Mayors to retain share of income tax under major devolution package

Mayors will also be handed greater control over decisions on jobs, transport, housing and public services in their area, as part of a package described by the Government as "the biggest transfer of power from Westminster in a generation".

The Government said the ability to keep a portion of income tax revenues would allow local leaders great power to invest in what matters locally.

The announcement is part of the new Prime Minister Andy Burnham's devolution plans, which he has previously said would be central to his Government's agenda.

The new powers will come into play next spring, when mayors will also begin retaining a greater share of business rates.

Further details on this and on income tax retention will be set out in a roadmap at the Budget and will be underpinned by the Government’s "firm commitment" to fiscal discipline.

Over time, local areas will move away from dependence on Whitehall grants and towards funding that rewards local growth, the Government said.

The Government also announced plans to hand greater powers over services to mayors, including the ability to bring rail and bus services under greater local control, helping introduce integrated ticketing and more reliable services, and powers to build more homes where they’re needed and unlock stalled development sites by giving local leaders stronger planning and regeneration powers and more devolved funding.

In addition, it revealed plans to give more control over large local transport schemes, trams and metros to Mayors by removing and streamlining Whitehall, and to hand mayors control over 16-19 funding and employment support.

Commenting on the new package, Burnham said: "I said we’d take power out of Westminster and carry it into every postcode in the country. Today, we make good on that promise.

"Under our plans, more of the taxes raised in a community will stay in that community. Soon, every local leader will have the power and resources to improve public transport, build homes and create jobs.

"I know what it’s like to be ignored by politicians in Westminster. I’m not going to make that same mistake now I’m PM."

The announcement said that the new agenda will end the Whitehall-first culture and will involve forcing departments to justify why powers should stay in Westminster rather than be handed to local leaders.

The newly-appointed Chancellor of the Exchequer, John Healey, said: "The people who best understand what skills employers want, what transport an area needs and where investment can make the biggest difference are those who live there.

"For the first time we’re giving Mayors a share of income tax so communities directly benefit when their economy grows - passing power out of Westminster and driving growth in every postcode."

Angela Rayner, Secretary of State for Housing, Communities and Local Government meanwhile hailed the announcement as the first step towards "bringing an end to the begging-bowl culture of the past".

She added: "We need every region to be firing on all cylinders if we want good growth in every postcode, and we will do everything in our power to make that a reality."

Responding to the announcement, the chair of the Local Government Association, Cllr Eamonn O’Brien, said the announcement was a "positive step", adding: “Councils, strategic authorities and government should work together to ensure genuine devolution gives local areas the fiscal powers, tools, and capacity to shape their own futures, including a sustainable financial model for local government.

“Successive devolution agreements have shown that when local leaders are treated as equal partners trusted with real powers, communities thrive. A rebalancing of power must include completing the devolution map so that every community can benefit from meaningful devolution, avoiding a long tail of areas left without the same level of devolved powers, resources or influence."

He meanwhile said that there was a risk that areas currently without Mayors or strategic authorities would not benefit from the plans, adding that "it is important Government provides clarity on how distribution will be equitable regardless of geography or governance structures”.

Adam Carey