Mayors to Gain Fiscal Powers in Sweeping Devolution Reforms

From 2028, English regional mayors will receive a share of income tax receipts, fundamentally altering local finance.

They will also gain the ability to borrow for investment in projects, a move designed to drastically reduce their reliance on central grants.

The income tax rate will not directly change due to these reforms, ensuring national fiscal stability.

An equalization system will remain in place to support areas collecting less tax and prevent widening disparities.

Louise Haigh, the Prime Minister's de facto deputy, expressed skepticism regarding Tees Valley mayor Ben Houchen's proposal for a tax rebate.

She noted an existing business rates retention system already distributes funding to correct for disparities.

Haigh stated, "There is already a way that the business rates retention is distributed to correspond with central funding formula to correct for that."

She added, "So there will be a formula and funding position set out in the budget that that corrects this, but really, we are the most centralised nation in the G7, and that has held back our growth and our productivity outside London and the south-east for too long."

The government intends for devolved powers and resources to be reinvested directly in public services and local economies.

These funds are explicitly not for tax rebates, a clear directive from Whitehall.

The Prime Minister stated the policy targets growth and investment, not for mayors to act as "mini Chancellors of the Exchequer" or to undermine national tax policy.

Tees Valley mayor Ben Houchen, however, questioned this approach, highlighting a core tension in the devolution debate.

He stated, "'So devolution means getting people's taxes to spend but not being allowed to give it back to them.'"

Lord Houchen of High Leven further asserted, "'Fiscal devolution must be about giving places like Teesside the power to do things differently, back growth and reward the people that drive our local economy instead of squeezing every last penny out of them.'"

He recalled a previous conversation with the Prime Minister, noting, "Last time I spoke to the PM, devolution was about Whitehall not dictating what areas can or can’t do."

The civil service in Britain, currently 520,000 strong, expects to become smaller and more strategic as decision-making decentralizes.

Ministers will justify why powers should remain in Whitehall under a new 'local first' principle.

The cost threshold at which mayors require Government approval for transport schemes will rise significantly, from £200 million to £500 million.

Combined authorities will take out 30-year loans against projected income for major projects, a capability previously hindered by restrictive one-year funding settlements.

Andy Burnham's council tax rebate plans for band A to H households have been ruled out, despite his assertion that "'every local leader will have the power and resources to improve public transport, build homes and create jobs.'"

James Cleverly cautioned against Burnham's approach, drawing a clear line in the sand.

He stated, "Andy Burnham is right to want to boost growth across our communities. But his model of Manchesterism is a recipe for soaring taxes in every post code."

The government plans to develop different proposals for Scotland, Wales, and Northern Ireland, acknowledging their distinct constitutional frameworks.

Several parts of England currently have mayors, including Greater Manchester, the Liverpool City Region, Cambridgeshire, and South Yorkshire.

Voters in other areas will elect mayors for the first time over the coming years, expanding the reach of this new governance model.

These new mayoral areas include Greater Essex and Hampshire and the Solent.

These new funding streams replace existing grants rather than providing additional money, a crucial detail for understanding the fiscal impact.

Proposals expect implementation starting from April 2027 for business rates and April 2028 for income tax, setting a clear timeline.

Mechanisms will reduce regional inequalities in funding distribution, ensuring areas not growing at the same rate do not fall behind.