UK devolution debate highlights fiscal trade-offs over regional fairness

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UK devolution debate and fairness

Highlights

Full devolution of income and corporation taxes, which fund 43 per cent of UK public spending, would let London halve tax rates but force significant rate hikes elsewhere.
London paid 70 per cent of the Elizabeth Line's cost, but regions cite investment bias, while average 2024 commuting times show Londoners face 54 minutes versus 30 in Manchester.
Devolved models based on incremental revenue retention weaken growth incentives and, as seen in Scotland, Wales and Northern Ireland since 1997, have not delivered stronger economic growth.

Fiscal powers expose limits of local autonomy

As argued by the Financial Times, support for stronger devolution in England often rests on the view that Britain's highly centralised economic model has held back growth and weakened local accountability.

Advocates say handing more authority to regions and cities can sharpen incentives to promote investment, allow borrowing against future tax revenues and give local politicians clearer responsibility to voters. Yet the article notes that this consensus rarely confronts the central trade-off, namely that meaningful fiscal devolution would require transferring major tax revenues to local areas.

If income and corporation tax were more fully devolved, the gap in local tax-raising capacity would become stark. The text says those taxes fund 43 per cent of UK public spending, excluding national costs such as debt interest and defence, and under such a model London could afford to roughly halve its tax rates while many other areas would need significant increases.

That imbalance makes full fiscal devolution politically difficult because it would quickly be judged unfair. Once that option is ruled out, regional politics instead becomes a contest for a larger share of revenues raised in the capital, leaving Whitehall to decide how money should be divided.

Investment disputes and growth expectations

Arguments over transport spending illustrate how competing claims of fairness can pull in opposite directions. Cities such as Manchester, Birmingham, Liverpool, Leeds and Newcastle may view heavy investment in London's Elizabeth Line as evidence of bias, although the article notes that London paid 70 per cent of the cost.

At the same time, Londoners can point to longer commuting times and stronger returns on infrastructure spending to argue that the capital's transport needs are greater. The text cites average commuting times in 2024 of 54 minutes for central London, compared with 30 minutes in Manchester and 26 in Merseyside, underscoring why central government still has to arbitrate these competing demands.

A more limited model of devolution, in which regions keep only additional revenues generated after an initial allocation, is presented as more feasible. But that approach also weakens the very growth incentives that make devolution attractive, especially if periodic reviews later redistribute funding to prevent weaker areas from falling further behind.

The article also points to evidence from Scotland, Wales and Northern Ireland, where substantial devolution since 1997 has not produced stronger growth. Its conclusion is that reorganising power inside the UK may still offer benefits, but it is unlikely on its own to transform economic performance or erase regional grievances.

Our earlier coverage of Andy Burnham’s “Number 10 North” plan outlined proposals to base a stronger hub of central government in Manchester as part of a broader drive to devolve power from Whitehall. We noted that the initiative was framed around long-term growth strategy and discussions on fiscal devolution, including what additional powers and funding tools English regions and mayors would need to deliver local economic priorities.

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