Greater Manchester should keep share of income tax raised in the city-region, argues new report

A new report published by Centre for Cities is arguing Greater Manchester should be able to retain a share of the income tax raised locally as part of further devolution agreements.

‘Trailblazer’ devolution deals agreed with Westminster for Greater Manchester and the West Midlands earlier this year have already expanded city-region leaders’ remit in areas such as post-16 education, health and social care, and transport, and Centre for Cities is calling for local administrations to gain further devolved powers.

The think-tank propose that a degree of fiscal devolution, similar to the powers over taxation held by the devolved government in Scotland, for England’s three largest city-regions (Greater London, the West Midlands, and Greater Manchester) would help to decentralise the national economy away from the capital and encourage local growth by allowing local leaders to reinvest money raised.

Centre for Cities estimates that Greater Manchester and the West Midlands could raise £152 million and £121 million respectively solely in income taxes by 2038 in a medium growth scenario, with the Treasury also increasing its overall revenues.

The potential enhanced devolution agreement proposed would also see city-regions received reduced central government grants in exchange for additional autonomy over spending and full retention of business rates. The Centre for Cities also proposes city-regions get greater powers over planning, local rail services and public services and regulations such as waste management and licensing rules and would see strengthened elected legislatures established in Greater Manchester and the West Midlands, similar to the London Assembly.

Anthony Breach, Senior Analyst at Centre for Cities and co-author of the In Place of Centralisation report, said:

“We would like to see serious new plans for devolution put forward in the next parliament. The challenges of bringing big cities’ powers in line with cities of a similar size in Europe are considerable but not insurmountable.

“Once we have shown how devolution at this scale can work for our biggest city-regions, other cities should be able to benefit from it as well. The idea is to establish the next phase of devolution across England.”

Andrew Carter, Chief Executive of Centre for Cities, said:

“Decades of centralisation have weakened the connections between improvements to local economies and the resources available to invest in those places. In the short term, along with restrictions on spending and tax rises placed on it by Whitehall, it has also brought local government to the brink of insolvency. But these are problems that can’t be fixed just by increasing the value of central Government grants. Obstacles to growth in the UK’s biggest cities cannot be removed with the stroke of a pen in Whitehall.

“Devolution at this scale will naturally benefit some parts of these economies while burdening others. We think this is worth it given the long-term growth benefits this unlocks well into the 2030s.”