UK Government Unveils Major Fiscal Devolution for Regional Mayors

Regional mayors in the UK are set to gain greater financial autonomy, with the government announcing a significant fiscal devolution plan that includes a share of business rates and income tax.

Chancellor John Healey outlined the "roadmap to fiscal devolution," stating that local areas will retain 20% of business rates starting next year, with this figure increasing to 100% by the end of the decade. Additionally, mayors will receive a portion of income tax from the 2028-29 tax year. They will also be empowered to implement an unlimited 'overnight visitor levy' on accommodations like hotels and holiday lets from 2028.

Healey described these measures as "the most radical act of devolution in a generation," emphasizing that the new powers would enable investment in local infrastructure projects. Examples cited include the Trent Sport District in the East Midlands and the Bakerloo Line extension in London.

However, the Conservative party criticized the proposals. Shadow housing, communities, and local government secretary Katie Lam accused Labour mayors of being solely interested in increasing taxes and spending "other people's money." Lam questioned why Labour mayors would not allow local leaders to cut taxes and support businesses if they are serious about empowerment.

The Treasury confirmed that the retained business rates will replace existing grants from central government. The government plans to consult with local authorities on the implementation of these changes, with a call for evidence expected later this year.

Discussions are reportedly nearing agreement on 10 new devolution deals, establishing mayoral strategic authorities in areas including Devon, Plymouth and Torbay; Hertfordshire; Lancashire; Leicester, Leicestershire and Rutland; Stoke and Staffordshire; Surrey; Thames Valley; and Wessex. Specific arrangements are also being made for Cornwall, and for Kent and Medway.

The government anticipates that over 90% of England's population will be covered by a devolution agreement, with the entire north of England included under mayoral devolution for the first time. To support areas transitioning to these new arrangements, the government is also confirming £285 million in funding for 2027-28, including £120 million for incubator capital.

Responses to the announcement have highlighted both support and concerns. The County Councils Network called for deeper devolution, advocating for rural areas to receive powers and resources comparable to urban mayors. Conversely, the travel trade association UKinbound expressed reservations about the timeline for the overnight visitor levy, noting that businesses already book holidays for 2028 and that an 18-month implementation period after finalization would be more realistic.

Labour's Abena Oppong-Asare, chairwoman of the Commons Housing, Communities and Local Government Committee, stressed the importance of ensuring strategic authorities have the necessary capacity and accountability measures to effectively utilize their new powers.