Mayors to Keep Tax Revenues: Income Tax, Business Rates and the New Fiscal Devolution Plan

Andy Burnham's devolution plan moves beyond giving mayors responsibilities while leaving them dependent on short-term Treasury grants. By attaching revenue and borrowing capacity to local government, the proposal aims to let regions plan infrastructure over decades rather than negotiate one year at a time. Retained income tax and business rates, thirty-year borrowing and a 'local first' principle add up to a major rebalancing of how English regions are funded, if the autumn Budget fills in the numbers.

How the funding model changes

A retained share of income tax and business rates would give combined authorities a recurring revenue base. That stability matters because lenders are more willing to finance transport, housing and regeneration when repayment does not depend on annual Whitehall decisions.

What mayors could do with the money

Potential uses include rail and bus networks, housing programmes, skills, business incentives and major public-realm projects. Flexibility is politically attractive, but local voters will need clear accounts showing how money is raised, borrowed and spent.

The risk of a two-tier England

London and prosperous areas generate more tax than weaker local economies. If retained revenue simply replaces grants, places with the greatest need could receive the least capacity unless an equalisation mechanism redistributes resources.

Borrowing and fiscal discipline

Thirty-year loans can unlock projects that produce benefits over generations, but they also transfer obligations to future taxpayers. Prudential rules, independent forecasts and transparent limits will be needed to prevent optimistic revenue assumptions from creating hidden liabilities.

Whitehall's institutional resistance

The 'local first' principle challenges departments accustomed to controlling budgets and standards. Real devolution requires civil servants, regulators and ministers to accept variation between areas while preserving national minimum protections.

What the autumn Budget must answer

The decisive details are the percentage of tax retained, the grant formula, treatment of non-mayoral areas and rules for borrowing. Until those numbers are published, the plan is a significant political commitment rather than a fully costed settlement.

What happens next

Key percentages and grant arrangements are not final. Recheck the autumn Budget and any devolution legislation before publishing operational claims. Everything here ultimately reduces to the retained percentage and the equalisation formula, and neither figure has been published.