Prime Minister Andy Burnham has unveiled a bold plan to reshape fiscal power in England by granting regional mayors a share of income tax revenue for the first time. This move marks a significant step toward decentralising control from Westminster and empowering local leaders to drive economic growth and public service delivery in their communities. However, the proposal has sparked debate over its potential impact on economic equality and the practicalities of devolving tax income.
Shifting Fiscal Power to Regional Mayors
Burnham’s announcement signals a historic shift in the UK’s approach to fiscal devolution. For decades, the UK has maintained one of the most centralised tax systems among major economies, with only 5.8% of national taxes collected at a local level—far below countries like France, Japan, and the United States.
Under the new framework, mayors of city regions will start retaining a portion of income tax revenue from their areas, alongside an increased share of business rates. These changes are slated to begin with business rates retention in April 2027, followed by income tax shares from April 2028. While the exact percentage of income tax devolved remains under discussion, some experts suggest mayors could receive around 2.5p of every pound collected at the basic 20p rate.
Burnham emphasises that the policy is designed to boost local economic growth and investment, not to transform mayors into mini-chancellors. By allowing regions to keep more of the taxes raised locally, the government hopes to incentivize mayors to foster economic expansion and tailor services such as housing, transport, and skills development to their communities’ needs.
Potential Benefits and Economic Implications
Devolving tax revenues could bring tangible benefits to regions long starved of control over their economic destinies. Mayors like Burnham, who previously led Greater Manchester, argue that fiscal autonomy can unleash innovative local policies and infrastructure projects that better reflect regional priorities.
One immediate advantage is the fast-tracking of infrastructure projects. The government plans to raise the approval threshold for local transport investments from £200 million to £500 million, enabling mayors to expedite new tramways, roads, and light rail schemes. This could accelerate urban development and improve connectivity, stimulating local economies.
Moreover, by linking funding more directly to local economic performance, regions with growing tax bases could see increased resources, creating a virtuous cycle of investment and growth. This aligns with Burnham’s vision of reversing the UK’s decade-long stagnation in regional economic disparities.
Concerns Over Unequal Impact and the Risk of a Two-Tier System
Despite the promise of empowerment, critics warn that the plans risk deepening regional inequalities. Opposition parties and some Labour MPs have expressed concern that areas without elected mayors—often rural or less economically vibrant—might be left behind.
Perran Moon, Labour MP for Camborne and Redruth, highlighted the “discriminatory” nature of the policy, noting that regions like Cornwall, which lack mayoral combined authorities, may not access the same devolved powers or funding. This raises fears of a “postcode lottery” where wealthier urban centers benefit disproportionately, while rural and economically weaker areas struggle to keep pace.
The government acknowledges these concerns and is reportedly working on an equalisation mechanism to ensure less affluent regions continue receiving adequate support. However, the details remain vague, and opposition parties remain sceptical about the safeguards.
Political Divide and Varied Local Responses
The political response to Burnham’s plans has been mixed. Labour mayors such as Tracy Brabin of West Yorkshire have welcomed the reforms, seeing them as a way to make local residents feel the direct benefits of their economic contributions.
Conversely, some Conservative mayors have voiced reservations. Lord Houchen of Tees Valley described the policy as a potential “tax grab,” advocating instead for tax cuts and local rebates to alleviate the cost of living. He suggests that devolved income tax powers could be used to implement rebate schemes, giving money back to local taxpayers—a concept Burnham has dismissed as missing the policy’s growth-focused intent.
Meanwhile, opposition parties like the Liberal Democrats and Reform UK warn that without careful design, the reforms could exacerbate funding disparities and leave rural communities underfunded.
The Road Ahead: Implementation and Challenges
Burnham’s government plans to release full details alongside Chancellor John Healey’s autumn budget, setting out the exact proportions of tax revenue to be devolved and the mechanisms for equalisation. The “local first” principle aims to shift decision-making closer to communities, requiring ministers to justify retaining powers in Whitehall.
However, translating this vision into effective policy will be complex. The government must balance incentivising economic growth with ensuring fairness across diverse regions. It also faces the challenge of integrating devolved tax revenues with existing funding streams and public service responsibilities.
Moreover, the success of fiscal devolution depends on the capacity and political will of local authorities. Mayors will need robust governance structures and transparent accountability to manage new funds effectively and maintain public trust.
As the UK embarks on this ambitious devolution journey, the coming months will reveal whether Andy Burnham’s vision can deliver more than symbolic power shifts—potentially reshaping the country’s economic landscape and redefining the relationship between central and local government.
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For more context, see related Peack News coverage and explainers linked below.