Burnham's mayoral tax plan risks leaving weaker English regions behind
As detail work begins ahead of the autumn budget, the prime minister's pledge to hand English mayors a slice of income tax confronts a hollowed-out local government and the danger of widening regional inequality.
The detail work on Andy Burnham's flagship devolution policy is set to begin in earnest ahead of the autumn budget, starting with the mechanics of handing England's regional mayors a share of locally generated income tax. The scheme, initially announced by Rachel Reeves earlier this year, is meant to give mayoral authorities their own revenue base for economic development rather than relying on grants allocated by Whitehall.
The scale of what Burnham is attempting becomes clearer when set against European peers. The Centre for Cities calculates that roughly 5 per cent of UK tax revenue currently remains with mayors and local authorities. In France the figure is 14 per cent; in Japan, 22 per cent. Britain ranks among the most fiscally centralised economies in the developed world, and reversing that is not a matter of signing a few orders.
A long runway
The Institute for Fiscal Studies estimates that retaining between 6 and 9 per cent of local income tax receipts would be enough to replace the central government grants, known as integrated settlements, that mayoral authorities receive today. But the plan will not take full effect until 2028, and dozens of new mayoralties covering areas such as Essex, Stoke-on-Trent and Warrington must still be created by the end of that year.
That timeline is a problem for a prime minister campaigning on urgency. It also raises a structural worry: the mayoral authorities growing fastest, London and Greater Manchester chief among them, tend to be the wealthiest. If rising income tax receipts accrue disproportionately to the strongest economies, slower-growing areas such as the West Midlands and South Yorkshire face a cycle of underinvestment and further stagnation.
Hollowed-out town halls
The OECD endorsed the devolution direction last month but cautioned that Britain's starting point makes delivery difficult. English local government has been gutted since 2009: the workforce has fallen from 2.2 million to roughly 1.1 million, and many councils struggle with basic services. Only the most established mayoralties, Greater Manchester and the West Midlands among them, have built the analytical and delivery teams needed to deploy new powers effectively.
Governance safeguards are equally thin. Just 1 per cent of English authorities published audited accounts for 2022-23 by the original deadline. The abolition of the Audit Commission under the Conservatives, combined with the decline of local journalism, has stripped away key oversight. Labour has signalled it will strengthen the new Local Audit Office and draw on the National Audit Office to fill gaps.
The economic prize
If the obstacles can be cleared, the payoff could be substantial. Centre for Cities research suggests that integrating bus, tram and rail networks across the six largest English cities outside London would connect 1.2 million more people to their nearest city centre and generate productivity gains worth an estimated £17 billion. The OECD notes that countries with greater fiscal devolution tend to record higher wages.
The need is stark: seven of the bottom 20 large cities in the G7 for productivity are British. Public trust in local government, at around 35 per cent reporting high or moderately high confidence, still trails the OECD average of roughly 45 per cent, but it exceeds trust in Westminster.
Burnham's road from pledge to functioning fiscal decentralisation is long, expensive and politically exposed. For Europe's most centralised major economy, though, the cost of standing still has been measured in decades of lagging regional output.
