Prime Minister Andy Burnham has announced devolution measures described as "the biggest transfer of power from Westminster in a generation," granting England's regional mayors the authority to retain a share of income tax generated in their areas and to keep business rates collected locally. The announcement, set for Friday, July 31, 2026, follows the introduction of the English Devolution and Community Empowerment Bill earlier this year and builds on a devolution programme that MHCLG confirmed for participating areas in July 2025. The Guardian

Under the plan, mayors will retain business rates from April 2027 and a share of income tax from 2028. Chancellor John Healey is expected to set out the precise proportions in the autumn budget; officials are still working on the numbers. Crucially, the retained revenue will replace existing government grants rather than supplement them, meaning combined authorities gain fiscal autonomy but not necessarily additional aggregate funding. The Guardian

A new "local first" principle will instruct ministers to justify why any given power should remain in Whitehall rather than be devolved, inverting the default assumption that has governed central-local relations in England for decades. No 10 said the civil service, which currently numbers 520,000 officials with one in five based in London, would become "smaller and more strategic" as decision-making shifts out of the capital. The Guardian

Combined authorities will also gain the ability to take out 30-year loans against their projected income to fund major infrastructure projects, without requiring Treasury approval. Henri Murison, chief executive of the Northern Powerhouse Partnership, said the borrowing power could unlock schemes such as an underground station at Manchester Piccadilly. The Guardian

The scope of mayoral authority is already substantial. England's directly elected mayors control areas spanning three-quarters of the population, and earlier in the same week the government announced greater mayoral control over technical education for teenagers. Some close to the Prime Minister have called for mayors to additionally oversee schools, GPs, and childcare providers through health and education commissioners, though it remains unclear whether that ambition will be pursued in the current legislative push. The Guardian

The response from mayors themselves reveals the range of political and fiscal philosophies the new framework will accommodate. Oliver Coppard, Labour mayor of South Yorkshire, said the changes get mayors "out of the death grip of the Treasury" and provide long-term certainty around income. Ben Houchen, the Conservative mayor of Tees Valley, suggested he would use retained income tax revenue to hand out tax rebates to local residents. The divergence hints at how mayors of different parties and regional economies might deploy the same fiscal tools in radically different ways. The Guardian

Ministers are actively considering mechanisms to ensure that less economically productive areas, such as Humberside and north-east England, are not left behind. Because income tax retention inherently rewards regions with higher earnings and larger tax bases, the risk of widening interregional fiscal disparities is structural. The design of any equalisation formula will determine whether the policy narrows or deepens the north-south divide it is ostensibly meant to address.

The broader context here is a decades-long argument about where economic and political power in England should sit. The English Devolution White Paper, published by MHCLG in December 2024, laid the intellectual groundwork, and the English Devolution and Community Empowerment Bill translated it into legislation. Steve Reed, as Secretary of State at MHCLG from July 2026, has been a key figure in steering the agenda through government. Burnham's own track record in Greater Manchester, including the £1bn GM Good Growth Fund unveiled in November 2025 with a pipeline of more than 30 projects, has served as something of a proof of concept for what fiscally empowered combined authorities might attempt at scale. MHCLG/Gov.uk | Greater Manchester Combined Authority

Yet several variables remain unresolved. The retention percentages for both income tax and business rates are unspecified. The transition from grant-based funding to tax-revenue retention could create fiscal cliffs for authorities during the handover period. And the 30-year borrowing window, while potentially transformative for infrastructure, will expose combined authorities to interest-rate risk and revenue volatility over a long horizon that no single mayoral term can guarantee. GMCA's own budget documents from February 2026 note that income from council tax and business rates remains subject to confirmation by local authorities, underscoring the layers of approval still in play. GMCA Democracy

What is clear is that the Burnham government is pursuing a structural shift in how the English state is financed and governed, not merely a transfer of line-item budgets. The "local first" principle, if enforced, would make devolution the default and centralisation the exception, a reversal of the gravitational pull that has defined Whitehall's relationship with the regions. Whether the autumn budget delivers the detail needed to make that principle operative, and whether an equalisation mechanism can prevent the policy from entrenching existing geographic inequalities, will determine whether this transfer of power lives up to its billing.