central government grants. The new model aims to empower local leaders to invest directly in public services and infrastructure, tailoring spending to the specific needs and priorities of their communities.
Prime Minister Burnham, in the early weeks of his premiership, has made devolution a cornerstone of his political agenda, framing it as a fulfilment of his pledge to "bring power home" to "every postcode in the country." He argues that granting mayors direct access to a share of locally generated tax revenues will foster greater accountability and enable more responsive governance, allowing regions to thrive and address their unique challenges without constant reliance on central government directives. The rates of income tax themselves will not change as a result of this reform, but rather the distribution mechanism for a portion of the revenue generated within mayoral combined authority areas. Chancellor John Healey is set to provide more granular detail on these proposals when he delivers his first Budget on 28 October.
However, the proposals have not been met with universal approval, even within the broader political spectrum. Lord Houchen, the Conservative mayor of Tees Valley, has emerged as a prominent critic, arguing that while the principle of fiscal devolution is sound, its current framing misses a crucial opportunity. Lord Houchen contends that mayors should possess the power to offer taxpayers a rebate, allowing residents to retain more of their own money, particularly amidst the ongoing cost of living crisis. Speaking on BBC Radio 4’s World at One, the Tory mayor passionately stated, "The prime minister has said he wants to alleviate the cost of living [crisis] and give people room to breathe – what better way to do that than allow them to keep more of their own money?" This stance highlights a philosophical divide: is the purpose of fiscal devolution primarily to enhance local investment or to reduce the tax burden on citizens?
Lord Houchen further dismissed the notion that creating a mechanism for mayoral tax rebates would be overly complex or controversial. While First Secretary of State Louise Haigh acknowledged the absence of such a mechanism, Houchen retorted that it was "not beyond the wit of man" to design one, asserting it would not be "overly complicated." He reiterated his support for the prime minister’s direction on fiscal devolution but stressed that "for it to be real devolution we’ve got to have local decision-making and choose what’s best for the people we represent." This sentiment underscores a desire for genuine autonomy, extending beyond just spending powers to include revenue-raising and — crucially for Houchen — revenue-reducing capabilities at the local level.
Prime Minister Burnham, however, directly rejected the idea of mayors issuing taxpayer rebates, firmly stating that the plans were not intended to transform local leaders into "mini-chancellors of the exchequer, undermining or rewriting policy on tax and personal finance." His comments underline the government’s intention to maintain a clear distinction between national fiscal policy, controlled by the Treasury, and regional investment decisions. For Burnham, the objective is to empower regions to drive economic growth and improve public services through targeted local investment, not to create a fragmented and potentially chaotic system of local tax adjustments.
While proponents like Tracy Brabin, the Labour mayor of West Yorkshire, enthusiastically welcomed the plans, stating that giving regions a proportion of income tax would mean "people will be able to see and feel the real benefit of their hard work and where that money is going," others echoed concerns about economic disparities. Richard Parker, the Labour mayor for the West Midlands, described the plans as "phenomenal," a "sea change," and "monumental," underscoring the perceived transformative potential for well-established combined authorities. These Labour mayors see the reform as a vital step towards localizing prosperity and making regional governance more tangible and impactful for citizens.
However, significant concerns have been voiced from within the Labour Party’s own ranks regarding the potential for exacerbating regional inequalities. Sean Woodcock, Labour MP for Banbury in Oxfordshire, while broadly supportive of the principle of devolution, warned that without a strong element of redistribution from central government, areas with weaker economies could lose out significantly. "If you want to close the gap between the areas that are affluent with the ones that are less so, the ones that are less so need more support, more help, and that means redistribution, frankly, from the centre," Woodcock told BBC Radio Oxford. He highlighted that this crucial redistributive element was notably absent from the current package, with even talk of some central grants being phased out. "While this does have the potential to benefit a number of areas, frankly a lot of areas will see minimal benefit," he concluded, painting a stark picture of a potential "devolution lottery."
Perran Moon, Labour MP for Camborne and Redruth in Cornwall, amplified these concerns, describing the government’s plans as "discriminatory" and likely to create a "two-tier system." His constituency, like many rural areas, is unlikely to ever have a mayor or become part of a combined authority, thereby risking exclusion from the very devolved powers and funding streams that other areas would gain. Moon argued vehemently for equitable treatment, stating, "What we’re asking government to do is to provide us with the same powers, the same funding that mayoral combined authorities have without the requirement of becoming a combined authority or having a mayor." This highlights a fundamental challenge: how to achieve broad-based devolution without disadvantaging areas that, due to their geography, demographics, or political will, do not fit the combined authority model.
The opposition has been quick to seize on these perceived weaknesses. Labour’s Shadow Chancellor criticized Burnham’s announcement for being "very short on the detail" and, crucially, for announcing "no new money." This lack of additional funding, they argue, could mean that areas with weaker local economies, which are less able to generate significant income tax or business rate revenues, could ultimately find themselves losing out compared to more affluent regions. This concern reinforces the argument for continued central government redistribution to ensure a level playing field.
The Liberal Democrats further warned that the plans risked "creating a postcode lottery," leaving millions of people living in rural areas "short-changed and underfunded." Their critique aligns with the concerns raised by Perran Moon, highlighting the potential for a growing divide between mayoral combined authorities and other parts of England, especially those with sparser populations or less economic density. The party advocates for a more inclusive approach to local empowerment that doesn’t solely rely on the combined authority model.
Reform UK, through its home affairs spokesman Zia Yusuf, injected a different dimension into the debate, arguing that the prime minister should "fully devolve the power to stop the housing of illegal migrants in local communities by the Home Office." While seemingly unrelated to fiscal devolution, this demand reflects a broader call from Reform UK for local communities to have greater control over decisions impacting their areas, including sensitive issues like immigration and housing, which often fall under central government purview. It underscores the multifaceted nature of the devolution debate, extending beyond purely financial matters to encompass social and administrative powers.
As the debate continues, the government faces the challenge of balancing its ambition for greater regional autonomy with the need to ensure fairness and prevent the exacerbation of existing regional inequalities. Chancellor Healey’s upcoming Budget on 28 October will be a critical juncture, as it is expected to unveil more comprehensive details of how these seismic shifts in local government finance will be implemented, and how the concerns raised by a diverse range of critics will be addressed. The success or failure of Burnham’s flagship devolution agenda may well hinge on its ability to convince a sceptical public and a divided political landscape that it can deliver genuine empowerment without creating a new set of problems.
George Anjay
Nakalama John
