Prime Minister Andy Burnham has announced a significant shift in fiscal policy, revealing plans to allow mayors of English city regions to retain a portion of income tax revenue collected in their areas. This initiative is part of a broader strategy to decentralize power from Westminster and empower local leaders to drive economic growth.
Under the proposed reforms, regional authorities will also gain increased control over business rates and local services, including housing, transport, and skills development. Additionally, the government plans to raise the threshold for local transport projects requiring central approval from £200m to £500m, providing mayors with a faster route to deliver infrastructure such as roads and tramways.
While the specific percentages of tax revenue to be allocated remain undecided, the government expects mayors to begin retaining business rate revenue by April 2027, followed by a share of income tax in April 2028. The Prime Minister emphasized that these changes are intended to ensure that more tax revenue remains within the communities where it is generated. "Under our plans, more of the taxes raised in a community will stay in that community," Burnham stated.
The proposal has drawn mixed reactions. Supporters, such as West Yorkshire Mayor Tracy Brabin, welcomed the move as a way for residents to see the direct benefits of their economic contributions. However, critics, including opposition politicians and some Labour backbenchers, expressed concerns regarding a potential "postcode lottery." There are fears that areas with weaker economies could face funding shortfalls, and some MPs argued that the lack of detail risks creating a two-tier system for regions that do not have mayoral structures.
The UK currently holds one of the most centralized tax systems in the G7, with local authorities collecting only 5.8% of national taxes. The government intends to publish further details, including an equalisation mechanism to support lower-tax-yielding areas, alongside the Chancellor’s autumn budget.
Source: BBC News
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