Workers in parts of England could receive local tax rebates under proposals being discussed as part of Andy Burnham’s fiscal devolution programme. Tees Valley Mayor Ben Houchen has said his authority is exploring payments equivalent to 1%, 2% or 3% of a worker’s income tax.
The proposal represents a change from the position outlined when the devolution policy was announced in July. At that point, ministers said the new arrangements were intended to give mayors a share of locally generated income tax and business rates revenue for spending on areas including housing, transport and skills.
Tees Valley Mayor Discusses Direct Rebates for Workers and Businesses
According to The i Paper, Houchen is working with senior staff at No 10 North on a possible scheme that would return some locally controlled revenue directly to workers and businesses rather than using all of it for public investment.
Houchen said workers would need to demonstrate that they were employed in the Tees Valley by a business based in the area. “If you’re employed in the Tees Valley by a Tees Valley business and you can prove to us your income, we will give you a rebate the equivalent of 1, 2, 3 per cent of your income tax,” he told The Sunday Times, as reported by the Birmingham Mail.
The average salary in Tees Valley is £33,850 a year. According to The i Paper, using the standard personal allowance and basic income tax rate, that salary produces an annual income tax bill of about £4,256. A rebate at the levels suggested by Houchen would therefore be worth about £43 at 1%, £85 at 2% and £128 at 3%.
Businesses could also be included. Houchen has suggested that companies operating in Tees Valley might be able to apply for a rebate of around 5% of their business rates. He said the policy could encourage firms to locate in the area and argued that returning money to workers and businesses could support spending, business creation, relocation and employment.
Rebates Could Reduce Money Available for Local Investment
The proposed rebates would come from the same pool of revenue that the Government originally said could be used for housing, transport, skills and other growth-related projects. Using part of that money for direct payments would therefore leave less available for those programmes.
A Government spokeswoman said mayors choosing to establish what she described as “complicated and administratively burdensome grants” would need to make clear that the spending would reduce investment available for transport, housing and other services.
The discussions also mark a shift from the position taken when the fiscal devolution policy was introduced. Burnham previously said the changes were not intended to turn mayors into “a sort of mini-chancellor of the exchequer”.
Louise Haigh, the Cabinet Office minister responsible for devolution, had also said that rebate schemes were “certainly” not possible under existing HMRC arrangements. According to The i Paper, she said there was currently no system capable of delivering such payments and that new administrative arrangements would be required.
The plans remain under discussion. Houchen said the details were still being worked through, while the Government said it would work with mayors on the design of fiscal devolution and on ensuring that greater local financial freedoms were accompanied by transparency.
