The Rate Stays in London

Britain is the most fiscally centralised country in the G7, and the government has just proposed to fix it without touching the part that matters. From April 2028 the mayors of England's city regions are to receive a share of the income tax collected in their areas, and from April 2027 a slice of the business rates. The rates themselves do not move. The basic rate will be 20 per cent on income between £12,571 and £50,270 in Greater Manchester for precisely the reason it is in Surrey, which is that the Treasury says so.

The problem being addressed is real and the number is embarrassing. According to OECD figures, 5.8 per cent of taxes in the United Kingdom are collected at local level. That is the lowest share in the G7. France manages 20.4 per cent, Japan 36, the United States 45.7. An English mayor today runs transport, skills and housing on money sent down from Whitehall in annual instalments, with conditions attached, and spends a good part of the year lobbying for the next one. Nobody defends this arrangement. It survives because the people who would have to end it are the people it suits.

So the announcement deserves its credit before it gets its argument. Assignment is not nothing. Tying a mayor's budget to the tax base of their own city region gives them a direct financial stake in whether it grows, which a grant never did. Retaining business rates from 2027 is a real break with dependency. And the case for stopping short of full tax-raising powers is not a stupid one. A genuine local income tax would let two neighbouring authorities set different rates and watch the higher earners move ten miles. Poorer areas would raise less on the same rate through no fault of their own. The equalisation needed to stop that becoming a punishment has to be run from somewhere central. Those are the arguments a serious Treasury makes, and they are good arguments.

They are also not the arguments being had, because nobody has been asked to choose. What has been announced is assignment, and assignment is a share of a tax you cannot change. A mayor cannot put a penny on it to build a tram line. A mayor cannot take a penny off it to pull a factory across a boundary. They wait to see what the national rate and the national economy hand them, and then they spend it. That is exposure to a tax, not control of one.

A lever, or a longer leash

The equalisation question sharpens the point. The government says it is still working out a system to ensure areas where less tax is collected keep receiving support, and it will have to, because without one the reform quietly moves money from poor places to rich ones. But the size of that top-up is set centrally, is revisable, and in the poorest mayoralties will be the largest line in the budget. Make it generous and the assigned share is decoration on a grant. Make it mean and the reform becomes a transfer to places that were already winning. Either way the Treasury still holds the dial. It has moved it one room further from the voter, which is not the same as giving it away.

The shadow chancellor's objection is the flattest and the hardest to answer: unless something else changes, no new money has been announced here. He is right, and the government would struggle to dispute it. Swapping a grant of £100 million for an assigned tax share of £100 million is an accounting change. Ministers would say the point was never the money but the incentive, and that a mayor who benefits from local growth behaves differently from one who does not. That is a fair reply, and it is a testable claim about behaviour. But an incentive only bites if the person holding it has instruments that move the tax base, and the instruments that move it most - planning, migration, corporation tax, employment law - are the ones nobody is devolving.

The share itself has not been decided. One think tank has suggested 2.5p in every pound of the basic rate. The rest is due with the autumn budget, alongside the policy paper, which is where this reform will actually be written. That sequencing is not an administrative footnote. A share whose size a Chancellor sets, on a base a Chancellor defines, funded by a rate a Chancellor chooses, is a grant with an unusually complicated formula. The one thing that would make it something else is a rate the mayor sets.

There is a version of this that would be genuinely historic, and it is not far out of reach. Give mayors a defined band of income tax they can vary within a fixed range. Put the equalisation formula in statute so it cannot be adjusted by a phone call. Then let each of them go to an election having raised it or cut it, and defend the choice. That is a country where local decisions carry local consequences and local blame. It is also the version that requires a Chancellor to hand over something they cannot quietly take back, which is why it is not the version on the table.

The autumn budget has one test to pass and it is not a percentage. It is whether a mayor, on any date, in any circumstance, can change a rate and answer for it at an election. Until that answer is yes, the money has come home and the power has not.

Power without a dial on it has not come home. It is visiting.

An opinion of the house. The argument is ours; the record beneath it belongs to no one.