(Bloomberg) — UK Chancellor Rachel Reeves is resisting calls from English mayors to extend their revenue-raising abilities, an awkward clash that comes as her government launches its plan to extend more powers to local leaders.
Deputy Prime Minister Angela Rayner will deliver a speech Monday to launch the “English devolution white paper,” a document setting out how Labour will deliver on its election promise to devolve more responsibility to local leaders. The governing party, which was elected in a landslide in July, has repeatedly said it believes in “unleashing power from Whitehall back into communities that know their areas best.”
But it comes as English mayors, the majority of whom are Labour, ask for greater ability to raise their own money, such as by introducing a tourist tax or by retaining a greater share of business levies. They asked for these powers at several meetings, including one last week, according to people familiar with the matter, but Reeves pushed back, they said.
The chancellor told the mayors that people are already paying enough tax, according to the people, who declined to be named discussing private meetings. She also expressed concerns about the impact on the hospitality sector, they said. Reeves has faced criticism following a tax-raising budget that levied a £40 billion ($50 billion) tax increase on businesses.
A spokeswoman for Reeves declined to comment. The clash between Reeves and the mayors was first reported by the Sunday Times.
Devolution, the process of transferring power from London to the nations and regions of the UK, began the last time Labour was in government, under Tony Blair in 1998.
Different parts of the UK have varying degrees of power: Scotland, Wales and Northern Ireland have their own legislatures that can pass laws in “devolved” areas, whereas English regional mayors only have executive powers, which Labour is seeking to extend. Not all English regions have a mayor, though Labour has promised to offer devolution deals to areas currently without one.
The request from the English mayors comes amid concern that they will be forced to increase council taxes — one of their few tax-raising powers — or transport levies to raise funds amid tight spending settlements for local government in the budget.
They are looking for additional fiscal levers to raise funds and incentivize investment, such as taxing vacant properties and some underdeveloped land, or a so-called “conferences and events levy” to pay for transport that that many non-residents use, according to a person familiar with the matter. Reeves pushed back against the suggestion, they said.
The “devolution revolution” that Rayner will announce on Monday will include giving mayors responsibility for housebuilding, vocational education and economic growth in the area, according to a government press release. It will also include a wider “devolution as default,” meaning that swathes of government policy will be devolved unless an exception is made.
More stories like this are available on bloomberg.com
