Mayors could hand out tax rebates under Burnham devolution plans

A Tory mayor has revived plans to hand tax rebates to residents in his region after talks with Treasury officials convinced him the scheme could be possible under Labour’s devolution plans. The proposal was initially dismissed by Louise Haigh, the Cabinet Office minister responsible for devolution, who said in July that the scheme was “certainly” not possible with current HMRC limitations. But Ben Houchen, the Conservative mayor of Tees Valley, says he now believes mayors could have the power to introduce tax rebates under plans to give England’s regions greater control over taxation. Shorts The proposal would allow Houchen to turn a slice of the Government’s devolution settlement into a direct tax giveaway – putting him on a collision course with Labour mayors who argue devolved money should be spent on public services and economic investment. Houchen says the power will be available unless ministers specifically decide to take it away. He told The i Paper: “We continue to explore a tax rebate scheme for residents if the Prime Minister presses ahead with fiscal devolution. Following discussions with Treasury officials, the likely structure of fiscal devolution will allow for mayor’s to create such a rebate scheme unless the Government specifically carves out the ability for mayor’s to make such decisions.” Houchen would not say how much residents could receive, or whether a rebate would go to individuals, businesses or both. It would likely depend on the final shape of fiscal devolution, including whether it covers income tax alone or business rates as well, and how much new money is ultimately transferred to the regions. The idea has won support from Luke Campbell, the Reform mayor of Hull and East Yorkshire, and Andrea Jenkyns, the Reform mayor of Greater Lincolnshire, who are understood to be exploring similar proposals. The Government is due to spell out the details of its fiscal devolution plans at the Budget on 28 October. Mayors to get greater financial powers Mayors are expected to get greater control over business rates revenue first, with income tax revenue sharing due to follow from 2028, although the precise powers and funding arrangements have yet to be set out. However, ministers have repeatedly stressed that fiscal devolution will not give mayors the ability to create their own tax systems outside the national framework. Burnham said the plans were not about turning mayors into “a sort of mini-Chancellor of the Exchequer” or allowing them to rewrite national tax policy. This was echoed last month by Haigh, who said mayors would not be able to set their own regional or local income tax rates. She said: “There’s not a system that would currently allow that, and they certainly wouldn’t be able to set tax rates locally or regionally, but we’ll consider what proposals are put forward.” She was more guarded, however, when asked about the broader question of how devolved revenues could be used. “We’d have to see the details of that, but it certainly isn’t possible at the moment,” she said of Houchen’s proposed rebate. Haigh added that such schemes would require HMRC to establish entirely new administrative systems, and that this was not currently possible. However, Caroline Simpson, Burnham’s Deputy Chief of Staff working from his new No 10 North operation in Manchester, appeared this week to leave some room for such flexibility. She told Politico: “The PM is absolutely right – there’s going to be no ability to sit outside of the tax framework at a local level. That’s not what fiscal devolution is about. “But flexibility about how that money is spent in a local area is going to be there… the absolutely technical ‘what does that flexibility look like?’ is going to have to be worked through.”