The Government has announced plans to give English metro mayors a share of locally raised income tax for the first time, in what ministers say is one of the most significant transfers of power away from Westminster in decades.
Under the proposals, mayors will be allowed to retain a proportion of income tax generated within their areas, alongside greater control over business rates, borrowing and local investment. The Government says the changes are intended to give regional leaders more certainty over funding and greater freedom to invest in transport, housing, skills and economic growth.
Prime Minister Andy Burnham promoted the reforms on X, writing:
"I promised to take power out of Westminster. I meant it.
"For the first time ever, we're giving Mayors a share of income tax so communities have more control over jobs, transport, housing and public services in their area.
"I know what it's like to be ignored by politicians in Westminster. I won't make that same mistake as Prime Minister."
The announcement forms part of the Government's wider devolution programme, which aims to reduce Whitehall's control over regional funding and decision-making. From next year, strategic authority mayors are also expected to retain all locally raised business rates, replacing a significant proportion of existing Treasury grants. Further details on the income tax arrangements are expected to be published alongside the Autumn Budget.
A fundamental shift in local government funding
For decades, most tax revenue collected across England has been paid into the Treasury before being redistributed through central government grants.
The proposed reforms would begin to reverse that model by allowing regions to retain a share of the revenue generated by their own economies. Ministers argue this will enable local leaders to plan infrastructure and public services over the long term, rather than relying on annual funding settlements from Westminster.
The Government has also said that safeguards will be introduced to ensure less affluent regions are not disadvantaged, with equalisation arrangements expected to remain part of the funding system.
Political debate expected
Supporters of greater fiscal devolution argue that local leaders are often better placed than Whitehall to decide how investment should be directed in their communities, and that retaining a share of local tax revenues could strengthen accountability and encourage economic growth.
However, critics have questioned whether wealthier regions could benefit disproportionately if funding mechanisms are not carefully designed. Others have argued that more detail is needed on precisely how much income tax will be retained locally and how the system will operate in practice.
If implemented, the reforms would represent one of the most substantial changes to the financing of English local government in a generation, with further legislation and Budget measures expected to set out the detailed framework later this year.
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