The UK government has decided to give some of England's local mayors a portion of income tax money for the first time. But the mayors cannot agree on what to do with it.

The government announced on 30 July 2026 that mayors of city regions will get a share of income tax revenues, along with more control over things like housing. The government called it the biggest package of financial powers ever offered to English mayors. From next spring, mayors will start by keeping more of the money raised locally from business rates (the tax that businesses pay on their premises), with income tax money to follow (GOV.UK; MHCLG blog, 31 July 2026; East Midlands Combined County Authority, 30 July 2026).

Lord Houchen, the Conservative mayor of Tees Valley, said he would rather the government just cut taxes outright. He said the plan lets mayors spend people's taxes but does not let them give the money back. Lord Houchen wants to use the income tax money to give residents a rebate — meaning some of their tax would be returned to them (BBC News, 30 July 2026; Yahoo News UK, 31 July 2026; BBC Tees, 5 August 2026).

Kim McGuinness, the Labour mayor of the North East, wants to spend the income tax money on local services instead. BBC Tees reported the disagreement on 5 August 2026, describing it as a test of how mayors from different parties in neighbouring areas should use their new powers (BBC Tees, 5 August 2026; BBC News video).

Lord Houchen has also said he will not bring in a tourist tax (a charge on visitors who stay in hotels or holiday lets, similar to ones already used in parts of Scotland) in Teesside, Darlington and Hartlepool for as long as he is mayor. He said this in November 2025 and has not changed his mind (BBC News, 27 November 2025).

The money involved is large. In July 2025, the BBC reported that almost £2.8 billion was made available for North East and Tees Valley mayors to spend on local projects, including £1 billion for Tees Valley (BBC News, 5 July 2025). The push for northern mayors to get the same powers as the Mayor of London is not new. In July 2024, a newly elected Labour MP said mayors in the North East and Tees Valley should have powers comparable to those held by London's mayor (BBC News, 15 July 2024).

The announcement was welcomed elsewhere. Steve Rotheram, the Labour mayor of Liverpool City Region, said he was pleased mayors would get a share of income tax. Leaders in Surrey, an area looking into becoming a strategic authority (a body that groups several councils together for regional planning), also welcomed the plans to let mayors keep a share of income tax and business rates revenue (Liverpool City Region Combined Authority, 30 July 2026; Surrey Local Government Reform Hub, 5 August 2026).

The disagreement between Houchen and McGuinness points to a problem the government may not have expected. By giving mayors income tax money without a clear way to send it back to residents as rebates, the plan assumes mayors will spend the money rather than cut taxes. Houchen's objection is not to the idea of devolution itself but to the rules attached: the money comes through the mayor's budget but cannot be passed back to taxpayers. McGuinness's approach fits what the government seems to have intended, using the new money to improve services.

The tension matters beyond the North East and Tees Valley. If a Conservative mayor in an area that voted heavily to leave the EU can argue convincingly that devolved income tax is a spending trap rather than new freedom, other mayors in similar areas may face pressure to take the same view. Equally, Labour mayors who embrace the spending approach give their opponents a line of attack: that devolution means higher local taxation without any way to give money back. The government has said the package empowers local leaders to make lives better. Whether voters agree may depend on which mayor they happen to have.