Andy Burnham, the incoming MP for Makerfield and widely expected successor to Sir Keir Starmer as Labour Party leader, has confirmed plans to introduce a major change to income tax affecting all workers in England. The proposal would grant local authorities devolution over income tax, a move described by close allies as 'constitutional devolution'.
Exploring Income Tax Devolution
Lord Jim O'Neill, a key economic adviser during Burnham's tenure as Greater Manchester Mayor, told LBC that exploring elements of income tax devolution 'is definitely something that would be on the agenda to study in a serious way.' He criticised the current approach of 'tiptoe with little drip feeding bits of 'if you're good, you can have a little bit more,'' calling the proposed change 'a whole new level.'
Lord O'Neill stated: 'Business rates devolution is a very strong probability. I think exploring [devolving] aspects of income tax is possible ... It is definitely something that would be on the agenda to study in a serious way.' He questioned why Westminster assumes it knows the adult skills needs in Rotherham are the same as in Reading, calling them 'completely different.' He described the redistribution of power away from the capital as 'badly needed.'
Implications and Financial Concerns
The radical suggestion raises questions about how income tax revenues would be distributed around the country. Lord O'Neill also warned that a 'spectacular rise' in public spending could not continue without punishment from financial markets. 'We do not have 10-year gilt yields sitting above Greek equivalent yields for no reason,' he told CNBC. 'It's because we have got a spectacular rise in public spending and our debt levels.'
