Regional mayors may soon receive a portion of nationally collected taxes to invest in their respective areas as per the recent announcement by Rachel Reeves. The Chancellor disclosed plans to unveil a “road map for future fiscal devolution” at the upcoming Budget in the autumn.
Reeves emphasized that this initiative would not escalate the tax burden but rather distribute existing tax revenues to regional leaders, moving away from central government control over the funds. Addressing the annual Mais Lecture at Bayes Business School in London, Reeves stated that her officials are collaborating with mayors and businesses to craft a roadmap for fiscal devolution, focusing on granting regional leaders authority over a portion of specific national taxes, including income tax.
The Chancellor highlighted that this shift marks a significant departure from past practices and offers a unique opportunity for the regions of Britain to shape their futures. Reeves assured that there would be no imposition of new taxes on taxpayers, and any reforms would be financially neutral, allowing regional leaders to utilize a portion of the income tax generated within their jurisdictions.
In addition to this development, plans were revealed for the establishment of “city investment funds” supported by £2.3 billion, primarily targeted at northern England and the West Midlands. Furthermore, there are discussions underway regarding the potential creation of a development corporation for Greater Oxford, similar to the one already operational in Cambridge.
Reeves doubled the funding commitment for Cambridge and Oxford to £800 million to facilitate growth through land acquisition and infrastructure development. She also stressed the advantages of closer ties with the EU, cautioning that the UK could risk isolation between trading blocs unless it seeks a more integrated relationship with Brussels.
The Chancellor pointed out that while the UK would maintain some divergence from EU regulations, alignment in most areas would be pursued to reduce prices and inflation. Reeves highlighted the impact of Brexit, citing profound uncertainty and economic setbacks, including up to an 8% decline in GDP and increased costs for businesses and consumers.
The Chancellor underscored the intertwined fate of the UK with Europe, emphasizing the need to navigate the challenges posed by Brexit and global economic shifts.
