By Salma El-Sakka
The UK government's latest budget will devolve business rates and a share of income tax revenue to mayors and regional leaders in England, providing long-term funding streams for major infrastructure projects. Chancellor John Healey announced an initial £285 million allocation on Wednesday as part of a plan to give local leaders more financial power.
For London Mayor Sadiq Khan, the new powers will allow progress on the West London Orbital railway connecting Hendon and Hounslow, and the extension of the Bakerloo line from Elephant and Castle to Lewisham with two new stations at Burgess Park and Old Kent Road. A £50 million upgrade at Euston station and the transformation of Stratford into an international travel hub are also under discussion.
Devolution of Tax Revenues
Under the plans, all business rates will be retained by local administrations by 2030, with 20% going to mayors from next year. From 2028, a share of income tax receipts will also be directed to mayors. Healey described the move as "the most radical act of devolution in a generation," estimating it could unlock around £10 billion in extra borrowing capability for London alone.
Regional Projects Across England
Outside London, devolved loans worth £1.5 billion will support projects such as the Black Country Metro, the reopening of Doncaster Airport, and regeneration in Gateshead. The Treasury confirmed that 10 new devolution agreements are in their final stages, aiming for full devolution coverage by 2028.
Shift from Central Grants to Local Funding
The government said retained business rates for mayors would replace grants from central government. A call for evidence on implementation is planned for later this year.
