US-style tax cutting powers for mayors 'could turn Redcar into Nashville of England', claims Michael Gove

The Levelling Up Secretary told MPs yesterday that increasing fiscal devolution could help “Redcar become the Nashville of England” by allowing Tory mayor of Tees Valley Ben Houchen to bring in tax cuts similar to those being introduced in Tennessee.

In the US state, Governor Bill Lee is bringing in $418m (£343m) of tax cuts, including levies on food items, from next month. Mr Houchen argued earlier this year that allowing mayors to slash business rates would help the Government to deliver on its levelling up ambitions by encouraging private sector investment.

Speaking to the Levelling Up, Housing and Communities Committee yesterday, Mr Gove said that he is “very keen to see a move towards greater fiscal devolution” but added that care needed to be taken to ensure any such move did not unintentionally end up increasing regional inequalities.

“If it were the case that you had a significantly greater devolution of control over retention of business rates, that would be fantastic for London and not so great for the rest of the country,” he said.

“But I do think that we need to move in that direction because as devolution becomes more widespread and deeper across England, there needs to be a greater degree of accountability for what mayors and others are doing. To my mind, that accountability is having to make decisions about raising revenue.”

When asked whether levelling up can be achieved without greater fiscal devolution, Mr Gove said: “No. I will always be arguing for it.”

He said he did not wish to “set a hare running” by giving specific examples of powers he believed could be passed to mayors but said his preference is for tax cuts rather than tax rises.

“What I strongly believe is that the experience of the United States, the experience of Germany, the experience of Switzerland, the experience of the Netherlands is that if you have a measure of fiscal devolution that sooner or later people recognise that if you want to stimulate economic activity you reduce taxes.

“I was in the United States looking at urban regeneration and one of the points that was made to me is that Nashville is booming because Tennessee has gone for a low tax approach. We have seen talent flow into that state and city.

“Similarly if Ben Houchen were able to do everything he wanted in taxation terms, it would be the case that Redcar would become the Nashville of England.”

Increasing the number of mayors across the country is a central plank of the Government’s levelling up strategy and a potential devolution deal for North Yorkshire and York is due to involve the region getting a new mayor. The new political post, which is likely to be filled by a Conservative, will join the existing Labour mayors of South and West Yorkshire in representing the region.

But in East Yorkshire, a proposed devolution deal for Hull and East Riding currently does not include a new mayor for the region due to the councils involved not wishing to have such an elected figure in their area.

Mr Gove said he is in favour of more mayors that he likened to the governors in America.

“My own view is that if you strengthen the hand of local government by having a directly accountable figure who has a clear mandate, you are more likely to get a system similar to similar to what you have in the United States.

“You can have a governor who is elected on the basis of local performance rather than the ebb and flow of national politics.

“In America you can have states that are traditionally Democrat but have a Republican governor because they get elected and re-elected on the basis of their specific performance as a local leader.

“I think having people make decisions based on what people actually do locally rather than what’s happening nationally, reinvigorating local government, is a good thing. But we have to persuade.”

New committee planned to oversee North Yorkshire Council's creation

A new committee of councillors is to be established to scrutinise the creation of the new North Yorkshire Council linked to devolution plans for the region.

A huge shake-up of local government is seeing the current county council and seven district and borough councils being replaced with a single unitary authority from next April.

Councillors have already been elected to the existing county council on the basis of the new model.

Next week, senior councillors will be asked to back the creation of an overview and scrutiny committee which will be dedicated to analysing decisions related to local government reorganisation.

A paper which will be considered by North Yorkshire County Council’s executive on Tuesday next week has set out the plans for the new committee.

The county council’s leader, Councillor Carl Les, said: “The move to a new council for North Yorkshire represents a landmark in how services will be provided for the public as well as the governance of these services.

“It is a huge task, but it is one which we are committed to and ensure that there is a smooth transition to the new authority.

“The chance to introduce a new overview and scrutiny committee will provide the opportunity to monitor the succession of key decisions which will be made ahead of the launch of North Yorkshire Council.

“We have made a commitment to the public that the process will be conducted in an open and transparent manner, and the proposed committee will be a key part of ensuring that this is the case.”

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