Press Story

Giving mayors 5 per cent of income tax would double their local spending power
Former Treasury minister Lord Jim O’Neill hails landmark report as crucial for No10 North
But researchers highlight need for baked-in accountability, so devolution can’t be derailed by one bad decision

England’s mayors should be handed a 5 per cent share of income tax revenues, shifting an extra £3.8 billion a year out of Whitehall and roughly doubling the funding under their control, according to a new report from IPPR and IPPR North.

The proposal would give local leaders greater autonomy over billions more to invest in transport, housing and regeneration without increasing income tax.

By shifting relevant Whitehall budgets into mayoral control, likely including funding currently held by DfT and MHCLG, IPPR and IPPR North say the delivery of projects like mass transit systems would be supercharged.

The authors argue that giving mayors control of a 5 per cent share of income tax would provide the scale of fiscal devolution needed to turn the government’s growth ambitions into reality, while allowing places to share in the additional revenues generated when their economies grow.

The authors modelled what different shares of income tax could look like for England’s regions:

5 per cent share: An additional £3.8 billion a year shifted from Whitehall to England’s mayors, doubling devolved funding
3.5 per cent share: An additional £1.7 billion a year, increasing funding under mayors' control by around 50 per cent
2.5 per cent share: No immediate change to the total baseline funding, but mayors gain greater autonomy over how they spend the money

In the landmark report, endorsed by Lord Jim O’Neill, the researchers caution that plans for fiscal devolution must come with built in safeguards to ensure fairness, economic responsibility, and real accountability for local authorities.

The think tank welcomes Prime Minister Andy Burnham’s plans to bring fiscal devolution to all mayors by 2028 as a bold and ambitious tool to begin reversing decades of damaging over-centralisation that has held the country back.

However, the report cautions that its success depends on strong safeguards and accountability – a bad decision or mismanaged funding from any one authority risks turning public opinion against devolution and undoing progress everywhere.

In addition, researchers argue that mayors must see larger capacity, real powers, and proper accountability to ensure this proposal results in measurable growth across the country.

To see fiscal devolution’s ultimate success, IPPR and IPPR North recommendations include:

Accountability measures from the outset, including regional audit offices so public finances are guarded from overspending and misuse, at national standards
Advanced borrowing powers for areas with the most capability and experience, with full flexibility over spending, while building capacity at every level of government
Fairness built in from the start through a tariff and top-up system, where funding is transferred from richer to poorer regions, so no region is left behind, ensuring growth while avoiding widening inequality.

Lord Jim O’Neill, former Treasury minister and foreword writer:

“The UK is a centralised outlier amongst its OECD peers.

“Without fiscal devolution, mayors and local leaders won't have the freedom to make real change happen.

“It is a simple mathematical fact that if the places with the biggest potential grow more strongly, the national economy will also grow to the benefit of all."

Aditi Sriram, economist at IPPR and lead author of the report:

“For too long, mayors have been expected to drive growth with one hand tied behind their backs, reliant on Whitehall for the money and permission to get things done.

“Fiscal devolution, as laid out in this report, would give mayors the freedom to plan for the long term, invest in the things that bring growth and share in the revenues that growth creates, all while ensuring they have the capacity to deliver it.

“But we’re at a defining moment; critics are loud, political trust is faltering, and the public want to see action, so the devolution agenda cannot afford to fail.”

ENDS

Experts are available for interview

CONTACT

Maeve Schaffer, IPPR North communications lead on 07585772633 or m.schaffer@ippr.org

NOTES TO EDITORS

The IPPR and IPPR North paper Devolution that delivers: Fiscal power for regional growth, by Aditi Sriram, Mirte Boot, and Dr Ryan Swift, will be available for download at: https://www.ippr.org/articles/devolution-that-delivers
Advance copies of the report are available under embargo on request
Methodology:
IPPR modelled different shares of 2025 English income tax assigned to mayors, under the assumption that it will replace 2025 integrated settlements which covers 40% of England. Values of different income tax shares were compared with current integrated settlement funding to determine how much additional funding each scenario would place under mayoral control.
This report focusses on fiscal devolution to the regional tier of government in England – strategic authorities and does not discuss the fiscal frameworks currently applying to the devolved nations, and none of the recommendations should be read as having implications for these arrangements.
IPPR (the Institute for Public Policy Research) is the UK’s most influential think tank, with alumni in Downing Street, the cabinet and parliament. As an independent charity working towards a fairer, greener, and more prosperous society, we have spent almost 40 years creating tangible progressive change - turning bold ideas into common sense realities. www.ippr.org
IPPR North is the leading think-tank in the north of England, developing bold ideas for a stronger economy and prosperous places and people. For more information, visit www.ippr.org/north