Introduction
The Burnham government’s ambitious plans to reform local devolution took their first concrete step with the Budget of 28 October. The full plan for devolution will follow in the Rewiring the State Delivery Plan, due before the end of the year. But the Budget already brought significant news on the fiscal powers of English regional and local authorities, set out in the Fiscal Devolution Roadmap. This post looks at the Roadmap and at how it plugs into the legal framework created by the English Devolution and Community Empowerment Act 2026.
The measures
The Roadmap concerns mainly, though not exclusively, Mayoral Strategic Authorities (MSAs). It introduces four measures: income tax assignment, increased business rates retention, an Overnight Visitor Levy, and Good Growth Funds.
The headline change is that, from 2028, each MSA will be assigned a share of the income tax generated in its area ([2.15]). The government is not devolving the power to set income tax rates or thresholds: what MSAs receive is the revenue, with more flexibility over how it is spent ([2.17]). The assigned revenue comes from the basic rate of income tax on employment, self-employment and pension income, allocated according to where taxpayers live and, the Roadmap adds, ‘generally, vote’ ([2.22]–[2.23]).
The obvious concern is that assignment will widen regional inequalities. The Roadmap’s answer is a model that ‘recognises the importance of fairness between regions by reflecting local differences from the outset, while giving all places an equal shot at benefitting from growth and ensuring a minimum level of funding certainty over time’ ([2.16]). Each MSA will receive a bespoke initial allocation, reflecting existing funding commitments, the new responsibilities to be devolved under the Rewiring the State Delivery Plan, regional disparities, economic factors and the strength of regional tax bases ([2.19]). These allocations will be set at the 2027 Spending Review.
In each later year, the gap between an MSA’s assigned revenue and its starting allocation becomes its equalisation adjustment, indexed to average income tax growth across MSAs. An MSA whose revenues grow in line with or faster than that average keeps a share of the additional revenue; one whose revenues grow more slowly bears some of the downside risk. Gains above a specified level are progressively tapered away ([2.20]). Two safeguards against what the Roadmap calls ‘runaway divergence’ complete the design: a hard funding floor, possibly around 95 per cent of baseline, and a rolling reset that phases out one year of historic performance at a time ([2.21]). The parameters that will decide how redistributive the system actually is, the assignment rate, the taper, the floor and the reset period, are left to the Spending Review ( [2.25]).
For business rates, the design principle is a shift, by the end of the decade, from today’s model of central government grant to one funded by locally retained business rates: local and regional government are to retain 100 per cent of business rates income, with local authorities keeping at least 70 per cent ([2.9]). The first step is a 20 per cent share for MSAs from 2027. A first wave of new MSA business rates retention zones is planned in nine MSAs, subject to business case approval and legislation, with a further opportunity for areas working towards strategic authority status ([2.35]–[2.36]).
The Overnight Visitor Levy – or so-called ‘tourist tax’ – is so far only outlined: the legislation is to be introduced ‘shortly’, and strategic authorities are expected to set out plans for investing its revenues by March 2028 ([2.44]). ‘Foundation’ (i.e. non-mayoral) authorities as well as MSAs will be able to introduce it ([2.3]), and, unlike with income tax and business rates, they will be the tax authorities responsible for administering and collecting it ([2.42]).
The Good Growth Funds enables SAs to invest in their priorities without seeking permission from central government. The funding could be used for town centre regeneration, building homes, or investing in high-productivity sectors. Local leaders will be provided with £285 million in 2027–28: £165 million for places with a mayor in 2027 to establish the funds, and £120 million of incubator capital for areas moving towards a devolution agreement or strategic authority status ([2.46]). A bespoke £1.5 billion borrowing facility for MSAs will be operational by April 2028 ([2.48]), made possible by the 2026 Act’s extension of the power to borrow to mayoral strategic authorities, under section 13 of the Act, amending section 23 of the Local Government Act 2003. Mayoral authorities that could not previously borrow must still obtain the Secretary of State’s consent before first borrowing for purposes other than transport, police or fire and rescue.
Analysis
We argued in an earlier post that the English Devolution Act 2026 represents a meaningful step in the direction of creating a framework of robust regional entities grounded in cities in England. We noted, however, that the Act does not fundamentally change the relationship between central government and the sub-units of English government and that some of its more ambitious aims could not be realised without substantial reforms in financing and funding.
Taken together, the fiscal changes contained within the Roadmap give teeth to the 2026 Act’s ambition of completing the map of English MSAs. Yet many questions are left open. One issue relates to funding constraints for local councils that shoulder important social policy costs, such as provision for children with Special Educational Needs and Disabilities (SEND), the escalating deficits of which are projected to hit £10.4 billion by March 2028. The Roadmap is simply silent on them.
Furthermore, despite the welcome move away from central government grants, the funding model remains deeply anchored in Whitehall. The government’s commitment to engage with mayors and local leaders in setting the starting allocations and the parameters of the model ([2.12][2.18], [2.25]) signals a move towards a relationship based on trust. But it remains to be seen whether the Rewiring the State Delivery Plan will change the organisation, status and powers of regional and local authorities, and whether the legislation that is to put this system ‘on a statutory footing’ ([4.2]) will give local funding any more security against HM Treasury’s discretion in determining solutions to local needs.
Darryn Nyatanga recently assessed the Bill that became the 2026 Act against four tests: identity, entrenchment, fiscal autonomy and voice. He found, on the fiscal side, ‘responsibility without capacity’. In giving mayoral authorities real fiscal capacity, the Roadmap partially remedies that defect. But this falls far short of fiscal autonomy. Mayoral authorities will receive revenue, not the power to tax ([2.17]), and the parameters that govern it will be set by the Treasury at the Spending Review ([2.19], [2.25]). The new fiscal model does not end regional dependence on the centre, then, but merely changes its form.
Thomas Poole, Professor of Law, The London School of Economics and Political Science
Elena De Nictolis, Assistant Professor, Luiss University
(Suggested citation: E. De Nictolis and T. Poole, ‘Fiscal Capacity without Fiscal Autonomy: Regional and Local Fiscal Devolution in the Autumn Budget’, U.K. Const. L. Blog (5th November 2026) (available at https://ukconstitutionallaw.org/))
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