Prime Minister Andy Burnham has announced plans he calls "the biggest transfer of power from Westminster in a generation." For the first time, England's regional mayors would be allowed to keep a share of the income tax collected in their areas and to hold onto business rates — a tax paid by local businesses. The announcement is set for Friday, July 31, 2026, and follows the introduction of the English Devolution and Community Empowerment Bill earlier this year, which itself builds on a programme the government's housing and communities department (MHCLG) confirmed for participating areas in July 2025. The Guardian

Under the plan, mayors will keep business rates from April 2027 and a share of income tax from 2028. Chancellor John Healey is expected to announce the exact percentages in the autumn budget, and officials are still working on the numbers. One key point: the tax money mayors get to keep will replace the grants they currently receive from the central government, rather than adding to them. So mayors gain more control over how money is raised and spent, but they won't necessarily get more total money than before. The Guardian

A new "local first" rule will mean that government ministers have to explain why any particular power should stay in London rather than be handed to local leaders. That flips the usual assumption on its head — for decades, the default has been that decisions get made at the centre. No 10 said the civil service, which currently has 520,000 officials with one in five based in London, would become "smaller and more strategic" as decision-making moves out of the capital. The Guardian

Regional authorities will also be able to take out 30-year loans against their expected future income to pay for big infrastructure projects, without needing approval from the Treasury (the UK's finance ministry). Henri Murison, who leads the Northern Powerhouse Partnership, said this borrowing power could help fund projects like an underground station at Manchester Piccadilly. The Guardian

Mayors already have significant authority. England's elected mayors cover areas that are home to three-quarters of the population, and earlier in the same week the government gave them more control over technical education for teenagers. Some people close to the Prime Minister want mayors to also run schools, GP surgeries, and childcare providers, though it is unclear whether that will happen in the current round of legislation. The Guardian

The mayors' own reactions show how differently they might use these new powers. Oliver Coppard, Labour mayor of South Yorkshire, said the changes get mayors "out of the death grip of the Treasury" and give them long-term certainty about their income. Ben Houchen, the Conservative mayor of Tees Valley, said he would use the retained income tax money to give local residents tax rebates. In other words, the same tools could be used in very different ways depending on the mayor and the region. The Guardian

There is a built-in challenge. Because keeping income tax naturally benefits areas where people earn more and pay more tax, poorer regions could fall further behind. Ministers are looking at ways to share money around so that less well-off areas, like Humberside and north-east England, are not left behind. How that sharing system is designed will determine whether the policy narrows or widens the gap between the richer south and the poorer north — the very gap it is supposed to help close.

The broader context here is a long-running argument about where power in England should sit. A government white paper (a formal policy document) published in December 2024 by MHCLG set out the thinking behind these changes, and the English Devolution and Community Empowerment Bill turned that thinking into law. Steve Reed, who became Secretary of State at MHCLG in July 2026, has been a key figure in pushing the agenda through government. Burnham's own work in Greater Manchester, including a £1bn investment fund announced in November 2025 with more than 30 planned projects, has been a kind of test case for what locally empowered authorities might do with real money. MHCLG/Gov.uk | Greater Manchester Combined Authority

Several things are still unresolved. The exact percentages of income tax and business rates that mayors will keep have not been set. The switch from government grants to tax revenue could create funding gaps during the transition. And the 30-year borrowing option, while potentially very useful for building infrastructure, will expose regional authorities to interest-rate changes and income ups and downs over a period far longer than any single mayor's term. GMCA's own budget documents from February 2026 note that income from council tax and business rates still needs to be confirmed by local authorities, showing how many layers of approval remain. GMCA Democracy

What is clear is that the Burnham government is trying to change how the English state is funded and run — not just shuffling budget lines. The "local first" principle, if it is actually enforced, would make handing power to the regions the starting point, and keeping it in London the exception. Whether the autumn budget fills in enough detail to make that work, and whether a money-sharing system can stop the policy from deepening existing inequalities, will determine whether this transfer of power lives up to its billing.