What Andy Burnham’s new tax sharing plans could mean for your region

Mayors in England will get to keep a share of taxes collected in their regions to “bring power home” to communities, Andy Burnham has announced.

Mayors will receive a share of income tax revenues for the first time under the plans, which the government has described as the “biggest transfer of power from Westminster in a generation”.

Further details on the exact funding settlements are yet to be laid out, but the shift has the potential power to hand billions to mayoral authorities across England.

This would inevitably be rebalanced with a reduction in the level of grants given to local leadership by central government. But it would also come with more freedom over the spending, which Mr Burnham says will enable mayors to “improve public transport, build homes and create jobs.”

The new prime minister added: “I said we’d take power out of Westminster and carry it into every postcode in the country. Today, we make good on that promise.

“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.”

Depending on the model, some mayoralties could take away much more than others, given major differences in business rates and income tax receipts between areas.

A report last month from think tank Re:State, which lists Mr Burnham as an adviser, recommended the government allocate mayors 2.5p in every pound raised from the 20p basic rate of income tax in their areas.

If adopted, this model could see an extra £2.38bn handed to the Greater London Authority, led by mayor Sadiq Khan.

Manchester, meanwhile, would gain £674 million, and the West Midlands £666 million, researchers found.

More details will be announced at the Budget on 28 October, the government has said, confirming that the plan will start next spring with business rates.

Under current rules, local authorities typically already keep 50 per cent of business rates paid in their area, with the other half going to central government.

The Greater London Authority also retains 37 per cent of business rates collected across the capital after some tariffs from central government. Receipts for the entire region are estimated to total £9.07bn in 2026-2027.

But two trials currently underway in Manchester (estimated £1.22bn in business rates) and the West Midlands (£1.13bn) have seen local authorities keep 100 per cent of their business rates, with 25 per cent of this given to the local metro mayor.

This model may be applied to all mayoral authorities under the government’s plans, netting local leaders tens of millions.

The plans are not radical on the international stage, with Centre for Cities pointing out that the UK is the “least fiscally devolved country in the G7”.

Only five per cent of taxes are currently devolved, the think tank finds, compared to 34 per cent in the USA and Germany, and 41 per cent in Switzerland.

While the prime minister made clear that he intended for the extra funding to be used for public services and investment, several mayors have indicated that they would rather issue tax rebates to people living in their area.

However, Louise Haigh, the first secretary of state, told media this would not be “possible at the moment”, adding the government will “consider what proposals are put forward”.

Conservative Tees Valley mayor Lord Ben Houchen criticised her remarks, saying: “Last time I spoke to the PM, devolution was about Whitehall not dictating what areas can or can’t do.”

He added: “They want to reward mayors for growing the economy but the best way to grow the economy is to let people keep more of what they earn.”

Mr Burnham has since directly rejected the idea, arguing that the policy is designed to boost “growth and investment”.

Of the 14 full or partly established mayoral authorities, 10 are led by Labour mayors, while two are Conservative and two are Reform.

In an official paper laying out its devolution plans on Friday, the Cabinet Office said that it wants every region in England to have a strategic authority in place by 2028. However, it added it “will not impose mayors on areas that do not want one”, but says powers available to mayors will be “commensurately greater”.

More details are set to be revealed in the autumn, but a key question Mr Burnham’s policy will need to answer is how he will grapple with local leaders who do not share his political vision, while still delivering power out of Westminster.