Fiscal devolution is a key piece of the economic puzzle but must fit in the right place
Fiscal devolution is a significant piece of the jigsaw puzzle if the shift in power to communities is going to be successful.
Britain has one of the most centralised economies in Europe and regions like Yorkshire have experienced first-hand the frustration that comes with being held back for many decades. It is clear that civil servants sat in Whitehall are not best placed to make decisions that ultimately shape the region and its future.
However, with fiscal power comes added responsibility for local mayors. As the debate around the pros and cons of a visitor levy shows, mayors must exercise caution. Otherwise, regions could be set back even further. Local leaders would have to spend the share of taxation carefully.
Think tank Centre for Cities has today published a blueprint for fiscal devolution and it provides a lot of food for thought. The think tank says mayors should be given access to around 7 per cent of locally generated income tax receipts.
It also calls for access to around 2 per cent of locally generated corporation tax. Centre for Cities describes the role of corporation tax as an essential “carrot” to incentivise mayors to grow and invest in their high-productivity businesses.
Given Britain has suffered from decades of low economic growth it is vital that the Government gets fiscal devolution right.
The fact that nine of the biggest cities outside London contain 16 per cent of the UK population but generate only 15 per cent of national economic output shows the need to change course when it comes to the economy.