Andy Burnham is planning to hand billions of pounds of income tax to Labour mayors.
The incoming prime minister is expected to accelerate plans to give more power to mayors to fund economic growth projects as part of his devolution strategy.
The Telegraph understands that Treasury officials have worked up a plan for “income tax-sharing” to be presented to Mr Burnham in his first days in office.
It will involve giving some English mayors a share of income tax revenue from their area, which officials believe will encourage them to pursue higher economic growth.
Rachel Reeves, the Chancellor, announced plans earlier this year to “give regional leaders control of a share of some national taxes”, which are usually retained by the Treasury.
The Telegraph understands that the policy would probably apply to the seven most senior regional mayoralties, six of which are held by the Labour Party.
The Labour mayors are in London, the West Midlands, Liverpool, the North East, South Yorkshire and West Yorkshire, while the seventh, Greater Manchester, is currently vacant after Mr Burnham’s resignation.
Although Ms Reeves asked officials to draw up a plan for devolving income tax receipts earlier this year, it is understood that the process has been accelerated because of Mr Burnham’s election as Labour leader.
It is thought that the policy has been raised in “access” talks between Mr Burnham’s team and the Treasury as he prepares to take office next week.
‘Take power back’
Mr Burnham has repeatedly called for more “fiscal devolution” to give regional mayors greater control of local economic policy using their own funds.
He previously pushed for mayors to be given tax-raising powers, including through new tourist levies and control of local transport networks.
In his first speech as Labour leader on Friday, Mr Burnham pledged to “take power back from Westminster and Whitehall and give it to the place where you live”, and praised Steve Rotheram, the Mayor of the Liverpool City Region, for his plan to bring local trains under public control.
Sources close to Mr Burnham told The Telegraph that he was likely to argue that giving mayors more money would raise wages across the country, drawing on data from the Organisation for Economic Cooperation and Development that show countries with more devolution are often wealthier.
Switzerland, Germany, Canada and the US, which have higher average wages than the UK, all devolve more than 30 per cent of tax revenue, whereas 95 per cent of Britain’s revenues are collected and spent from Westminster.
Handing mayors as little as 1 per cent of the income tax collected in their region would amount to a multi-billion-pound giveaway by the Treasury.
Economists widely support giving mayors greater powers to invest in local economic projects, although some have warned that it risks creating a “two-tier” system in which some regions have greater control than others.
Around three quarters of the English population live under a mayoral authority, although many mayors have only been created in the last five years and have less power than those in Manchester and London.
Some areas, including much of the Home Counties and the South West, do not have a mayor and would not be eligible for the Treasury’s income tax sharing plan.
In a report published this week, the Labour-aligned Institute for Public Policy Research (IPPR) warned that Mr Burnham risked creating a “two-tier” England if he does not speed up the creation of mayoral authorities.
It said: “The new government should ensure that every part of England benefits from agreeing a devolution settlement before the end of this parliament, stepping in if required to help tackle local gridlock.
“Leaving large gaps risks creating a two-tier England in which opportunities and the benefits of devolution depend on geography rather than need.”
Aditi Sriram, an economist at the IPPR, told The Telegraph that sharing national tax revenue with mayors would encourage them to pursue local growth projects, because they would benefit from additional tax receipts if they succeed.
“If mayors take on the risk to deliver projects, they can benefit from the upside when there are higher receipts,” she said, adding that economists had an “ambition to make sure there is no devolution island” in areas that do not have mayors.
Ms Reeves signalled that the plans were still under development by her department in a speech on Tuesday at Mansion House, where she said she wanted to see “a path to a permanent transfer of power and resources away from central government”.
Andy Burnham is planning to hand billions of pounds of income tax to Labour mayors.
The incoming prime minister is expected to accelerate plans to give more power to mayors to fund economic growth projects as part of his devolution strategy.
The Telegraph understands that Treasury officials have worked up a plan for “income tax-sharing” to be presented to Mr Burnham in his first days in office.
It will involve giving some English mayors a share of income tax revenue from their area, which officials believe will encourage them to pursue higher economic growth.
Rachel Reeves, the Chancellor, announced plans earlier this year to “give regional leaders control of a share of some national taxes”, which are usually retained by the Treasury.
The Telegraph understands that the policy would probably apply to the seven most senior regional mayoralties, six of which are held by the Labour Party.
The Labour mayors are in London, the West Midlands, Liverpool, the North East, South Yorkshire and West Yorkshire, while the seventh, Greater Manchester, is currently vacant after Mr Burnham’s resignation.
Although Ms Reeves asked officials to draw up a plan for devolving income tax receipts earlier this year, it is understood that the process has been accelerated because of Mr Burnham’s election as Labour leader.
It is thought that the policy has been raised in “access” talks between Mr Burnham’s team and the Treasury as he prepares to take office next week.
‘Take power back’
Mr Burnham has repeatedly called for more “fiscal devolution” to give regional mayors greater control of local economic policy using their own funds.
He previously pushed for mayors to be given tax-raising powers, including through new tourist levies and control of local transport networks.
In his first speech as Labour leader on Friday, Mr Burnham pledged to “take power back from Westminster and Whitehall and give it to the place where you live”, and praised Steve Rotheram, the Mayor of the Liverpool City Region, for his plan to bring local trains under public control.
Sources close to Mr Burnham told The Telegraph that he was likely to argue that giving mayors more money would raise wages across the country, drawing on data from the Organisation for Economic Cooperation and Development that show countries with more devolution are often wealthier.
Switzerland, Germany, Canada and the US, which have higher average wages than the UK, all devolve more than 30 per cent of tax revenue, whereas 95 per cent of Britain’s revenues are collected and spent from Westminster.
Handing mayors as little as 1 per cent of the income tax collected in their region would amount to a multi-billion-pound giveaway by the Treasury.
Economists widely support giving mayors greater powers to invest in local economic projects, although some have warned that it risks creating a “two-tier” system in which some regions have greater control than others.
Around three quarters of the English population live under a mayoral authority, although many mayors have only been created in the last five years and have less power than those in Manchester and London.
Some areas, including much of the Home Counties and the South West, do not have a mayor and would not be eligible for the Treasury’s income tax sharing plan.
In a report published this week, the Labour-aligned Institute for Public Policy Research (IPPR) warned that Mr Burnham risked creating a “two-tier” England if he does not speed up the creation of mayoral authorities.
It said: “The new government should ensure that every part of England benefits from agreeing a devolution settlement before the end of this parliament, stepping in if required to help tackle local gridlock.
“Leaving large gaps risks creating a two-tier England in which opportunities and the benefits of devolution depend on geography rather than need.”
Aditi Sriram, an economist at the IPPR, told The Telegraph that sharing national tax revenue with mayors would encourage them to pursue local growth projects, because they would benefit from additional tax receipts if they succeed.
“If mayors take on the risk to deliver projects, they can benefit from the upside when there are higher receipts,” she said, adding that economists had an “ambition to make sure there is no devolution island” in areas that do not have mayors.
Ms Reeves signalled that the plans were still under development by her department in a speech on Tuesday at Mansion House, where she said she wanted to see “a path to a permanent transfer of power and resources away from central government”.
The Treasury declined to comment.