Cornwall set to be the biggest loser in Burnham’s income tax overhaul

Prime Minister Andy Burnham is preparing to announce a major shift in how local governance and funding operate in England, potentially granting the nation's 14 metro mayors a direct share of income tax revenues to invest in local growth and infrastructure. This proposed change marks a pivotal step in Burnham’s broader devolution strategy, aimed at decentralizing power and resources from central government to regional leaders. According to reports, the announcement is expected to occur later this week, as part of Burnham’s ongoing efforts to ensure “good growth in every postcode.” However, the plan has sparked concern among critics who warn it could deepen existing inequalities across the country. Burnham’s proposal involves redistributing a portion of income tax collected in each region back to the respective metro mayors, enabling them to allocate funds toward local priorities such as transportation, skills training, and economic development. This represents a departure from traditional models where central government controls the distribution of public funds. While the initiative aligns with Burnham’s vision of empowering local leaders, it raises questions about how non-mayoral areas, those without directly elected mayors, will be included in the new financial framework. Approximately half of England’s population resides in regions without an elected metro mayor, leaving millions of people potentially excluded from the benefits of this new system. Cornwall, one of the largest regions without a mayor, stands at the center of these concerns. Residents have historically opposed devolving power to a mayoral structure, citing worries about losing their unique cultural identity and autonomy. In 2023, Cornwall rejected a proposed devolution deal, and the region has since maintained its stance against adopting a mayoral combined authority. Perran Moon, the Labour MP for Camborne and Redruth, has voiced alarm over the potential consequences of Burnham’s plan for areas like Cornwall. He emphasized that excluding non-mayoral regions from the income tax-sharing mechanism could create a “two-tier” system, disadvantaging communities that lack a mayor. Moon noted that the Parliamentary Labour Party is increasingly aware of the risk that regions without mayors might fall further behind economically and socially. The concerns are supported by a recent report from researchers at King’s College London and Harvard Kennedy School, which cautions that excessive devolution without adequate redistribution mechanisms could worsen regional disparities. The study, co-authored by former Labour shadow chancellor Ed Balls, highlights that while devolution offers opportunities for localized decision-making, it must be accompanied by measures to prevent the creation of a “postcode lottery,” where wealth and services vary drastically depending on location. The report underscores that simply transferring more fiscal responsibility to regions without ensuring equitable resource distribution could reinforce existing inequalities. It points out that London and the Southeast, which already have robust economies, stand to gain disproportionately from increased fiscal autonomy, whereas less affluent regions might struggle to compete. The authors argue that Burnham has a rare chance to implement a balanced approach to devolution that addresses these imbalances effectively. In response to these criticisms, a government spokesperson reiterated the administration’s commitment to achieving “good growth in every postcode” by shifting power and funding closer to local communities. They assured that areas not yet ready for a mayoral structure would still receive support through alternative mechanisms, such as non-mayoral foundation strategic authorities, which can manage aspects like transport, skills, and local growth. Additionally, the government pledged to allow local authorities in non-mayoral regions to retain more control over business rates, aiming to provide them with greater flexibility in managing their budgets. As Burnham moves forward with his devolution agenda, the challenge lies in ensuring that all regions, including those without mayors, benefit equitably from the proposed changes. The success of this initiative will depend heavily on how effectively the government balances the need for localized decision-making with the imperative to address regional disparities and prevent the emergence of a divided national landscape.