England’s mayoral strategic authorities are due to gain new revenue from commercial-property business rates and residents’ basic-rate income tax, shifting some local funding toward tax bases that vary by region.
HM Treasury published its Fiscal Devolution Roadmap alongside the Budget on Oct. 28. From 2027, mayoral authorities are due to receive 20% of locally retained business rates and 20% of business-rate growth in their areas. The new share is intended to replace some grants, including Investment Funds and Mayoral Capacity Funding where applicable.
The government aims for local and regional government collectively to retain all business-rates revenue before the end of the decade, while local authorities would keep at least 70%. The roadmap says the mayoral share will not reduce constituent councils’ core funding. Local authorities across the sector have retained 50% of business-rates income since 2013, according to the Treasury.
From April 2028, authorities are due to receive an assigned share of basic-rate income-tax revenue from employment, self-employment and pensions, based on where taxpayers live. Mayors will not set tax rates or thresholds; those will remain national. The Treasury is developing initial allocations that account for existing funding, new responsibilities, regional disparities and local tax bases.
Authorities whose assigned revenues grow more slowly than the average would bear some of the downside risk. A proposed funding floor could be about 95% of an annual baseline, but its level and other safeguards remain unsettled. The Institute for Fiscal Studies said differences in tax revenues mean redistribution payments will be needed to balance incentives for growth with funding based on local needs, and warned that spending-needs baselines could be contentious.
The Local Government Association estimates councils will face a £7 billion funding gap in 2028/29 compared with 2025/26. An Oct. 30 editorial in The Guardian questioned whether the new arrangements would be enough to address regional disparities and deteriorating shared spaces. In his Oct. 28 Budget speech, Chancellor John Healey said local leaders should not have to “come cap in hand to Whitehall.”
The roadmap also proposes legislation for an Overnight Visitor Levy, with local leaders expected to be able to set out plans by March 2028; it does not specify rates. The Treasury says further funding parameters will be addressed through the 2027 Spending Review.
