Prime Minister Andy Burnham’s plan to assign regional mayors income tax revenue marks the most ambitious rewiring of UK public finance in a generation, and also the vaguest. The direction is clear. The numbers are not.
Burnham confirmed on 30 July 2026 that English metro mayors will receive a share of income tax collected in their areas, with business rates retention arriving first from April 2027 and income tax assignment following from April 2028. Strategic authorities without directly elected mayors will also be eligible, which matters for places like Lancashire, where the Lancashire devolution deal agreed in November 2023 provided up to £20 million in capital funding but left the area without a single elected figurehead.
The rates of income tax will not change. What changes is where the proceeds flow.
The G7’s most centralised tax system faces reform
The case for doing something is not in dispute. According to the OECD Revenue Statistics 2025, the share of national taxes collected at a local level in the UK stands at 5.8%, the lowest in the G7. France manages 20.4%, Japan 36%, the United States 45.7%. Across all unitary OECD countries, the average local share is 9.8%, ranging from 0.6% in Estonia to 35.7% in Sweden. Britain sits near the bottom of that range, not near the middle.
Burnham spent years pushing against this from the Greater Manchester mayoralty. Now he is in Downing Street, and the diagnosis has become policy, if not yet a worked prescription.
What regional mayors income tax assignment would actually mean
The most concrete proposal on the table comes from the think tank Re:State, which has recommended, in its Taxing for Take-Off report, that mayors be assigned 2.5p of the 20p basic rate of income tax raised by residents in their area. Critically, Re:State frames this as a replacement for the Integrated Settlement grant pot, not an extra layer of funding on top of it. The remaining 17.5p would continue to flow to central government, and mayors would have no power to vary the underlying rate, as the House of Commons Library confirms in its fiscal devolution briefing.
That last point matters enormously. What is being proposed is assignment, not devolution of rate-setting. When Conservative Tees Valley mayor Lord Ben Houchen suggested he would use a local income tax share to create a rebate scheme for residents, First Secretary of State Louise Haigh shut it down. ‘There’s not a system that would currently allow that,’ she said. ‘They certainly wouldn’t be able to set tax rates locally or regionally.’
Houchen responded on X: ‘So devolution means getting people’s taxes to spend but not being allowed to give it back to them.’ It is a point that lands, even if his preferred alternative, cutting taxes from the centre, sidesteps the question of regional investment entirely.
The House of Commons Library also flags a distributional problem that the government has not yet solved. England’s regions are deeply unequal in economic terms, which means a 2.5p assignment would raise very different sums for different mayors. An equalisation mechanism is being developed, but the design of that system will determine whether weaker-economy areas gain or lose compared with the current grant settlement. Conservative shadow chancellor Sir Mel Stride has already characterised the announcement as ‘very short on the detail’ with ‘no new money being announced’.
He is not wrong about the detail. Treasury sources acknowledge officials are still working out how it will function in practice. The exact proportions will be confirmed when Chancellor John Healey delivers his first budget in the autumn.
Some researchers want to go further still. The Prosper UK think tank has proposed, in its Set up for Success report, that income tax assignment be accompanied by devolving a basket of locally generated revenues: stamp duty land tax, vehicle excise duty and air passenger duty. That would be genuine fiscal devolution. What Burnham has announced is closer to a down payment on it.
My read is that the architecture here is sound and the direction is right. The OECD numbers make an embarrassing case on their own. But the political risk is real: an equalisation mechanism designed in Whitehall, for mayors with no rate-setting powers, with a share to be decided in the autumn, can easily look less like devolution and more like a rebranded grant. The autumn budget is where this either becomes a structural shift or retreats into symbolism.
