This document proposes a "triple devolution deal" to further devolve powers from central government in the UK to local governments in London, Greater Manchester, and the West Midlands. It suggests devolving control over business rates, income tax, and council tax to the mayors of these regions. Specifically, it recommends that the mayors be allowed to retain a portion of locally generated income tax and business rates. This fiscal devolution could increase national growth by empowering these economic centers. It models different scenarios for how revenues might be shared between local and central governments while remaining revenue neutral. Reforming council tax collection could also strengthen economic incentives and make the system fairer.

2. In Place of Centralisation:
A Devolution Deal for London, Greater
Manchester, and the West Midlands
November 2023
Anthony Breach
Centre for Cities

3. The next priority for devolution – a ‘triple deal’ focusing on taxation
• Need more national growth
• Manchester, Birmingham, and London need to do well for the UK
to do well
• But devolution hasn’t yet increased national growth
• Proper devolution to local government requires reform of
all three legs of the stool
• Fiscal devolution is the most challenging
• A ‘triple devolution deal’ for London, Manchester, and
Birmingham together
• Small enough to be practical
• Large enough to make a difference
• Fiscal devolution is the priority to increase growth
Devolution
National Growth

4. Principles of fiscal devolution
• Chicken and egg problem
• Centralisation damages
growth, created the
funding crisis, and has not
reduced inequality
• But fiscal devolution could
increase inequality…
• Two separate questions:
• The amount of resource in
the funding system
• The design of the funding
system
• We aim for:
• Reconnecting increases in local
resource to local growth
• Revenue-neutrality for mayors and
HM Treasury
• Shift from national to local
redistribution
• Two separate strands:
• Business Rates + Grant + Income Tax
• Council tax

5. • Mayors keep a slice of local income
tax – varies between London and
GM/WM
• A single grant given to the mayor
on a per head basis
• Full retention of business rates and
the multiplier
• Council tax reform
• £200 per head grant for each
mayor
• Income Tax Share: GM + WM 20%
• Income Tax Share: GLA 1.5%
• Changes to funding:
• GM: 16% increase
• WM: 2% decrease
• London 3% decrease
• HM Treasury: £15m cost
Fiscal devolution can advance using income tax sharing

6. • Room for negotiation
on the details…
• ASSUMPTIONS
• Per head grant of
£333
• Income Tax Share: GM
+ WM 13%
• Income Tax Share:
GLA 0.3%
• Changes to funding:
• GM: 12% increase
• WM: 5% decrease
• London 3% increase
• HM Treasury:
£447m cost
Many options for fiscal devolution

7. If the cities grow, then more income tax revenues for everyone by 2038
Share of Local
Income Tax Recipient Authority
High Growth
Increase Scenario
Medium Growth
Increase Scenario
Low Growth
Increase Scenario
20% Greater Manchester £229.5 million £152 million £76 million
20% West Midlands £186.5 million £121 million £61 million
1.5% London £27 million £18 million £9 million
Treasury £489 million £324 million £161.5 million

8. • Four problems
• 1991 values
• Not enough bands
• Capping by central government
• ‘Anchoring’ around Band D
• Four solutions:
• Revalue every year
• At least two extra bands on top
• No more capping
• No more anchoring
• Incentives to grow (especially
build houses) stronger and also
council tax becomes fairer
Improving economic incentives of council tax by making it fairer

9. Bolton – shows how fiscal devolution makes council tax progressive with
revenue-neutral reform

10. Around 74% of people get a council tax cut in every borough (even London) of
roughly £637