Prime Minister Andy Burnham has unveiled plans to grant all mayors of city regions in England a share of income tax revenue for the first time, marking a significant step in his strategy to decentralize power from Westminster.

This initiative aims to transfer greater authority and financial control to local leaders, moving away from the UK's historically centralized tax system. The move is part of a broader agenda to empower metro mayors, who Burnham argues are best positioned to drive economic growth across their regions.

Under the proposed reforms, mayors will also be permitted to retain a portion of business rates collected locally and gain enhanced oversight of services including housing, transport, and skills development. The exact share of income tax revenue to be allocated has not yet been determined, with further details expected in Chancellor John Healey's upcoming autumn budget.

Critics have raised concerns that the plans lack specific details and could disadvantage areas with less robust economies, potentially leading to funding disparities. However, Burnham stated the policy fulfills a commitment to "bring power home to every postcode in the country," asserting that more taxes raised locally will remain within those communities.

The UK's reliance on central government grants for local authorities, particularly for strategic authorities in England, is notable. The share of national taxes collected at a local level in the UK stands at 5.8%, the lowest among G7 nations, significantly lower than countries like France, Japan, and the United States, according to the OECD.

Burnham, who previously advocated for greater tax revenue control as the Mayor of Greater Manchester, sees this devolution as crucial for boosting national economic growth. The government had already been considering ways to distribute national tax revenue to metro mayors prior to Burnham's premiership.

English metro mayors are anticipated to begin retaining business rates revenue from April 2027, followed by a share of income tax from April 2028, with the intention of replacing central government grants with these local tax revenues. The reform will not alter existing income tax rates.

Treasury sources suggest that successful economic growth and expansion of local tax bases could result in increased funding for some metro mayors. The precise mechanism for allocating income tax shares is still under development, with proposals from think tanks like Re:State suggesting a specific allocation per pound raised within mayoral areas.