Andy Burnham has reversed his position on local income tax ‘rebates’, with new developments indicating that fiscal devolution could be used to return funds directly to workers and local businesses. Originally, fiscal devolution powers were intended to support investments in housing and infrastructure projects. However, the focus appears to be shifting towards initiatives that put money back into the pockets of taxpayers.
Ben Houchen, the Conservative mayor of Tees Valley, has revealed he is working closely with senior officials at No 10 Downing Street to develop a “tax rebate” scheme aimed at companies and employees within the region, utilising the devolved powers granted to local authorities.
Similarly, Luke Campbell, the Reform Party mayor of Hull and East Yorkshire, is reported to be exploring the possibility of similar rebate schemes for his area. This follows an announcement last month from Makerfield MP Andy Burnham that English mayors will be permitted to retain a share of income tax and business rates collected within their jurisdictions.
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Several mayors have since indicated plans to implement schemes designed to redistribute funds to taxpayers, rather than solely investing in public services.
However, Labour Party member and Chancellor of the Duchy of Lancaster, Louise Haigh, expressed scepticism about the feasibility of such rebate schemes. Speaking on Times Radio, she said she was “not convinced it would be possible” for Houchen to establish a rebate system under the current arrangements and emphasised that further details would be necessary to assess its viability.
On 29 August, Houchen stated that senior civil servants had accepted the possibility of creating tax rebates for local businesses and their employees, indicating progress in negotiations.
A government spokesperson commented: “If a mayor wishes to use public funds to establish complicated and administratively burdensome grants, they must acknowledge that this could lead to reduced investment in transport, housing, and other essential services. We will work collaboratively with mayors to design fiscal devolution policies that ensure increased powers come with transparency.”
Previously, Haigh noted that schemes of this nature would require HMRC to implement comprehensive systems that are currently not feasible. She remarked, “These powers and resources are primarily intended to be reinvested into public services and local economies, not used for direct tax rebates. While proposals from Ben Houchen will be considered, the existing system does not support setting local or regional tax rates.”
Haigh further emphasised the purpose of fiscal devolution: “It aims to enable areas to benefit directly from economic growth and job creation by reinvesting in local public services and infrastructure, sustaining a virtuous cycle of investment.”