UK Prime Minister Andy Burnham announced a devolution plan on July 31, 2026, that will give English regional mayors a share of income tax receipts starting in 2028. The plan, unveiled in Burnham's second week as prime minister, will allow mayors to borrow against locally retained revenue to fund major infrastructure investments, replacing central government grants with a new fiscal framework anchored in locally generated taxes The Guardian.

Under the new framework, mayors will begin retaining a greater share of locally generated revenues from next spring, starting with business rates (the tax on commercial properties) by April 2027. Income tax receipts will follow from 2028. Crucially, this new funding will replace existing central government grants rather than sit on top of them. Mayors will be able to borrow, mainly from private investors, to finance big projects instead of relying on the grant system. The plan also devolves greater control over housing and transport services to regional authorities The Guardian.

The government described the overhaul as "the biggest transfer of power from Westminster in a generation." Burnham, who was expected to officially announce the plan at a community centre in the north of England on the morning of July 31, stated the plan would "make lives better in every postcode" GOV.UK. Louise Haigh, chancellor of the duchy of Lancaster overseeing No 10 North, noted that the UK is "the most centralised nation in the G7" as she framed the rationale for the restructuring The Guardian.

London's devolution package is particularly expansive. The capital will receive devolved powers over 16-19 funding (education and training for older teenagers), employment support budgets, and the ability to tailor vocational routes. Haigh acknowledged that London will be able to retain more money under the tax devolution plans, a dynamic that immediately raises questions about regional equity. To address this, she stated that a funding formula and budget position would be set out to correct for regional disparities in tax retention The Guardian.

That equity concern was seized on by Conservative shadow chancellor Mel Stride, who warned that if faster-growing areas receive more funding under the new model, it could harm areas with weaker local economies. The structural tension between tax retention as an incentive for growth and its potential to entrench regional disparities will be a central political fault line as the plan is implemented The Guardian.

Some mayors are already positioning themselves to test the boundaries of the new powers. The Conservative mayor of Tees Valley and Reform UK's Greater Lincolnshire mayor Dame Andrea Jenkyns were considering using the newly devolved authority to roll out tax reliefs, a signal that the fiscal autonomy could produce divergent policy experiments across regions The Guardian.

The plan applies to England, but the government said it will develop different devolution proposals for Scotland, Wales, and Northern Ireland. More details of the English framework will be released in a white paper (a government policy document) and the autumn 2026 budget The Guardian.

The broader context here is what this shift means for how local government is funded. Moving from grant-based funding to tax retention fundamentally changes the risk profile of local government finance. By allowing mayors to borrow against future tax receipts, the plan ties local fiscal capacity directly to economic performance. Think of it like a household whose borrowing power depends on its income: regions with robust tax bases will gain access to cheaper loans from capital markets, while areas with weaker economies may face higher borrowing costs and less room to invest. Haigh's promised funding formula will be the mechanism that determines whether this model narrows or widens the regional divide. The autumn budget, where the formula and overall budget position will be set out, will be the decisive moment for assessing the plan's distributive impact.

The deeper backdrop is a restructuring of the UK's intergovernmental fiscal framework along lines familiar to federal systems like Germany or Canada, but applied within a unitary state where Parliament has historically held nearly all the purse strings. The decision to replace rather than supplement existing grants means the net fiscal transfer to regions will depend entirely on the design of the redistribution formula and the baseline set in the budget. For investors, the introduction of mayoral borrowing against income tax receipts creates a new class of sub-sovereign debt, meaning debt issued by regional authorities rather than the national government. The creditworthiness of these instruments will hinge on the stability and growth trajectory of regional tax bases, the durability of the devolution settlement across electoral cycles, and the specific borrowing limits to be detailed in the forthcoming white paper.

The East Midlands Combined County Authority noted that the announcement comes with the white paper and budget still pending, meaning the operational parameters of the new fiscal framework remain under development East Midlands CCA. A prior English Devolution White Paper published in December 2024 established that income from council tax together with locally retained business rates would provide a real-terms increase in total core spending power, framing the current announcement as the implementation phase of a longer-running policy trajectory GOV.UK.