Ministers weigh up Westminster select committees, enhanced reporting rules, and local audit bodies to police regional spending before an income tax handover starts in April 2028.
Whitehall officials are examining how to maintain financial oversight as billions in public funding move from Westminster to regional mayors and combined authorities. Prime Minister Andy Burnham is accelerating his expanding devolution programme. His strategy involves elevating the status of Downing Street regionally while delegating more authority to England’s mayoral bodies. Having spent nine years at the helm of Greater Manchester before succeeding Keir Starmer as Labour leader in July, he is now pushing to embed local financial motivators directly into the funding architecture.
Treasury Committee Scrutiny and Proposals for Local Accountability
Officials have even discussed the possibility of allowing spendthrift mayors to face public recall by their electorate just like rule-breaking MPs. Government discussions have explored various mechanisms to keep local leaders accountable between elections, including a dedicated Westminster select committee, stricter reporting requirements, and a revitalized local audit body similar to the Audit Commission, which was abolished in 2015.
“It’s clear that one of the prime minister’s key ambitions is to take spending power out of Westminster and hand it to local leaders. It is absolutely critical, though, that strong, clear scrutiny structures are established which match this move to localism. It would be reckless to hand out new powers without ensuring there are transparent mechanisms to hold mayors to account for their decisions.”
Meg Hillier, Treasury select committee chair
Hillier argued that her committee is the natural body to oversee the incoming spending powers.
Business Rates Growth and Equalisation Payments to Prevent Disparities
Under proposals reviewed by Bloomberg, mayors would keep 20% of any growth in business rates receipts, alongside income tax sharing scheduled for April 2028. Existing grants would swap for a baseline funded by property taxes in a change meant to be fiscally neutral at launch, while central government would retain 30% of revenue. The IFS set out how the government could implement new fiscal devolution measures.
The IFS urged the government to implement equalisation payments, calling for a system of equalisation to avoid winners and losers
and suggesting special arrangements relating to London given its much higher tax revenues per person than other MSAs
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Tax Revenue Reforms Incentivize Regional Economic Growth
Iain Murray, director of public financial management at Cipfa, noted that allowing mayoral strategic authorities to retain a share of income tax revenues is a bold change. The reforms aim to give local leaders a direct incentive to boost regional economic performance while exposing combined authorities to wider economic cycles.
According to David Phillips, who leads devolution research at the IFS, allowing mayors to benefit more directly from regional economic expansion could serve as a vital pillar for the administration’s spatial growth plans.
The principle of rewarding mayoralties for delivering growth is to be lauded, though careful design will be needed to prevent richer areas’ funding unfairly pulling ahead.
Growth above a certain level would face a levy, with proceeds bankrolling a safety net that guarantees a minimum income if business rates fall.
Government planners are grappling with mechanisms to guarantee that metro mayors remain thoroughly answerable to the public regarding their utilization of supplementary funds during the years between electoral cycles.
The Treasury stated that tax decisions remain exclusively for the chancellor to announce during formal fiscal events rather than through routine commentary on ongoing proposals.
Further specifics regarding the fiscal devolution roadmap are expected to emerge alongside John Healey’s first Budget.