Manchester fiscal devolution talks could unlock Piccadilly underground project

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Manchester Piccadilly underground talks

Highlights

Manchester proposes funding an underground Piccadilly station by retaining a portion of local income tax revenues and capturing uplift from surrounding development.
Negotiations now involve potential deals with institutional investors and use of pension funds, enabling a long-term income stream and influencing northern infrastructure finance strategy.
This emerging fiscal devolution model, included in the chancellor’s Northern Growth Strategy, could become a template for broader UK city infrastructure funding and greater local fiscal powers.

Piccadilly funding model gains political weight

As reported by the Financial Times, negotiations over Manchester Piccadilly have evolved into a wider test of whether fiscal devolution can support large-scale transport and development projects in northern England.

Manchester has long argued that a new Piccadilly station linked to HS2 and Northern Powerhouse Rail should be built underground rather than on the surface, partly to avoid using prime development land. Supporters of that approach say the case is not only about transport design but also about creating the conditions for catalytic urban growth.

Successive Treasury teams have resisted the extra cost of an underground option, and Labour initially shared that position. But the dispute threatened to disrupt backing for the government’s plans for its version of Northern Powerhouse Rail, before a breakthrough emerged six months ago.

A group of northern figures linked to Andy Burnham, including council leader Bev Craig, adviser John Wrathmell, transport aide Tom Whitney and Chancellor envoy Tom Riordan, helped develop a compromise. Treasury minister Dan Tomlinson also plays a key role from the government side.

Under the outline discussed, Manchester would make its own financial contribution in exchange for further talks on a form of fiscal devolution to help fund the project. One option would let the city retain part of income tax revenues and capture some of the uplift generated by the station and surrounding development, creating a revenue stream against which it could borrow.

Implications for northern investment strategy

Another route raised is a deal with an institutional investor, with pension funds seen as more likely to back a long-term guaranteed income stream than a transport budget allocated from Whitehall only a few years at a time. The underlying concept has since been included in the chancellor’s Northern Growth Strategy published earlier this year.

The approach carries trade-offs because revenues that might otherwise support other public spending would be redirected to infrastructure. Even so, it illustrates a long-running argument from regional leaders that cities outside London need more flexible tools to overcome Treasury tests that often disadvantage places starting from a weaker economic base.

The Piccadilly debate also offers a broader indication of Burnham’s policy direction as devolution, local industrial strategy and regional growth gain prominence in national politics. If adopted more widely, the model could influence how UK cities structure future infrastructure funding and strengthen the case for a deeper transfer of fiscal powers from central government.

Our earlier report on Andy Burnham’s expected move into No. 10 looked at how markets and investors were reassessing UK policy risk as Labour’s leadership direction came into focus. We noted that signals such as James Purnell’s anticipated role as chief of staff were being read as evidence of a more pragmatic approach, with fiscal credibility, regulation and the stance toward private capital likely to shape sentiment around the UK growth agenda.

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