Burnham Unveils Historic Devolution Plan: Mayors to Keep Income Tax and Business Rates
Prime Minister Andy Burnham will on Friday announce the biggest transfer of power from Westminster to England’s regional mayors in a generation, including a first-of-its-kind share of income tax revenue and control over business rates, as part of his “local first” agenda to break what critics call the “death grip of the Treasury.”
The plan, which Burnham will set out in a speech expected to be delivered later today, will allow all mayors of city regions in England to retain a portion of income tax generated in their areas from 2028, alongside business rates totalling tens of millions of pounds by April 2027. The Prime Minister said the measures would ensure that “more of the taxes raised in a community will stay in that community.”
According to senior government sources, the exact percentage of income tax that mayors will receive has not yet been determined, with details to be confirmed when Chancellor John Healey presents his first Budget in the autumn. The revenue will replace existing central government grants rather than being additional funding, but local leaders argue the shift from ringfenced handouts to locally controlled income will transform their ability to plan long-term investments.
A Break from the “Death Grip” of the Treasury
Oliver Coppard, the Labour Mayor of South Yorkshire, welcomed the announcement as a fundamental change in the relationship between local and central government. “It’s really important because it gets us out of the death grip of the Treasury and gives us that long-term certainty around income,” Coppard said.
Under the new system, combined authorities will be able to borrow against projected income to fund major projects such as new tram lines, housing developments, and skills training. Transport Secretary Louise Haigh also confirmed that mayors will be given a fast-track route to build new trams and transport links, cutting through years of bureaucratic delay.
The devolution plan is part of Burnham’s broader drive to shift power away from Westminster, with a new “local first” principle requiring ministers to justify why any power should remain in Whitehall rather than be devolved to local leaders. Downing Street said the civil service, which employs over 520,000 people, would become “smaller and more strategic” as decision-making moves out of London, where one in five officials are currently based.
Why This Matters: Ending the Age of Whitehall Handouts
For decades, England’s regions have depended on competitive bidding for central government funds, often leading to short-term fixes and fragmented planning. The new system aims to replace this with predictable, locally controlled revenue streams, giving mayors the security to commit to multi-decade infrastructure projects.
England’s directly elected mayors already control areas covering roughly three-quarters of the population, and the new powers will allow them to use income tax and business rate revenue as they see fit, including offering tax breaks to key industries or rebates to residents. This flexibility is expected to accelerate housing construction, improve public transport, and boost local economic development.
However, the plan has not been without controversy. Opposition parties have criticised the lack of detail on tax shares, warning that areas with weaker economies could lose out if they generate less income tax revenue. Labour backbencher Perran Moon, the MP for Camborne and Redruth in Cornwall, called the plans “discriminatory” and warned they could create a “two-tier system” between regions with mayors and those without.
Coverage Beyond Mayors: Strategic Authorities
First Secretary of State Louise Haigh attempted to allay those concerns, telling BBC Radio 4’s Today programme that areas without directly elected mayors would benefit from investment through new strategic authorities. These authorities bring together local councils to manage regional issues such as transport and economic development, with decisions made collectively by council leaders rather than a single mayor.
So far, the government has not specified which regions will establish strategic authorities, but officials say they will cover large parts of England, ensuring that no community is left behind. This is a key part of Burnham’s promise to “bring power home” to “every postcode in the country,” a commitment he reiterated ahead of Friday’s announcement.
The Politics of Devolution: From Mayor to Prime Minister
Andy Burnham’s journey from Greater Manchester Mayor to Prime Minister has been defined by his advocacy for regional empowerment. As mayor, he often clashed with Westminster over transport funding, health policy, and housing targets. Now in Number 10, he is seeking to institutionalise his vision, telling allies that he knows “what it’s like to be ignored by politicians in Westminster” and will not “make that same mistake now I’m PM.”
The announcement comes as Burnham faces political pressures on multiple fronts, including a recent backlash over his social care plans, which critics have dubbed a “death tax.” The devolution plan could be seen as an attempt to refocus attention on his core promise of shifting power out of London, a message that resonated in his landslide victory in the 2024 general election and in his subsequent reshuffle, which signalled a Labour pivot to a more assertive regional agenda.
According to recent polls, the Labour Party under Burnham has seen a surge in support, overtaking Reform UK in some surveys, as voters appear to respond positively to his hands-on approach to governance. The devolution announcement is likely to reinforce that momentum by delivering a concrete policy that touches every part of England.
Economic Impact and Long-Term Potential
Experts say the most significant consequence of the plan is the ability of combined authorities to take out 30-year loans against their projected income. This will allow them to fund major capital projects that were previously impossible under the short-term grant system. For example, a combined authority could borrow to build a new metro network, with the debt repaid from the income tax share it will receive over three decades.
This is a revolutionary change in the UK’s highly centralised political system, where local government has historically relied on Westminster for the vast majority of its funding. The new powers are expected to encourage innovation, as mayors will be directly accountable to their electorates for how they spend locally raised taxes.
However, some economists caution that the plan could exacerbate regional inequalities unless careful safeguards are in place. Richer areas, such as London and the South East, will naturally generate more income tax revenue than poorer regions like the North East or Cornwall. The government has not yet outlined a redistribution mechanism to address this imbalance, leaving opposition parties to question whether the plan truly benefits all regions equally.
The Bigger Picture: A Shift in the UK’s Constitutional Settlement
Burnham’s devolution plan is the most significant attempt to reshape the UK’s constitutional settlement in decades. By transferring control of taxation and borrowing powers to regional authorities, the government is effectively creating a new layer of fiscal autonomy that did not exist before. This could lead to greater divergence in policy between regions, as mayors are likely to prioritise different issues based on local needs.
It also signals a fundamental change in the relationship between the Treasury and local government. For years, local leaders have complained that central control leaves them unable to respond to local crises or invest in long-term infrastructure. The new model aims to give them the freedom to act, but also the responsibility to deliver results for their constituents.
Beyond the immediate political headlines, the plan could have a lasting impact on how public services are delivered. Some of Burnham’s allies have called for mayors to oversee schools, GPs, and childcare providers through health and education commissioners, similar to the role of police and crime commissioners. This would further extend the reach of devolution into citizens’ daily lives.
What Happens Next: Budget and Rollout
With the Prime Minister set to announce the plan in full today, the next key milestone will be the Chancellor’s Budget in the autumn, when the government will confirm the exact share of income tax that mayors will receive and the timeline for business rates devolution. In the meantime, negotiations are expected with individual combined authorities to agree on which powers to assume first.
As Burnham prepares to speak, he is likely to emphasise the theme of local empowerment, painting himself as the leader who finally freed English regions from the “death grip” of the Treasury. Whether the plan delivers on its promise of equal benefits across the country remains to be seen, but there is no doubt that it marks a turning point in UK governance.
For now, mayors across the north, the Midlands, and beyond are preparing to take control of their own economic destinies. The question is whether Westminster will truly let go.
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