Devolution plans give London mayors share of local taxes

Mayors in England, including London’s Sadiq Khan, will retain a portion of locally raised income tax and business rates for the first time under devolution plans announced by the Prime Minister on 18 October 2024. The changes, to be detailed in Chancellor John Healey’s Autumn Budget, aim to reduce reliance on Westminster funding for long-term projects.

Andy Burnham, the former Mayor of Manchester, said the plans would give local leaders “more in their hands” to empower their regions. The proposals could accelerate transport upgrades, including Underground improvements, bus networks and rail links, while supporting housing and job creation.

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Transport projects fast-tracked

Transport Secretary Heidi Alexander announced on 18 October that mayors will no longer need Whitehall approval for transport projects costing under £500m. The threshold was previously £200m. The change applies to tram schemes, metro extensions and station upgrades.

Alexander said the move would reduce bureaucracy, allowing local leaders to deliver projects faster. “Locally funded transport schemes up to £500 million no longer need Whitehall approval, meaning fewer projects get bogged down by bureaucracy,” she said, as reported by *The Standard*.

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London’s infrastructure challenges

Antonia Jennings, CEO of the Centre for London, called the plans the most significant devolution moment since the Greater London Authority was created 25 years ago. However, she warned that London’s infrastructure costs often exceed the new £500m threshold.

The West London Orbital, a proposed 18.5km overground route connecting Hounslow to Hendon, is estimated to cost at least £1bn. Even projects considered relatively affordable for London, such as this, would still require government approval under the new rules.

Jennings added that London faces economic challenges, including stagnant productivity, high housing costs and child poverty rates of one in three. She argued that London’s leaders need tools to address these issues now, rather than waiting for other regions to catch up.

Funding disparities concern critics

Critics warn the devolution plans could disproportionately benefit wealthier areas like London. Studies suggest that allocating 2.5% of the basic income tax rate to mayors would generate £2.3bn annually for London, compared to £135m for Hull and East Yorkshire.

Ministers have said mechanisms will be introduced to reduce regional inequalities. Stephen Cowan, Chair of London Councils, described the plans as a “landmark moment” but stressed that London boroughs must be involved in designing and delivering the proposals.

“This is real progress towards real devolution from the new government, a landmark moment for the nation and local communities everywhere.”

Stephen Cowan, Chair of London Councils

What happens next

Details of the devolution plans, including the exact share of taxes mayors will retain, will be outlined in the Chancellor’s Autumn Budget. The government has not confirmed when the changes will take effect, but local leaders are expected to gain new powers in the coming financial year.

Transport for London and local authorities will need to assess which projects fall under the new £500m threshold. Schemes exceeding this amount will still require approval from the Department for Transport.