A proposal put forward by Rachel Reeves suggests that regional mayors could receive a portion of nationally collected taxes to invest in their respective areas. The plan, aimed at fiscal devolution, is expected to be detailed in the upcoming autumn Budget, according to the Chancellor.
Reeves emphasized that this move would not lead to an increased tax burden but rather involve the sharing of existing tax revenues with regional leaders, giving them control over a portion of the taxes currently overseen by the central government.
During the annual Mais Lecture at Bayes Business School in London, the Chancellor stated, “I have instructed my officials to collaborate with mayors and businesses to craft a roadmap for future fiscal devolution, to be unveiled during this year’s budget. This initiative will outline the transfer of control over certain national taxes to regional leaders, a practice long dictated by the central government.”
She further explained, “The focus will be on income tax and other taxes, with initial reforms targeting areas with the greatest capacity to implement them effectively and derive the most benefits.”
Describing this shift as a significant departure from the past, Reeves highlighted the opportunity for Britain’s regions to shape their own futures.
Reeves assured the public that this initiative does not involve imposing new taxes or increasing the tax burden. She confirmed that the reforms would be financially neutral, allowing regional leaders to allocate a portion of the income tax collected in their regions.
Moreover, the Chancellor outlined plans for “city investment funds” with a backing of £2.3 billion, primarily targeting northern England and the West Midlands. Additionally, there are consultations underway for the establishment of a development corporation in Greater Oxford, mirroring a similar initiative launched in Cambridge earlier this year.
Reeves has increased the funding commitment to £800 million for both Cambridge and Oxford, aiming to support their growth through land acquisition and infrastructure development.
In her address, Reeves stressed the benefits of closer ties with the EU, warning that the UK could be caught between competing trade blocs if it does not seek a closer relationship with Brussels. While acknowledging regulatory divergence in certain areas, she emphasized that alignment with the EU could help reduce prices and inflation.
Brexit, according to Reeves, has created significant uncertainty and placed the UK at risk of being isolated between powerful trade blocs as global integration recedes. She emphasized the interconnectedness of the UK with Europe and highlighted the negative impact of Brexit on the economy, with GDP declining by up to 8% and leading to increased costs for businesses and consumers.
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