Steve Reed, the Labour government's local government secretary, is developing plans to devolve billions of pounds in business rates revenue to regional mayors across England. The move represents one of the most substantial reforms to England's tax system in recent years and signals a broader shift toward regional devolution.
The business rates tax has faced sustained criticism from hospitality businesses, pubs, and other commercial operators who argue the levy places unfair burdens on struggling sectors. By transferring collection and control of this revenue to regional authorities, the government aims to address local grievances while expanding mayoral power beyond current boundaries.
Reed's plans extend beyond fiscal matters. The devolution package includes transferring authority over justice, health, and education to regional leaders. This reflects Labour's broader agenda of decentralizing power from Westminster to local areas, a theme Prime Minister Keir Starmer has championed since taking office.
The business rates devolution represents a practical test of whether regional governance can deliver more responsive policy-making. Currently, business rates remain centrally controlled, creating friction between local business communities and national tax administrators. Transferring this revenue stream could allow mayors to adjust rates based on regional economic conditions rather than applying uniform national rates.
The timing proves significant. Hospitality businesses have intensified campaigns against rising business rates valuations, particularly affecting struggling pubs and restaurants. Devolving the tax suggests the government recognizes the political cost of defending a system that sparks business opposition across multiple sectors.
However, devolution creates complexity. It requires establishing clearer relationships between central government, regional mayors, and local councils. Questions remain about revenue distribution formulas, minimum standards, and whether poorer regions could sustain services if rates decline under local control.
Reed's initiative aligns with Labour's devolution-first approach to governance, positioning the party as willing to relinquish central control over taxation and service delivery. Success or failure of this experiment will