UK ministers may give regional mayors billions from business rates

Ministers are contemplating a significant reform of the English tax system, which could involve transferring billions of pounds collected from business rates to regional mayors. This initiative is part of a broader strategy to empower local leaders with greater fiscal control, aiming to stimulate economic growth and address persistent regional inequalities.

Local government secretary Steve Reed indicated that while elements of business rates are under consideration for devolution, safeguards would be necessary to prevent poorer regions from falling further behind. The proposed system would aim to reward areas that demonstrate faster economic growth or better support for their businesses, while incorporating an equalisation mechanism to ensure fairness.

These proposals are linked to a wider agenda by Chancellor Rachel Reeves to grant regional leaders more authority over tax revenues, potentially including aspects of income tax. Experts suggest that the current centralisation of power and taxation in Westminster contributes to the UK's significant regional disparities. The government is also exploring the implementation of a national tourist tax, which could be a flat fee or a percentage of accommodation costs.

Business rates have become a contentious issue, particularly after recent revaluations led to sharp increases for many small businesses. The tax generated £26.4 billion in the past fiscal year, and even a portion of this revenue could substantially boost mayoral budgets. Thinktank ThinkLabour suggests that devolving income tax or business rates would fundamentally alter the UK's tax system and governance, providing greater investment certainty for local areas.