The Government needs to ensure devolution doesn’t inadvertently widen inequality

The zeal for devolution at the heart of Government is to be welcomed. However, there is a danger that the underlying mission statement of devolution could be undermined if policy is not designed with due care.

The Government has said that a portion of income tax revenues will be shared with regional mayors in England from April 2028.

While fiscal devolution is the right way to go after decades of overcentralised funding and decision-making, there are potential hazards that need to be considered and addressed.

The Institute for Fiscal Studies (IFS) points out that without careful design, richer areas such as Greater London could see their funding pull significantly ahead of poorer mayoral areas in the North and Midlands, and areas without mayors.

The principle of rewarding mayoralties for delivering growth is to be lauded. But when starting from a position of entrenched inequality, it is easy to see the danger that lies ahead. More affluent areas of the country will pull further ahead as the historically disadvantaged continue to flounder.

The IFS has called on the Government to operate a system of ‘equalisation payments’ to offset large initial differences.

This is not to begrudge London economic success. The country needs the capital to flourish and continue to be a trailblazer for growth.

The other issue is that of guardrails on how money is spent by mayors. While local leaders are best placed to decide how revenue raised locally is spent, there needs to be sufficient oversight to prevent profligacy.