Andy Burnham is drawing up plans to give England’s regional mayors the power to raise and retain their own taxes in what would be the most significant transfer of fiscal control away from Westminster in decades, according to allies.
The i Paper understands that the former Manchester Mayor has told friends that one of the first taxes he wants to give mayors the power to set and control in their areas is business rates, if he becomes Prime Minister as is widely expected.
The move would allow regional mayors to raise their own revenue and spend it as they see fit, rather than entirely depend on grants handed down by the Treasury.
The thinking is part of a wider devolution agenda taking shape as the runaway favourite to succeed Sir Keir Starmer prepares to deliver a set-piece speech on the economy and devolution next week, his first major intervention since returning to Parliament.
Burnham’s ambition on the economy
Burnham is expected to set out a bold ambition to “unlock regional growth potential” while moving the “centre of political gravity away from being solely in London”, The i Paper understands.
One ally said it would focus on building an economy that works for every part of the country, including communities long overlooked by Westminster.
Burnham’s team is understood to have moved the venue from London to a “symbolic location” in Greater Manchester.
The push to let mayors raise their own money is a direct extension of the “Manchesterism” model Burnham built over nearly a decade running Greater Manchester, which prioritises devolving powers and resources to city-regions so local leaders can drive growth and convert it into tangible public benefit.
As mayor he pressed repeatedly for greater fiscal freedom, and eventually won Treasury agreement to introduce a visitor levy – or tourist tax.
Burnham has long been an advocate of regional mayors being allowed to set and retain at least a proportion of the business rates raised in their areas.
Business owners, particularly pub owners, have long complained about that the high cost of rates is making it difficult to sustain their presence in the high street. Rates have soared in some areas due to the increase in property prices.
Although the Chancellor did bring in changes in the Budget intended to reduce rates, it came alongside reevaluation of rateable value, leaving hospitality firms paying a smaller percentage but on far higher amounts.
Biggest shake up of English tax in years
Lord Jim O’Neill, the economist and cross-bench peer who has been providing advice to Burnham, told LBC earlier this week that business rates devolution is a “very strong probability.”
Burnham’s commitment to further discal devolution chimes with work already under way in Whitehall.
According to reports, ministers are already considering handing billions of pounds raised through business rates to regional mayors, in what would rank among the biggest shake-ups of the English tax system in years.
Steve Reed, the Housing Secretary, said earlier this month that the Government was drawing up plans to devolve the tax as part of a wider effort to shift tax income to local leaders that Chancellor Rachel Reeves had been due to set out in this year’s Budget.
Reeves’s own future is looking uncertain amid the upheaval over Starmer’s premiership, but the proposals are widely expected to be taken up by Burnham given his long-standing commitment to devolution.
Reeves already planning fiscal devolution
On Thursday Reeves told the British Chambers of Commerce (BCC) conference that herbudget later this year would include further reforms to business rates and fiscal devolution – in what has been interpreted as a naked pitch to keep her job.
Burnham is reported to be considering Ed Miliband, Wes Streeting or Shabana Mahmood as possible replacements.
Reeves said she would not pre-empt his choice of Chancellor, but stressed that she had worked closely with him as mayor on “fiscal devolution” – but admitted there is “more to do.”
Earlier this week, Lord Jim O’Neill, the former Treasury minister, suggested Burmham’s agenda went well beyond the cautious settlements of recent years.
“I’d almost describe it as constitutional devolution,” he told LBC, contrasting it with more than a decade in which regions were, in his words, drip-fed small concessions only “if you’re good”. The shift Burnham envisages, he said, “would be a whole new level”.
He indicated the most advanced plans were around business rates. Allies say Burnham wants mayors to be able to levy and retain the tax on commercial property, such as offices and shops – giving regional leaders direct control over a significant revenue stream raised within their own boundaries for the first time, and the freedom to use it to support high streets, town centres and investment.
Income tax could eventually be devolved
Beyond business rates, Lord O’Neil has signalled that the devolution conversation could eventually stretch to income tax – though this remains far more tentative.
“I think exploring aspects of income tax is possible, it is definitely something that would be on the agenda to study in a serious way,” he told LBC.
To force the pace in government, his advisers have discussed designating a Whitehall department with the explicit job of identifying powers that could be stripped from the centre and handed to regional authorities, according to The Financial Times.
Andy Haldane, the former Bank of England chief economist now advising Burnham, has separately floated splitting the Treasury into a finance ministry and a dedicated growth department – an idea intended to remove the institutional brakes on the economy.
Alongside Haldane and O’Neill, Burnham has also been taking counsel from Richard Hughes, the former chair of the Office for Budget Responsibility.
Burmham has already confirmed he would not raise the headline rates of income tax, national insurance or VAT, and has committed to keeping the state pension triple lock, all of which are Labour manifesto pledges.
Burnham is acutely conscious of the bond markets. Having drawn criticism last year for declaring that the country needed to move beyond being “in hock to the bond markets”, he has since insisted his economic policy will sit within the government’s self-imposed fiscal rules and has set out to reassure the City that borrowing will not run out of control.
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