Rachel Reeves: mayors could be given share of income tax with greater fiscal devolution
A proportion of income tax raised in the North could be directly allocated to mayors and regional leaders, Rachel Reeves has said, as she revealed plans for greater fiscal devolution.
The Chancellor gave her second Mais Lecture this afternoon and set out how closer ties with the European Union and regional growth were key to boosting the UK’s flatlining economy.
“I want every part of Britain to do well. That’s why we’re going for growth all across the country, not just in a few places, because I want everyone to be able to succeed no matter what their parents do, where they grow up, or where they choose to settle down,” she told the Bayes Business School in London.
To drive this, Ms Reeves announced officials have been asked to draw up plans for greater fiscal devolution which would be set out at the Budget.
Currently, all taxes collected by HMRC go to the Treasury, which then allocates funding to the regions for specific projects, like transport or housing.
Instead, mayors could be given powers to retain a share of national taxation raised in their areas, meaning taxes raised in Yorkshire would be spent by politicians in Yorkshire.
Ms Reeves said: “I have asked my officials to work with mayors and businesses to develop a road map for future fiscal devolution to be published at this year’s budget.
“This will set out plans to give regional leaders control of a share of some national taxes which have, for too long, been allocated by central government.
“They will look at income tax alongside other taxes, with reforms initially targeted at those places that have the greatest capacity to deliver them and the greatest potential to benefit.”
A government source said this will mean that “as regions grow they can make more benefits of their successes”.
Mirte Boot, interim head of IPPR North, said this would “hand local leaders the powers to make the North rival the South”.
South Yorkshire Mayor Oliver Coppard commented: “The plan for mayors to gain greater control over some national taxes is potentially game-changing, allowing us to accelerate local improvements and delivery.
“I look forward to engaging with the Treasury on a roadmap for fiscal devolution ahead of this year's Budget.”
Ms Reeves also announced £1.7bn of funding for major cities across the Midlands and the North to try and push major regeneration projects through the tricky planning process.
The Chancellor hopes this will unlock housing and office developments in places like Leeds, Sheffield, Manchester, Liverpool and Newcastle, and encourage private investment.
In West Yorkshire, Tracy Brabin has been handed £145m to support jobs in the Northern Square Mile and development in places like Leeds South Bank.
While Mr Coppard has been handed £85m for the Don Valley Corridor and the Sheffield Innovation spine.
Housing Secretary Steve Reed said it would mean “more homes, more jobs, more opportunities” and getting places like Leeds South Bank and the Don Valley “buzzing again”.
However, York and North Yorkshire, the Tees Valley and Hull and East Yorkshire all missed out on the funding.
Tees Valley Mayor Lord Ben Houchen said: “If the Chancellor truly wants to see every part of Britain do well, she would do well to remember the towns in places like Teesside that have been let down for too long by Governments of all colours.
“Labour promised change but seems determined to continue the decades of Treasury orthodoxy that has favoured the big cities, stripping our towns of jobs and opportunity while the same places keep taking more than their fair share.
“It’s time the Chancellor left London and the big cities and faced the reality here in Teesside. Next time she might even remember Darlington if she used her Treasury office here more often.”
The Treasury said that only combined authorities with a single settlement were eligible for the funding, and explained that other mayors would get access to £234m over the next three years.