English mayors to win income tax share and borrowing powers

Prime Minister Andy Burnham has announced a plan to transfer a share of income tax receipts and borrowing powers to England’s regional mayors, replacing traditional Whitehall grants. The government described the move as the biggest transfer of power from Westminster in a generation, with separate proposals to follow for Scotland, Wales, and Northern Ireland.

Under the timeline set out by the government, mayors will retain a share of business rates totalling tens of millions of pounds by April 2027. From 2028, they will receive a portion of local income tax receipts instead of relying on central handouts, though this will replace existing funding rather than provide additional money.

The economic significance lies in the new borrowing freedoms. Combined authorities will be able to secure 30-year loans from private investors against their projected tax income to fund major transport and housing projects. This bypasses the previous requirement for annual Treasury approvals that frequently blocked large-scale regional investments.

Mayors will also gain greater control over local services, including housing, transport, and technical education for 16-to-19-year-olds. To enforce this shift, Burnham is applying a "local first" principle requiring ministers to justify why any powers should remain in London. The 520,000-strong civil service is simultaneously slated to become "smaller and more strategic".

The proposal has drawn criticism from the Conservative opposition, with shadow chancellor Mel Stride warning that faster-growing areas could hoard funding at the expense of weaker local economies. First Secretary of State Louise Haigh acknowledged that London will retain more money under the plan. However, she argued that a funding formula to be detailed in the autumn budget would prevent richer areas from pulling further ahead.

"We are the most centralised nation in the G7, and that has held back our growth and our productivity outside London and the south-east for too long," Haigh said. Some regional leaders, including Conservative Tees Valley mayor Ben Houchen, have signalled intentions to use the funds for tax reliefs to attract investment. Haigh ruled out direct resident rebates, noting that such schemes require HMRC infrastructure and that revenue must be reinvested into local economies.