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Devolution plan would shift income tax share to England mayors

The Centre for Cities estimates just 5% of tax revenue currently stays with mayors and local authorities, while the Institute for Fiscal Studies says 6% to 9% of local income tax could replace central grants.

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A policy push by UK Labour leader Andy Burnham to devolve power to local areas is focusing on a proposal to give England’s regional mayors a share of income tax to support local economic development, a plan that is expected to be detailed ahead of the autumn budget, according to the Guardian Business.

The proposal is aimed at changing a highly centralized fiscal system. The Centre for Cities estimates as little as 5% of tax revenue currently stays with mayors and local authorities, with the rest going to Whitehall and being allocated by central government, the outlet notes.

The piece says devolution in Britain has long been uneven, with Westminster often retaining control and past funding structures encouraging councils to rely on central pots. It also cites cross-country comparisons where 14% of tax stays local in France and 22% in Japan.

While economists and researchers see the tax-share idea as a potential tool for addressing regional inequality, the Institute for Fiscal Studies estimates that between 6% and 9% of local income tax revenues could be sufficient to fully replace the integrated settlements, or central government grants, that mayoral authorities currently receive, but the plan would take time and require design fixes, the Guardian Business reports.

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