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Andy Burnham Proposes Sharing Income Tax with Regional Mayors to Boost Local Power
Prime Minister Andy Burnham has announced plans to devolve a portion of income tax and business rates to metro mayors, seeking to replace reliance on central grants with locally generated revenue. While aligning with international trends toward fiscal devolution, the initiative has sparked debate over fairness, implementation timelines, and potential regional disparities. This analysis examines the implications for local governance, economic growth, and public service delivery across England.
Understanding the Proposed Fiscal Devolution
Burnham’s proposal allocates a share of income tax revenue collected within English city regions directly to their metro mayors. For the first time, local leaders would have a direct financial stake in their areas’ economic performance, as part of their funding would derive from taxes paid by residents and businesses locally. The plan also extends to business rates, allowing mayors to retain a portion of this commercial property tax. Crucially, the overall rate of income tax paid by individuals will remain unchanged; instead, a segment of revenue currently sent to the Treasury would be redirected to local authorities. This mechanism incentivizes mayors to promote local economic growth, as increased business activity and higher wages translate into greater local tax receipts. The exact percentage to be devolved is pending, with details expected in Chancellor John Healey’s autumn budget. The reforms are being developed by No 10 North, Burnham’s Manchester-based policy unit, signalling a focus on northern England.
How the UK Compares Internationally on Tax Decentralisation
The UK operates one of the most centralised tax systems in the developed world. OECD data shows only 5.8% of national taxes are collected and spent locally—the lowest among G7 nations. In contrast, France allocates 20.4%, Japan 36%, and the United States 45.7% to local government. This centralisation limits English local authorities’ ability to respond swiftly to local economic conditions or invest in tailored public services. Reliance on central grants creates inflexibility, as funding often comes with strict conditions and may not reflect local priorities. Burnham’s plan seeks to align revenue generation with local spending, bringing the UK closer to international norms of fiscal decentralisation. The stark disparity underscores the scale of reform needed to match peer economies, where local governments enjoy far greater fiscal autonomy to address community-specific challenges and opportunities.
Timeline and Implementation Details
The rollout is phased: business rates retention begins April 2027, followed by income tax sharing in April 2028. This staggered approach allows time for local authorities to build capacity in financial management and tax administration. Individual taxpayers will not see a change in their income tax bills—the reform concerns only revenue distribution, not tax rates. To address fairness concerns, the Treasury is developing an equalisation mechanism to ensure regions with weaker economic bases receive adequate funding, preventing prosperous cities from gaining disproportionate advantages. A comprehensive policy paper outlining devolution scale, safeguards, and accountability measures is expected with the autumn budget. The phased timeline reflects pragmatic considerations for administrative readiness while maintaining momentum toward the government’s broader decentralisation agenda.
Political Reactions and Areas of Concern
Labour metro mayors, including Tracy Brabin of West Yorkshire, have welcomed the move, arguing greater fiscal autonomy enables more ambitious local investment in public transport, skills training, and infrastructure. Brabin highlighted that direct control over tax revenues allows mayors to design initiatives reflecting specific local needs rather than adapting to national programmes. Conversely, Conservative critics have raised concerns about lack of detail and potential inequities. Shadow Chancellor Sir Mel Stride warned that without additional national funding, redistributing existing tax revenue could leave economically weaker regions worse off, undermining equitable growth. Reform UK’s Zia Yusuf called for further devolution, suggesting immigration enforcement powers should also transfer to local authorities. Ben Houchen, Conservative mayor of Tees Valley, acknowledged he would prefer tax cuts but would use a share of income tax to create local rebate schemes if granted. The spectrum of responses illustrates the tension between aspirations for local empowerment and anxieties about fiscal fairness across England’s diverse regional economies.
Potential Impacts on Local Governance and Economic Development
If implemented successfully, the reforms could fundamentally alter how English city regions operate. By linking funding to local economic performance, mayors gain stronger incentives to attract investment, support business growth, and improve skills provision—knowing success directly increases their budgets. This shift could reduce dependence on Whitehall grants, often criticised for inflexibility, slow distribution, and misalignment with local priorities. Greater financial autonomy may encourage innovation in public service delivery, as councils experiment with approaches tailored to unique demographics and economic structures. However, success hinges on the equalisation system’s design, local authorities’ administrative readiness to handle tax revenues, and political will to sustain reforms across electoral cycles. Without robust safeguards, the policy risks exacerbating regional inequalities rather than reducing them. The effectiveness of equalisation will be pivotal in determining whether devolution strengthens national cohesion or deepens existing divides between affluent and struggling regions.
What this means
Burnham’s initiative to share income tax with regional mayors represents a bold attempt to rebalance fiscal power in England, moving away from decades of centralisation toward local economic empowerment. By giving mayors a direct financial interest in their communities’ prosperity, the government hopes to stimulate innovation, improve public service relevance, and reduce reliance on conditional central grants. However, long-term success depends on careful implementation—particularly designing fair equalisation arrangements and ensuring all regions, regardless of economic strength, can manage new fiscal responsibilities. As further details emerge in the autumn budget, stakeholders across local government, business, and civil society will watch closely to see whether this reform delivers more responsive, equitable, and sustainable governance for England’s city regions. The outcome could reshape the economic landscape of England for generations, either fostering vibrant local economies or highlighting the complexities of fiscal redistribution in a politically divided nation.
Originally reported by bbc.co.uk. Adapted for our readers with AI assistance.
