Burnham to Grant English Mayors Share of Income Tax Revenue

This initiative represents a significant devolution drive. Prime Minister Burnham asserted, "Under our plans, more of the taxes raised in a community will stay in that community."

The reform will not alter income tax rates. Instead, it empowers local leaders with resources to enhance public transport, construct homes, and generate employment.

Burnham affirmed this objective, stating, "Soon, every local leader will have the power and resources to improve public transport, build homes and create jobs."

Historically, the Treasury dictated local funding distribution from Westminster. The UK's share of national taxes collected at a local level stands at 5.8%, the lowest among G7 nations.

Ministers must now justify retaining powers in Whitehall, operating under a new "local first" principle. A dedicated team in No10 North, Manchester, drives these devolution reforms.

The transfer of powers encompasses control over housing, transport, skills, jobs, and public services. Officials also consider further devolving business rates, specifically to reward regions that accelerate economic growth.

Greater Manchester Combined Authority and surrounding local authorities already retain 100 percent of business rates. This existing model provides a precedent for broader implementation.

The proposed method, developed by Re:State, an organization Andy Burnham previously engaged with, aims to provide more funding than current integrated settlements. It actively incentivises economic growth within the regions.

However, the proposed system could generate significant funding disparities based on population size and current income tax contributions. Nine smaller mayoral authorities could receive less combined revenue than London alone under this proposal.

London currently contributes approximately £4 for every £10 the government raises. Despite these potential disparities, ministers will maintain an equalization system to support areas with lower tax collection.

Sir Mel Stride questioned the financial implications of the announcement. He stated, "Unless Burnham is going to launch another tax raid elsewhere, borrow even more, or make cuts to central government grant, there is no new money being announced here."

Several English regions already operate with a mayor, including Greater Manchester, the Liverpool City Region, Cambridgeshire and Peterborough, and South Yorkshire. The Integrated Settlement model already functions in Greater Manchester and the West Midlands.

Voters in Greater Essex and Hampshire and the Solent will elect mayors for the first time in the coming years. This expands the reach of mayoral authority across the country.

The government has not yet determined the exact portion of taxes mayors will receive. More details will emerge when Chancellor John Healey delivers his first budget in the autumn.

Officials claim the share of income tax assigned to each mayor could vary. Practical implementation details remain under development.

Treasury sources indicate some metro mayors could increase their spending power by growing local economies and expanding their tax bases. Critics, however, claim the plans lack detail and could disadvantage areas with weaker economies.

Prime Minister Burnham reflected on his own past, stating, "I know what it’s like to be ignored by politicians in Westminster. I’m not going to make that same mistake now I’m PM."

He further articulated his vision, stating, "What I’m trying to do here is make the UK one team where we’re all pulling behind you because your place is where growth happens or it doesn’t happen."

Details regarding the level of income tax retention for local leaders will be announced in the new Chancellor John Healey’s first Budget in the autumn.