Rachel Reeves announces plan to give mayors a share of national tax revenues

Rachel Reeves has announced plans to give regional mayors control over a share of income tax, in a move aimed at boosting local investment.

The Chancellor said the proposal would not increase taxes, but instead allow more of the money already raised to be spent locally rather than controlled centrally by the Treasury.

Under the plans, regional leaders could be given the power to decide how a portion of income tax revenue is used in their areas, with the aim of supporting growth and improving local services.

Ms Reeves said the move would help shift decision-making away from Westminster and into the hands of those closer to local communities.

The proposal forms part of a wider push to drive economic growth across different regions of the UK, particularly outside London and the South East.

However, questions remain over how the system would work in practice and how funding would be distributed between regions.

The Treasury has stressed that the changes would not increase the overall tax burden, but would instead change how existing revenues are allocated.

Giving the annual Mais Lecture at Bayes Business School in London, she said: "I have asked my officials to work with mayors and businesses to develop a road map for future fiscal devolution to be published at this year’s budget.

"This will set out plans to give regional leaders control of a share of some national taxes which have, for too long, been allocated by central government.

"They will look at income tax alongside other taxes, with reforms initially targeted at those places that have the greatest capacity to deliver them and the greatest potential to benefit."

The Chancellor also set out plans for "city investment funds" backed by £2.3billion of funding, focused on northern England and the West Midlands, giving regional leaders control of "long-term, self-sustaining capital" to invest, with a commitment to the retention of business rates.