Several metro mayors in England are preparing to use newly granted fiscal powers to offer tax rebates to local residents, as part of a broader devolution initiative expected to be announced imminently. The government plans to transfer a share of income tax revenues to regional leaders, aiming to enable local decision-making on public spending and economic growth.
The forthcoming reforms, championed by Prime Minister Andy Burnham, will mark a significant shift in England’s tax structure by allowing metro mayors control over a portion of locally generated income tax and business rates. These changes are intended to promote regional investment in infrastructure and public services through greater fiscal autonomy, reducing dependence on central government allocation.
Ben Houchen, Conservative mayor of the Tees Valley—which encompasses 700,000 residents including Darlington, Hartlepool, and Middlesbrough—has indicated plans to introduce a tax rebate scheme designed to return income directly to residents. Houchen stated that by exercising new fiscal freedoms, the region could become more competitive compared to larger economic centres such as Manchester and London. Discussions are reportedly underway with the Treasury to determine the structure of the proposed relief.
Similar proposals are reportedly under consideration by other Conservative and Reform UK mayors, including Luke Campbell of Hull and East Yorkshire and Andrea Jenkyns of Greater Lincolnshire. These leaders are seen as pursuing fiscal devolution as a tool to lower the local tax burden rather than focusing solely on increased public expenditure.
However, some government officials have expressed skepticism about the feasibility of these tax-cut initiatives, citing longstanding financial pressures on local authorities. A government source pointed to past instances where elected officials had promised council tax reductions but later reversed course due to fiscal realities.
The move toward fiscal devolution responds to longstanding critiques of England’s highly centralised tax framework. Currently, local government authorities receive only about 5 percent of taxes collected within their areas, while the remainder goes to the Treasury. Among G7 countries, the UK ranks lowest in terms of local government funding derived from tax revenues.
Experts highlight the potential economic benefits of allowing regions to retain a larger share of business rates growth. Mirte Boot, interim head of IPPR North, noted that the current system offers little incentive for mayors to actively grow local economies. Likewise, Alex Walker from the Re:State think tank cited examples from Greater Manchester and the West Midlands where retention and reinvestment of business rates have supported regional development.
Despite broad support for greater fiscal autonomy, differences are expected to emerge among regions in how new powers are utilised. Richard Parker, Labour mayor of the West Midlands, acknowledged that varying approaches are an inherent feature of devolution.
Concerns have also been raised about potential disparities between mayoral and non-mayoral regions. Approximately half of England’s population resides outside areas governed by elected mayors, and it remains unclear whether these areas, such as Cornwall, will be granted similar tax powers, raising questions about a possible “two-tier” economic landscape.