Regional mayors may soon have the opportunity to access a portion of national tax funds to invest in their respective areas as per the proposal put forth by Rachel Reeves. The Chancellor mentioned that she intends to outline a strategy for future fiscal devolution in her upcoming Budget in the fall, aiming to allocate existing tax revenues to local leaders instead of the central government overseeing the funds.
During the annual Mais Lecture at Bayes Business School in London, the Chancellor revealed her directive for officials to collaborate with mayors and businesses to craft a roadmap for fiscal devolution to be unveiled at this year’s budget. This plan aims to empower regional leaders by granting them control over a share of specific national taxes, including income tax, with a focus on areas capable of implementing and benefiting from such reforms.
Describing the initiative as a groundbreaking shift, Ms. Reeves emphasized that this move presents a significant opportunity for regional development without imposing additional taxes on taxpayers. The reforms are designed to be fiscally neutral, enabling regional leaders to utilize a portion of the income tax collected within their jurisdictions.
Furthermore, the Chancellor outlined plans for city investment funds, supported by a substantial £2.3 billion fund, targeting northern England and the West Midlands. Additionally, she announced a consultation on establishing a development corporation for Greater Oxford, mirroring the model initiated for Cambridge earlier this year. The funding commitment for both Cambridge and Oxford has been increased to £800 million to facilitate growth through land acquisition and infrastructure development.
In her address, Ms. Reeves stressed the benefits of closer ties with the EU, cautioning that the UK could be isolated between competing trade blocs post-Brexit without a more integrated relationship with Brussels. While acknowledging divergence from EU regulations in some aspects, she highlighted the advantages of alignment in reducing prices and inflation.
The Chancellor warned about the uncertainties posed by Brexit, underscoring its adverse impact on the economy, with GDP shrinking by up to 8% and contributing to inflationary pressures. Ms. Reeves emphasized the interconnectedness of the UK’s fate with that of Europe, emphasizing the importance of aligning strategies to navigate the challenges ahead.
