Burnham's fiscal devolution leap is crucial -- and long overdue

Trying to get stuff done without these new powers and funding streams has been too difficult for elected mayors

The writer is the co-chair of Prosper UK, a former mayor of the West Midlands and former managing director of John Lewis

When I was mayor of the West Midlands, I used to say that we were in the most centralised country in the world outside of North Korea. It would always prompt a smirk, but it was basically true.

For years we have had a system where, if we wanted to fund an infrastructure project, target an economic intervention on the local jobs market or support a thriving local business, we, the elected administration for our region, would first have to win the approval of unelected civil servants.

During my time as mayor, the West Midlands secured roughly £10bn of additional public investment -- nearly all of which required government sign-off. It would have been similar in the Greater Manchester city region, where Andy Burnham served as mayor at the same time.

That is not to criticise civil servants. But it does highlight the absurdity of someone who has potentially never lived or worked anywhere but London deciding on what's best for the likes of Birmingham, Bradford and Bristol.

Over the years, thanks to vociferous lobbying from the mayors, steps have been taken to address that through limited devolution in areas like housing and skills. But the big leap was always "fiscal devolution".

Now, in the midst of an otherwise uneventful and quite disappointing Budget, it has arrived. Chancellor John Healey confirmed that from 2028 every mayoral authority will be assigned a share of the basic rate income tax its residents pay. And from next year they will keep a share of the business rates raised in the area, which councils and mayors between them are to retain in full by the end of the decade.

Anyone who has run anything -- as I did at John Lewis -- knows that certainty over your income line to give you the freedom to act, plan and invest is mission critical. That certainty allows long-term strategic planning, and it is how you turn regional economies around.

The numbers tell you why this turnaround is needed: over 90 per cent of the UK tax take goes to the Treasury, against an OECD average of around 53 per cent. Meanwhile, our urban areas outside London underperform in terms of output by around £47bn a year on estimates from the Centre for Cities.

International examples show what local control of the cash can deliver. Investment not just in physical infrastructure but in skills, research and business support has enabled clusters of new businesses to form. In Austin, Texas, property taxes paid for a medical school and then for a $7.1bn transit plan; Bordeaux planned a business district with 30,000 jobs around the station on its high-speed line to Paris.

So how do UK areas replicate these successes?

First, strategic planning. Investment in transport and housing often takes a decade but funding is rarely certain beyond a few years. A mayor with their own income can deliver a whole regional economic plan over the long term.

Second, skills. In the West Midlands, we used our devolved adult education budget to work with business on what it needed and ensured colleges and training providers responded. But Whitehall still set the amount and conditions. With fiscal devolution, mayors have their own money. This is critical. Every conversation with an inward investor includes the question: "Have you got the skills we need?"

Third, innovation. New industries take root where a place has natural advantages and the right investment. It is the mayor who can galvanise businesses and universities and put the cash there.

To make "fiscal devolution" work, the capability assessment promised in the Budget must be a real test, not a formality. Spending also needs proper scrutiny, something akin to Parliament's Public Accounts Committee in each region.

And yes, some areas will make more of their opportunities, some will make less, and some might take bad decisions. But that's part of the model; electorates have the power to hold their mayors to account and vote them out.

At Prosper UK we wanted mayors to receive 2.5p of the 20p basic rate, alongside retention of local taxes such as stamp duty, vehicle excise duty and air passenger duty. We will keep pressing the case with this government to go further and faster on fiscal devolution, but we also recognise the enormity of the step taken last month.

We are now finally moving to a model that sees success or failure sit with an elected mayor. Done right, it could herald a generational rebalancing of the UK's economy.