UK Prime Minister Andy Burnham announced a plan on July 31, 2026, that will give regional mayors in England a share of the income tax collected in their areas, starting in 2028. The plan, unveiled in Burnham's second week as prime minister, will let mayors borrow money against those future tax earnings to pay for major projects like roads and transit. Instead of receiving money handed down from the central government in London, mayors will rely on taxes generated locally The Guardian.

The change happens in stages. Starting next spring, mayors will keep a bigger share of business rates, which are taxes on shops, offices, and other commercial properties. That begins by April 2027. Income tax receipts follow in 2028. Importantly, this new money replaces the grants mayors currently get from the central government. It does not add to them. Mayors will also gain more control over housing and transport services in their regions The Guardian.

The government called the overhaul "the biggest transfer of power from Westminster in a generation." Burnham was expected to announce the plan at a community centre in the north of England on the morning of July 31, stating it would "make lives better in every postcode" GOV.UK. Louise Haigh, a senior minister overseeing the government's regional strategy, noted that the UK is "the most centralised nation in the G7," meaning power is more concentrated in the national government than in any other major Western economy The Guardian.

London's deal is especially broad. The capital will gain control over education funding for older teenagers, employment support budgets, and the ability to design its own vocational training programs. Haigh acknowledged that London will be able to keep more money under the new tax-sharing plans, which immediately raised questions about fairness between regions. She said a funding formula would be published to correct for gaps between wealthier and poorer areas The Guardian.

Conservative shadow chancellor Mel Stride seized on that concern. He warned that if faster-growing areas receive more funding under the new model, it could leave areas with weaker local economies even further behind. This tension, between rewarding growth and avoiding wider inequality, will likely be a central political fight as the plan rolls out The Guardian.

Some mayors are already testing the limits of their new authority. The Conservative mayor of Tees Valley and Reform UK's Greater Lincolnshire mayor Dame Andrea Jenkyns were considering using the new powers to offer tax breaks, a sign that different regions could end up trying very different policies The Guardian.

The plan covers England only. The government said it will create separate devolution proposals for Scotland, Wales, and Northern Ireland. More details will come in a white paper, which is a formal government policy document, and in the autumn 2026 budget The Guardian.

The broader context is why this change carries real risks alongside its promise. Right now, if a region struggles economically, the central government can step in with grants to keep services running. Under the new system, a region's ability to fund itself depends on how much tax its local economy generates. Wealthier areas with more businesses and higher-paying jobs will collect more tax, borrow more cheaply, and invest more. Poorer areas could fall behind. Think of it like two people applying for a loan: the one with a higher salary gets a lower interest rate. Haigh's promised funding formula is supposed to correct for that gap, but the details won't come until the autumn budget, making it the moment that decides whether this plan narrows or widens regional inequality.

For investors, this plan creates something new: local government debt backed by income tax. Whether that debt is safe to buy will depend on whether each region's economy is growing, whether future governments keep the devolution deal in place after elections, and what borrowing limits are eventually set out in the white paper.

The East Midlands Combined County Authority pointed out that the white paper and budget are still pending, so the exact rules of the new system remain under development East Midlands CCA. A previous government policy paper from December 2024 had already established that income from council tax combined with locally retained business rates would increase total local spending power, framing the current announcement as the next step in a plan that has been in motion for some time GOV.UK.