Prime Minister Andy Burnham's administration is starting to detail his devolution plans, including a proposal to give England's regional mayors a share of income tax. This initiative aims to support local economic development, with the work on specifics beginning ahead of the autumn budget.
The Centre for Cities estimates that only 5% of tax revenue currently remains with mayors and local authorities in the UK, compared to 14% in France and 22% in Japan. The Institute for Fiscal Studies suggests that retaining between 6% and 9% of local income tax revenues could replace the integrated settlements, or central government grants, currently received by mayoral authorities.
While economists largely support the principle of allowing mayors to retain a share of locally generated tax revenues to address regional inequalities, the plan faces implementation challenges. Concerns include the risk of weaker local economies falling further behind if wealthier mayoral authorities retain a rising share of income tax. The reforms are also expected to take time, with the income tax plan not fully effective until 2028. Additionally, dozens of new mayoralties are still being established, with a deadline of the end of 2028 to grant them powers similar to those in London and Manchester.
The Organisation for Economic Co-operation and Development (OECD) has endorsed devolution but highlighted the challenging starting point in Britain. Repairing damage from austerity years and addressing a shortage of staff and expertise in many local authorities are seen as vital building blocks for the success of Burnham's agenda.