Local leaders will be handed powers to control a share of some national taxes under new plans unveiled by Rachel Reeves, in a bid to boost growth in towns and cities outside of London.
The chancellor placed securing investment in areas outside the capital at the heart of her plan for economic growth, as she delivered a lecture in the City of London on Tuesday.
Speaking at Bayes Business School in London, Reeves said she had asked officials to draw up a roadmap for future “fiscal devolution”, which could include powers given to local leaders to control a share of national tax revenue.
She said the plans will be published at the Budget in autumn.
“I have asked my officials to work with mayors and businesses to develop a road map for future fiscal devolution to be published at this year’s Budget,” she said.
“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.”
Ms Reeves said the move to hand control of some national taxes from the Exchequer to regional leaders would not increase the tax burden, as she said the plan was “about being a country where every citizen can achieve, succeed and contribute”, no matter “where they grow up, or where they choose to settle down”.
Reeves also set out £2.3bn of new funding to be deployed by mayors in the largest city regions, focused in the North and Midlands, to back growth and attract private investment.
Other measures unveiled by the chancellor on Tuesday included an announcement to double funding for the Oxford-Cambridge growth corridor, and new government compulsory purchase powers to boost building.
Think-tank Institute For Public Policy Research (IPPR) said the chancellor’s announcement is a “a very welcome shift towards rebalancing the economy”.
“The UK is still one of the most regionally unequal places in Europe, with jobs and opportunity concentrated in places like London, Oxford and Cambridge. A young person growing up in the North shouldn’t have to look down South to imagine success,” Mirte Boot, principal research fellow and interim head of IPPR North said.
"But this investment package must also work hand in hand with the visitor levy and further devolution, to hand local leaders the powers to make the North rival the South.”
The plan to boost growth “in every part of Britain” were laid out as part of the chancellor’s “three big choices” for the decade ahead.
Closer ties with the EU and a drive for the expansion of artificial intelligence were also highlighted as Reeves outlined her strategy for the future of Britain’s economy.
On artificial intelligence, Reeves said Britain could either “bury heads in the sand” or “charter our own path” when it came to the development of new technologies, as she pledged a £2.5bn investment.
She warned Brexit had left the country facing the danger of being “stranded” between rival trading blocs, and added the UK’s exit from the bloc had hit GDP by up to 8 per cent.
“Our fate as a country is inescapably bound with that of Europe,” she said, as she set out ambitions to build a “new and stable future relationship” with Brussels.
The prime minister pledged to reset Britain’s relationship with Brussels when he took office, promising to rebuild ties with the EU that had been damaged by the previous Conservative government.
Setting out plans for the UK to align more closely with European Union rules, Reeves said deviating from the regulations set in Brussels should be “the exception, not the norm”.
“There are areas in which regulatory autonomy may be necessary for sectors with unique characteristics or strategic importance for the UK, but that should be the exception, not the norm,” she said.
“To get this right, we must work more closely with businesses, both here and across Europe, but when the economic gains exceed the costs, the trade-off is worth making.”
Shadow chancellor Sir Mel Stride criticised the chancellor’s speech, accusing her of “dragging us back into the old Brexit arguments” in an attempt to “cover her own failures.
“Rachel Reeves wants to blame everybody else but herself for her dreadful management of the economy,” he said.
“After £66bn in tax rises, growth has stalled, business confidence has collapsed, inflation is higher and unemployment is rising. But instead of owning the damage she's done, Reeves is dragging us back into the old Brexit arguments.
“The chancellor is utterly deluded and gaslighting the public to cover her own failures.”
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