Andy Burnham to give regional mayors share of income tax
Prime Minister Andy Burnham plans to let English city-region mayors and strategic authorities retain a share of locally raised income tax and business rates, as part of a wider effort to devolve power from Westminster. The proposal matters because it could give local leaders more reliable funding and greater control over housing, transport and skills, reducing dependence on central government grants.
The precise proportion of tax revenue has not yet been decided and is expected to be set out in Chancellor John Healey’s autumn Budget. Areas without elected mayors would also be eligible through strategic authorities, while authorities may gain the option to introduce an overnight visitor levy; the Conservatives warned that weaker local economies could lose out. The UK currently collects only 5.8% of national taxes locally, the lowest share in the G7, compared with 20.4% in France, 36% in Japan and 45.7% in the US.
In short
- English regions could retain income tax and business-rate revenue.
- Exact funding shares will be announced in the autumn Budget.
- Ministers say areas without mayors will also benefit.
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The case for
Supporters argue that retaining a share of locally raised income tax and business rates would give mayors and strategic authorities predictable resources to match their responsibilities for transport, housing and skills. They contend that local leaders understand their economies better than Whitehall and can coordinate investment more effectively, while reducing reliance on short-term, centrally controlled grants. The proposal is also presented as a practical correction to the UK’s unusually centralised tax system, with eligibility for non-mayoral strategic authorities intended to broaden its benefits.
The case against
Critics argue that linking local spending power more closely to local tax receipts could widen inequalities between prosperous city-regions and places with weaker economies or fewer high-paying jobs. They worry that, unless the scheme includes robust redistribution and clear national standards, councils in poorer areas could face less capacity to fund essential services precisely when they need more support. Opponents may also question whether new fiscal powers, including a possible visitor levy, could add complexity or place extra burdens on residents and businesses without a settled formula for how revenue and risk will be shared.
Explained simply
England’s regional mayors are directly elected leaders for areas made up of several councils, such as Greater Manchester and the West Midlands. They are responsible for some local services, often including transport, housing and job training, but much of their funding is decided by central government in Westminster.
Income tax is paid on earnings, while business rates are charges paid by many firms for using commercial properties. Allowing local authorities to keep part of these revenues would give them a more direct link between local economic activity and the money available for public services and investment.
Supporters of greater devolution argue that local leaders are better placed to decide regional priorities. Critics have raised concerns that areas with weaker economies might raise less money unless a system is used to balance funding between different parts of the country.