Andy Burnham to give regional mayors share of income tax

Prime Minister Andy Burnham will give all mayors of city regions in England a share of income tax revenue for the first time, as part of his drive to transfer power from Westminster to local leaders.

Burnham will also allow mayors of English strategic authorities to keep some cash from business rates collected in their areas, and gain greater control over services such as housing, transport, skills.

The government has not yet decided the exact portion of taxes mayors will be given, with more details to be announced when Chancellor John Healey delivers his first budget in the autumn.

Critics said the plans lacked detail and could lead to areas with weaker economies losing out on funding.

But Burnham said the move would "make good" on his pledge 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.

The power to raise and control tax revenues is highly centralised in the UK, making the country an outlier by international standards.

The share of national taxes collected at a local level in the UK is 5.8%, the lowest in the G7, according to the OECD, a global policy forum.

That share is far below that of other countries with large economies such as France (20.4%), Japan (36%), and the US (45.7%).

As it stands, mayors of strategic authorities in England receive most of their funding from central government grants.

During his time as Greater Manchester mayor, Burnham pushed for greater control over tax revenue, rather than having to rely on government grants.

The UK government had already been exploring whether a share of revenue from national taxes could be distributed to metro mayors, before Burnham became prime minister earlier this month.

But in a major speech on devolution in June, Burnham said he would "oversee the biggest rebalancing of power our country has ever seen" if he became prime minister.

Burnham has put devolution at the heart of his plan for government, arguing that metro mayors are best placed to boost economic growth across the country.

The prime minister wants local areas to move away from dependence on Whitehall grants and towards funding that rewards local economic growth.

English metro mayors are expected to start retaining some revenue from business rates from April 2027, and receive a portion of income tax from April 2028.

The plan is to replace grants with revenues from these taxes.

The rates of income tax - for example, the basic rate of 20% on income from £12,571 to £50,270 - will not change as a result of the reform.

Treasury sources say some metro mayors could end up with more money to spend if they grow their local economies and expand their tax bases.

The share of income tax assigned to each mayor could differ, but officials are still figuring out how it will work in practice.

One think tank, Re:State, has suggested the government should allocate mayors 2.5p in every pound raised by the 20p basic rate of income tax in their areas.

Conservative shadow chancellor Sir Mel Stride said the announcement was "very short on the detail".

"Unless Burnham is going to launch another tax raid elsewhere, borrow even more, or make cuts to central government grant, there is no new money being announced here," Sir Mel said.

He said areas with weaker local economies could end up losing out - "the opposite of what Andy Burnham claims he wants to achieve".

Reform UK home affairs spokesman Zia Yusuf said the prime minister should "fully devolve the power to stop the housing of illegal migrants in local communities by the Home Office".

He said: "Andy Burnham says he wants to devolve power and actually listen to local people. If he was listening, he would know that they do not want unvetted illegal migrants dumped in their areas."

The government is also working out the details of an equalisation system that will ensure areas where less tax is collected continue to receive financial support.

Ministers will be expected to justify why powers should remain in Whitehall rather than being devolved, under a "local first" principle.

The reforms are being developed by No 10 North in Manchester and a policy paper that will set out the full details will be published on the same date as the autumn budget.

The reforms come after a policy blitz during Burnham's first two weeks in Downing Street, with announcements on the cost of living followed by a speech on his plan to overhaul social care.

The reaction to the plans has been mixed among metro mayors from different parties.

Tracy Brabin, the Labour mayor of West Yorkshire, said giving regions like hers a proportion of income tax means "people will be able to see and feel the real benefit of their hard work and where that money is going".

"This will enable us to deliver on our ambitious plans including vital improvements to public transport, providing better skills and employment support," she told the BBC.

Ben Houchen, the Conservative mayor for Tees Valley, said he would prefer the government to cut taxes.

But he said if he was handed a slice of local income tax, he would "create a new rebate scheme to put money back into people's pockets".