Andy Burnham's announcement of a new era of fiscal devolution marks what may prove to be the most significant change to English local government finance since the introduction of business rate retention in 2013 - arguably since the abolition of domestic rates in 1990.
Delivered as the last of four long-term strategy statements this parliament, after social care and technical education, it is also the clearest signal yet of how the former Greater Manchester mayor intends to govern.
For those of us who have worked in and alongside local government for many years, this is a welcome direction of travel. England has long been recognised as one of the most centralised democracies in the developed world. Local leaders have frequently been expected to solve local challenges whilst remaining heavily dependent on annual funding settlements, competitive bidding processes and Treasury approvals. Burnham knows this from the inside, as mayor of Greater Manchester, a trailblazer authority, he used devolved bus and transport powers to make the case that local control changes outcomes, not just process.
Enhancing mayoral strategic authorities
The proposals are now starting to take shape. Mayoral strategic authorities will retain and spend a share of business rates from spring 2027, followed by a share of income tax revenues from 2028, replacing the ring-fenced grants that currently fund local projects. The precise percentages have not yet been set - that detail is expected at the Autumn Budget, when Chancellor John Healey publishes the fiscal devolution roadmap alongside a white paper. Burnham has already closed off one adjacent reform path, on 27 July he ruled out replacing council tax outright, saying "that won't be happening," which keeps this a story about assignment of existing national taxes rather than a wholesale rewrite of local taxation.
The commitment to allow mayors to retain locally generated income tax and business rates, alongside enhanced borrowing powers, represents an important philosophical shift. Rather than relying principally on grants from central government, strategic authorities will increasingly be funded by the economic success of their own regions. That creates stronger incentives to invest in infrastructure and build prosperous local economies - in principle.
In practice, mayors are already reading the incentive differently. Tees Valley's Ben Houchen has said that if his authority is handed a slice of local income tax and business rates, he will use it to fund a rebate scheme and hand money back to residents rather than reinvest it in regional projects. Hull and East Yorkshire's Luke Campbell is reportedly weighing a similar approach. Fiscal devolution was pitched as a tool for long-term regional investment, but at least two mayors are treating it as a mechanism for local tax cut, they're unlikely to succeed in such an approach - but the issue will no doubt arise again as a response to cost of living pressures.
Devolution revolution
There is also an unresolved argument about ambition. A new report from Re:State, Devolution Revolution: the case for radicalism, published to coincide with the announcement, argues that a single tax cannot deliver a durable fiscal settlement and urges Burnham to devolve "a balanced basket of taxes" available to every mayoral authority, not just those with the greatest existing capacity. The criticism is a fair one, the government's own framing has been that reforms will initially target "places that have the greatest capacity to deliver them," which risks entrenching exactly the geographic inequality fiscal devolution is meant to correct.
That points to the real gap in what's been announced. We do not yet know what proportion of income tax will be retained locally, how equalisation between wealthier and poorer regions will work, or how areas without an established mayoral authority will be treated. These are not technical footnotes - given how differently identical tax shares would land across England (a point the House of Commons Library has flagged) they will determine whether the reforms narrow regional inequalities or quietly widen them.
Changing roles and accountability
Greater fiscal freedom also brings greater accountability. Local leaders will be expected to make increasingly complex investment decisions, manage larger borrowing programmes and demonstrate that retained revenue is translating into tangible improvements. As powers move from Westminster to mayoral authorities, local scrutiny becomes more important, not less and it is worth asking whether local democratic institutions and local journalism are currently equipped to hold regional leaders to that standard.
Perhaps the most significant longer-term implication is what this means for the Ministry of Housing, Communities and Local Government. If local government becomes increasingly self-financing, Whitehall's role shifts from funding allocator towards constitutional steward - setting the fiscal framework, ensuring fairness between places, and stepping back from day-to-day local decision-making.
Uncertain outcomes
Burnham deserves credit for moving further, faster, on fiscal devolution than any of his predecessors managed from outside Downing Street. Whether that delivers narrower regional inequality or a patchwork of local tax policy will depend entirely on the detail the Treasury has yet to publish - and on what mayors choose to do with the power once they have it.
