Prime Prime Minister Burnham has unveiled plans to grant regional mayors in England a share of local income tax and business rates, marking a significant shift in how local authorities are funded. Under the proposed reforms, strategic authority mayors, including figures such as Steve Rotheram and Kim McGuinness, will gain greater control over key services like housing, transport, and skills, moving away from their traditional reliance on central government grants.
While the exact proportion of taxes to be devolved remains undecided, the government plans to release full details alongside Chancellor John Healey's first budget in the autumn. Under the current timeline, English metro mayors are projected to start retaining a portion of local business rates in April 2027, followed by a share of income tax in April 2028. The rates of income tax themselves—such as the basic rate of 20% on earnings between £12,571 and £50,270—will remain unchanged.
Prime Prime Minister Burnham framed the policy as a fulfillment of his promise to "make good" on his pledge to "bring power home" to "every postcode in the country." He stated, "Under our plans, more of the taxes raised in a community will stay in that community." Burnham, who previously campaigned for greater tax devolution during his tenure as Mayor of Greater Manchester, has placed devolution at the core of his administration's strategy, arguing that local leaders are best positioned to drive economic growth.
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.
The UK's highly centralised tax system has long made it an international outlier, with regional mayors currently dependent on Whitehall grants. To replace these grants, the new system will reward local economic growth. Treasury sources suggested that mayors who successfully expand their local tax bases and grow their economies could secure more funding to spend. The think tank Re:State has proposed that the government allocate mayors 2.5p out of every pound raised by the 20p basic rate of income tax in their respective areas.
The plans have drawn mixed reactions across the political spectrum. Critics said the plans lacked detail and could lead to areas with weaker economies losing out on funding. Conservative shadow chancellor Sir Mel Stride criticized the announcement as "very short on the detail," warning that it could penalize areas with weaker economies. "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," Stride argued, adding that poorer regions could end up losing out.
To address these concerns, the government is designing an equalisation system to ensure that regions with lower tax revenues continue to receive financial support. Furthermore, a "local first" principle will require ministers to justify why any specific powers should remain in Whitehall rather than being devolved. The reforms are being drawn up by No 10 North in Manchester, with a comprehensive policy paper scheduled for publication alongside the autumn budget.
Among regional leaders, West Yorkshire's Labour mayor, Tracy Brabin, welcomed the move, stating that local income tax retention means "people will be able to see and feel the real benefit of their hard work and where that money is going." She noted this would help fund "vital improvements to public transport, providing better skills and employment support." Conversely, Tees Valley's Conservative mayor, Ben Houchen, expressed a preference for overall tax cuts but noted that if given a slice of local income tax, he would "create a new rebate scheme to put money back into people's pockets."
Meanwhile, Reform UK home affairs spokesman Zia Yusuf urged the prime minister to "fully devolve the power to stop the housing of illegal migrants in local communities by the Home Office." These devolution proposals follow a rapid series of announcements during Burnham's first two weeks in Downing Street, which have also featured cost-of-living measures and a speech outlining plans to overhaul social care.
As these sweeping reforms begin to take shape in England, questions are also being raised about their wider impact on the rest of the UK. Where will Andy Burnham take Wales and Welsh devolution?
