Prime Minister Andy Burnham has announced a major devolution shake-up that will allow local mayors to keep a larger share of tax revenue raised in their areas, including income tax and business rates, as part of a pledge to take power away from Westminster.
The policy will give local leaders more flexibility to keep the money paid by residents and invest it in their communities. Under the plans, some of the cash people pay in taxes would stay in the area where it was raised instead of being passed back to central government for redistribution.
The Government has not yet said exactly how much of the income tax and business rates collected in each area will be kept locally. No figure has been attached to the plan, and no details have been given about how the new system would work.
The change is part of what the Government has billed as a devolution revolution, designed to hand decision-making back to elected leaders outside Parliament. Mr Burnham said he understood the frustration of people and places that had been ignored by London-based politicians.
« I know what it’s like to be ignored by politicians in Westminster – I’m not going to make that same mistake now I’m PM, » he said as he unveiled the latest policy announcement.
London Mayor Sadiq Khan will also be handed more powers and a portion of the income tax and business rates collected in the capital, the Prime Minister confirmed. The move is part of the Government’s pledge to take power out of Westminster and give elected local leaders greater control over spending decisions.
Under the plans, local leaders would be able to draw on a share of taxes paid by people in their area rather than relying solely on central government funding allocations. The Government says the retained revenue could be used for projects that benefit local communities, although the broader financial settlement that will accompany the change has not yet been set out.
The announcement is the latest in a series of policy launches by the new Prime Minister aimed at redrawing the relationship between Whitehall and local government. It follows promises to shift decision-making closer to the communities affected by it and to treat local leaders as partners rather than as recipients of centrally controlled funding.
The lack of detail means it is still unclear how significant the financial boost for mayors will be. The proportion of tax revenue that can be kept, the rules for different parts of the country, and the impact on existing grant funding will all determine whether the policy delivers the Government’s stated aims.
Mr Burnham presented the plan as a break with the past, saying he knew what it was like to be overlooked by Westminster politicians. He argued that money raised in local areas should be spent on local priorities, helping communities to shape their own futures.
The Government has promised to set out further information on the devolution programme in due course. In the meantime, local leaders are expected to examine how the promised flexibility will work in practice and how much additional funding their areas could receive.
