England mayors gain power to retain local tax revenue in devolution push
Britain is moving to give England's regional mayors a bigger direct stake in locally raised revenue as the government tries to loosen one of the most centralised fiscal systems among advanced economies. The plan lets mayors keep part of business rates from next year, adds a share of income tax from 2028 and introduces a new overnight stay levy from the same year.
Highlights
- From next year, England's regional mayors will retain 20% of business rates revenue and begin keeping a share of income tax from 2028.
- Mayors will gain authority to impose a levy on overnight stays starting in 2028, enabling new long-term local funding streams for infrastructure.
- Fiscal devolution, a key policy for Prime Minister Andy Burnham, addresses the UK's low subnational tax autonomy—just 6% versus 20% in France and 50% in Germany and the U.S.
Funding changes and implementation timeline
As reported by Reuters, finance minister John Healey says England's regional mayors will be able to retain 20% of business rates revenue from next year and keep a share of income tax from 2028.Healey also says mayors will gain powers to charge a levy on overnight stays from 2028. In his budget statement to parliament, he says the measures create long-term funding streams that can support investment in major local infrastructure, allowing more money raised locally to be spent locally.
Devolution agenda and wider fiscal context
Fiscal devolution is a priority for Prime Minister Andy Burnham, who served as mayor of Greater Manchester for nine years before replacing Keir Starmer in Downing Street in July. Burnham describes the policy as a rewiring of the British state, while the process begins earlier this year under Healey's predecessor Rachel Reeves.Britain remains one of the most centralised developed democracies in tax and spending and also among the most economically unequal. According to the Organisation for Economic Cooperation and Development, only about 6% of UK tax revenue is raised below national government level, compared with 20% in France and about half in Germany and the U.S.
In our earlier coverage of Chancellor John Healey’s deficit-reduction stance ahead of the October 28 Budget, we explained that he planned to stick with an IMF-backed path of fiscal discipline while still trying to support growth. We also highlighted fresh data showing UK GDP rose 0.1% in August and noted the mounting political pressure around the Budget as debates intensified over taxes and structural reforms.
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