Power to ‘every postcode’: Burnham hands mayors income tax share

The money raised in a place could soon stay closer to that place. Under plans being launched today, English mayors would keep a slice of the income tax and business rates generated on their patch, so that when a local economy grows, more of the reward stays local rather than heading back to the Treasury.

The Prime Minister is calling it the biggest transfer of power from Westminster in a generation. For Cornwall and every other part of England, it sets out a new deal on who controls the decisions that shape jobs, transport, housing and public services.

What is actually changing

The centrepiece is a first: mayors would receive a share of income tax revenues, on top of a bigger cut of business rates. The government frames it as places keeping more of what they earn, giving local leaders fresh money to spend on the things residents notice most.

The reforms do not touch the rate of income tax anyone pays. They change how existing revenue is split between central and local government. A system of equalisation stays in place too, so that areas still gain from local growth while funding remains fair across the country, in a similar way to how business rates retention and the local government finance settlement already work.

Change starts from next spring, when mayors begin keeping a greater share of locally generated revenue, beginning with business rates. The detail on business rates and on income tax retention is due in a roadmap at the Budget, which the government says will sit alongside a commitment to fiscal discipline. Over time the plan is to move local areas away from leaning on Whitehall grants and towards funding tied to local growth.

The Prime Minister’s pitch

Prime Minister Andy Burnham used the language of place to sell it.

“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,” Andy said.

“Under our plans, more of the taxes raised in a community will stay in that community. Soon, every local leader will have the power and resources to improve public transport, build homes and create jobs.

“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.

“The whole of government will now pull together behind the people and places that desperately need our support. This is how we’ll bring back hope and bring power home to you.”

Andy will tell his Cabinet, in his second week in office, that it is time for a new era of devolution that takes decision-making out of SW1 and puts it closer to people’s lives.

What areas without a mayor get

Cornwall does not have to have a mayor to feel the effect. The government says every community should benefit from stronger local decision-making, and that areas without a mayor will still be supported to set up strategic authorities and take more control over local priorities.

There is also a new “local first” principle. Ministers will be expected to justify why a power should stay in Whitehall rather than be handed to local leaders, reversing what the government calls the Whitehall-first culture that has held areas back for decades.

The powers on offer

Local leaders would gain greater control over housing, transport, skills, employment support and other public services. The list of new powers includes:

• Bringing rail and bus services under greater local control, with integrated ticketing and more reliable services.
• Building more homes where they are needed and freeing up stalled development sites through stronger planning and regeneration powers and more devolved funding.
• Getting local transport schemes, trams and metros built faster by removing Whitehall barriers and speeding up approvals.
• Control over 16-19 funding and employment support, so young people can train for the jobs local employers actually need and people out of work get tailored help back into a job.
• Backing local industries and innovative businesses and attracting investment to create more well-paid jobs.
• Whitehall resource following the power, so devolved leaders get the money to match their new responsibilities.

Some reforms land immediately. The government says it will remove barriers holding up locally led transport projects, switch on new planning powers for mayors, and give areas more flexibility over how funding is spent.

Chancellor of the Exchequer John Healey said the people who best understand what an area needs are the people who live there.

“For the first time we’re giving Mayors a share of income tax so communities directly benefit when their economy grows, passing power out of Westminster and driving growth in every postcode,” John said. “This is the way we start to build new hope and advance the working people of this country.”

Where it has already worked

The government points to places that have been trusted with more responsibility and delivered. In West Yorkshire, a Housing Investment Fund of up to £334 million is helping unlock land and bring forward stalled sites towards thousands of new homes. In the Liverpool City Region, local leaders are rolling out Tap and Go ticketing on Merseyrail, bringing the bus network into local control later this year and taking rail services back into public ownership by 2028. In the North East, 65,000 residents have been supported to gain qualifications, opening up work in sectors including construction and childcare.

Secretary of State for Housing, Communities and Local Government Angela Rayner described it as a first step in rewiring the country.

“This is the first step in our plan to rewire this country and build a better future, where power is no longer hoarded in Westminster but is put back in the hands of local people, where it belongs,” Angela said.

“Our devolution revolution is about bringing an end to the begging-bowl culture of the past, and instead making sure our local leaders have the tools they need to drive the change that communities have been crying out for.

“We need every region to be firing on all cylinders if we want good growth in every postcode, and we will do everything in our power to make that a reality.”

The reforms are to be driven by a strengthened No10 North operation, working with mayors and local leaders to remove barriers to growth and get government better connected to communities.

The bigger argument

The government’s case rests on a stark figure. Between 1997 and 2025, ONS data shows UK whole economy investment averaging 17.3% of GDP, the lowest in the G7 over the past three decades. Ministers argue that handing local leaders more control over funding and investment decisions will unlock opportunities a Whitehall-led approach has overlooked.

As powers move out, the Civil Service is set to become smaller and more strategic, focusing on what is best done at a national level. The plan is described as a major part of the Civil Service’s future operating model, being worked up as part of the Cabinet Secretary’s wider review into the organisation, performance and transformation of the permanent Civil Service.

The plans apply to England only, with the government saying it will develop the ambition for devolution to communities and regions within the nations that have their own devolved governments. A White Paper will be published alongside the autumn Budget, setting out the full programme and a timetable, building on the English Devolution and Community Empowerment Act and its community right to buy for treasured local assets.