Prime Minister Andy Burnham announced a plan to grant regional mayors in England a share of income tax revenue for the first time, as part of a broader initiative to devolve power from the central government to local leaders.
Under the proposed changes, mayors of English strategic authorities will also be permitted to retain a portion of business rates collected within their areas. Additionally, they are expected to gain more control over crucial services such as housing, transport, and skills development.
The exact percentage of tax revenue that will be transferred to mayors has not yet been determined. Further details are anticipated when Chancellor John Healey presents the government's first budget in the autumn.
Critics have voiced concerns that the proposals lack sufficient detail and could disadvantage regions with less robust economies, potentially leading to funding disparities. However, Burnham stated that the move fulfills his commitment to "bring power home" to "every postcode in the country."
"Under our plans, more of the taxes raised in a community will stay in that community," the prime minister added. He asserted that devolving tax-raising authority is key to his government's strategy for boosting economic growth across the nation, arguing that metro mayors are best positioned to achieve this.
The UK's system of tax collection is highly centralized, a characteristic that sets it apart from many other developed nations. According to the OECD, a global policy forum, the share of national taxes collected at the local level in the UK stands at 5.8%, which is the lowest among G7 countries. This figure contrasts sharply with nations such as France (20.4%), Japan (36%), and the United States (45.7%).
Currently, mayors of strategic authorities in England primarily receive their funding through grants from the central government. Burnham, during his tenure as Mayor of Greater Manchester, had previously advocated for increased control over tax revenue, reducing reliance on central government grants.
The UK government had been examining the possibility of distributing a share of national tax revenue to metro mayors prior to Burnham's assumption of the prime minister role earlier this month. In a significant speech on devolution in June, Burnham outlined his intention to "oversee the biggest rebalancing of power our country has ever seen" if he were to become prime minister. Devolution has been a central tenet of his administration's agenda.