Rachel Reeves Proposes Sharing Income Tax Revenues with England’s Regional Leaders

(LONDON, ENGLAND) — Chancellor Rachel Reeves announced plans on March 18, 2026, to give England’s regional mayors control over a share of national tax revenues, primarily income tax, in a proposal aimed at shifting fiscal power away from Westminster without raising overall taxes.

Reeves set out the plan during the annual Mais Lecture at Bayes Business School in London, where she said officials would develop a roadmap for fiscal devolution with regional mayors and businesses. The proposal is intended to support regional growth, local investment, and public services outside London and the South East.

“This will set out plans to give regional leaders control of a share of some national taxes which have, for too long, been allocated by central government. They will look at income tax alongside other taxes, with reforms initially targeted at those places that have the greatest capacity to deliver them and the greatest potential to benefit,” said Rachel Reeves, UK Chancellor of the Exchequer.

Her announcement put income tax at the center of the plan so far, while leaving room for other taxes to be considered later. Reeves presented the shift as part of a push to decentralize decision-making over how money reaches English regions.

The government plans to introduce the changes in phases rather than all at once. Early candidates are expected to include regions seen as having the strongest capacity or the highest potential, including parts of northern England and the West Midlands.

That phased approach puts the first emphasis on areas judged most ready to take on new powers. It also frames the proposal as a staged redesign of how funding and authority are shared between central government and regional leaders, rather than an immediate nationwide overhaul.

Officials are developing the roadmap with input from mayors and businesses. That process places regional leaders and business stakeholders inside the design of the policy, not simply at the point of implementation.

Reeves’ plan links tax devolution to a wider package of local funding powers. Alongside the proposed share of national tax revenues, the government is discussing £2.3 billion in city investment funds for long-term capital projects and business rates retention for local authorities.

Those financing elements sit at the heart of the model now under discussion. City investment funds would support long-term projects, while business rates retention would give local authorities a stronger direct connection to local economic activity and the revenues that follow from it.

Combined with a share of income tax, those measures would give regions more say over economic development and infrastructure decisions. The aim, as set out by the government, is to allow places outside London and the South East to back growth and services with a broader local funding base.

The proposal remains under development, and Reeves did not present it as an enacted tax change. Instead, she tasked officials with producing a full roadmap that will spell out how fiscal devolution would work in practice and which areas would move first.

That governance design is now a central part of the policy. Ministers are working with regional mayors and business leaders on the structure of the rollout, with accountability, administrative readiness, and local delivery capacity likely to shape the order in which powers are devolved.

Regions judged most able to absorb new powers are expected to stand at the front of the queue. That test of capacity runs through Reeves’ approach, from the opening phase of the rollout to the wider choice of where fiscal devolution can work first.

The proposal also ties together several strands of the government’s economic agenda. Reeves placed tax devolution alongside deeper EU cooperation and artificial intelligence investment as part of a broader strategy for growth.

In that sense, fiscal devolution is not being presented as a stand-alone tax measure. It is part of a wider attempt to reshape how investment, productivity, and public services are supported across England’s regions.

For English mayors, the proposal could mark a shift in role from spending allocated funds toward exercising some control over how revenue is raised and used locally. For the government, it is an attempt to move more economic power beyond Westminster while keeping overall taxes unchanged.

Income tax is the clearest revenue stream identified so far. Reeves also said officials would look at other taxes, indicating that the roadmap may reach beyond a single revenue source as the policy develops.

Much of the practical model still needs to be worked out. Important questions about how revenue would be distributed among regions remain under development, even as the political direction of travel has been made plain.

That leaves a gap, for now, between ambition and operating detail. The government has signaled what it wants fiscal devolution to achieve, but the final structure for allocating revenues and defining regional eligibility has yet to be published.

Even so, the outline already gives a sense of the government’s priorities. It wants to start with places seen as able to deliver reforms, back those reforms with long-term investment money, and build a framework in consultation with mayors and businesses rather than imposing one in isolation.

Northern England and the West Midlands stand out as likely early candidates under that approach. Reeves highlighted reforms initially targeted at places with both the greatest capacity to deliver them and the greatest potential to benefit.

That wording points to a model in which institutional readiness and economic opportunity matter together. It also suggests the first stage of fiscal devolution will be selective, with wider expansion to follow later if the early phases work as intended.

Business rates retention forms part of the wider fiscal framework under discussion. In practice, that would sit alongside city investment funding and the proposed share of national tax revenues as the government builds a package aimed at giving regions more control over local growth decisions.

The £2.3 billion in city investment funds gives that package a long-term financing element. Capital projects often stretch over years, and the inclusion of dedicated funding in the same policy discussion shows that ministers are linking devolved tax powers to long-range investment planning.

Reeves’ use of the Mais Lecture to launch the proposal also put the plan squarely in the government’s economic narrative. She used the speech to connect regional growth, fiscal devolution, and investment in a single argument about how England’s economy should be managed outside the capital.

Her focus on areas beyond London and the South East was explicit. The proposal aims to boost regional growth, local investment, and services in places that have long argued for a larger voice over how resources are allocated.

For now, the roadmap is the main next step. Officials are drawing it up with regional and business input, and the government expects to publish the full implementation plan at the autumn 2026 budget.

That budget is set to become the main test of how far the proposal has moved from political statement to policy design. It is expected to set out the timetable, the regions likely to qualify first, and the practical structure of devolved tax powers.

Until then, Reeves has established the direction of travel: a plan to let English regional leaders take control of a share of national tax revenues, led by income tax at the outset, backed by investment funds and business-rate powers, and built through a phased model of fiscal devolution that will begin taking fuller shape at the autumn 2026 budget.