Devolution Budget: Mayors to Get 100% of Business Rates by 2030

Mayors across England will keep 100% of business rates income by the end of the decade, under devolution commitments set out in John Healey's first budget.

The chancellor told MPs the offer also includes a new overnight visitors levy, letting mayors of strategic authorities (MSAs) tax people who stay in hotels and B&Bs in their areas. He set two milestones: 20% of business rates revenues will flow to mayors from next year, and some income tax receipts will be devolved to MSA mayors by 2028.

Healey framed the package in supply-side terms. He said: "New powers to the people who know their areas best, not sentimentality but supply-side economics. The biggest wave of devolution in a generation, driving good growth in every postcode delivered to the British people by this Labour government."

The phrase echoes Andy Burnham's signature promise to bring "good growth in every postcode and hope in every heart". Within two years, dozens of mayors could be preparing to spend billions of pounds under the push to devolve power across England. Fresh deals could also follow negotiations with leaders in Scotland, Wales and possibly Northern Ireland, letting the prime minister claim at the next election that he has rewired Britain's political system toward local control.

Who gets a deal and who does not?

Fourteen areas already have a mayor. Manchester, the West Midlands and Liverpool City Region head that list. Healey said all 14 are on course for enhanced deals.

Ministers are in the final stages of signing 10 more agreements, creating MSAs for:

• Devon, Plymouth and Torbay
• Hertfordshire
• Lancashire
• Leicester, Leicestershire and Rutland
• Stoke and Staffordshire
• Surrey
• Thames Valley (Oxfordshire, Berkshire and Swindon)
• Wessex

Last month, Essex county council leaders agreed to adopt an MSA to secure about £1.2bn of funding over 10 years. Cornwall's leaders, who secured a special devolution deal under the previous Tory government, were at No 10 North last week — the hub of devolution talks — hammering out an enhanced set of powers matched by extra money.

The gap matters. Areas without a mayor, or without a deal like Cornwall's, risk falling behind and widening regional inequality.

Jonathan Carr-West, chief executive of the Local Government Information Unit thinktank, said: "A rewired state needs every tier of government to play its part, and it needs every tier of government to be financially resilient."

What comes next from No 10?

Next month, No 10 will publish the much-anticipated Rewiring the State delivery plan. Burnham has said the plan will contain the thrust of what he wants to achieve as prime minister.

Carr-West said Burnham must fill the gaps left by Healey's speech if there is to be clarity about the way forward. He said: "Today's budget statement puts more, rather than less, pressure on that document."

One major barrier is the stalled reorganisation of local government in England. The plan was meant to convert county and district councils into a web of unitary authorities, which would carry out all roles previously split between the two tiers — from social services and education to parking and local business licences.

Angela Rayner, the secretary of state for housing, local government and communities, suspended the plan in September. Several county councils have used judicial reviews to challenge it, forcing Rayner to rethink.

Kent shows how deep the friction runs. The Reform UK-run county council objected to a government plan to split the county into four unitaries. It has gone to court, arguing Kent should remain a single entity, much like Cornwall.

Vince Maple, head of Medway council in Kent, accepts the dispute blocks a deal for now. But he said Healey's speech made clear that local government reorganisation (LGR) will go ahead in some form, with devolution deals to follow.

"Government has made itself clear that LGR is going ahead. Most people accept it will happen," Maple said.

Will devolution actually deliver growth?

Maple also heads the Key Cities Group of second-tier urban areas, which includes Gloucester, Sunderland and Salford. He said expanding MSAs to 10 further areas moves the government closer to its "every postcode" target.

"Our members will be part of the conversation now in a way that they weren't 24 hours ago," he said.

Scepticism remains about the economics. The consultancy Oxford Economics, in a judgment on the budget, said: "A combination of limited detail, unaddressed challenges, and the length of time for any upside to show means that the devolution announcements will not lead us to revising our regional forecasts."

Burnham will hope that rearranging the structure of local government will be enough at the next election to convince voters that change is beneficial — even if he cannot yet show a boost to economic growth.

By Daniel Okafor, Business Bearings