English Devolution Raises Fresh Questions Over Local Spending Accountability

England’s expanding devolution programme is prompting renewed questions over how billions of pounds in public funding will be scrutinised as greater financial powers are transferred from Westminster to regional mayors and local authorities. The debate centres on ensuring clear lines of responsibility, parliamentary oversight and a funding system that can encourage economic growth without widening existing regional inequalities.

The issue has gained importance as Prime Minister Andy Burnham accelerates his plans for English devolution and prepares for a new system in which regional mayors will receive a share of income tax revenues raised in their areas from April 2028. The government has said the arrangement will initially be fiscally neutral, but concerns remain over how the system could affect different regions.

Treasury Committee chair John Hillier has argued that effective accountability will require clear lines of authority running through government departments and ultimately to ministers.

Hillier said one way to achieve this would be to establish clearly defined responsibilities that would allow existing parliamentary select committees to scrutinise how devolved responsibilities are being exercised.

He emphasised the role of the Treasury Committee in examining how politicians make decisions involving taxpayers’ money, arguing that financial accountability should apply at local level as well as nationally.

The question is particularly significant because England’s devolution arrangements are becoming more complex, with mayors and combined authorities taking on greater responsibility for economic development, transport, skills and investment.

The English Devolution and Community Empowerment Act 2026 also provides for audit committees within combined authorities, with responsibilities including scrutiny of financial affairs, risk management, internal controls, corporate governance and the economy and effectiveness of resource use.

The debate also recalls the abolition of the Audit Commission in 2015. The commission had provided a central framework for auditing and overseeing public spending by local government in England.

Its abolition changed the structure through which local government finances were examined, with responsibilities subsequently distributed among other organisations and arrangements.

The expansion of devolution now raises a different but related question: whether existing oversight arrangements are sufficiently clear when regional authorities gain more control over substantial public resources.

A central issue for the government is how to encourage mayors to support economic growth while ensuring that the funding available to different parts of England does not diverge excessively.

The Institute for Fiscal Studies has examined the government’s plans to assign a share of income tax revenues to England’s regional mayors. Under the proposed system, the additional revenues would replace part of the grant funding currently provided by central government.

The income tax element is expected to begin in April 2028.

The principle is intended to give regional leaders a stronger financial incentive to support economic growth. If local economic activity increases tax revenues, the region would retain a greater share of the resulting financial benefit.

However, significant differences in income tax revenues between regions could create challenges. London, for example, has a substantially larger income tax base than several regions elsewhere in England.

Without carefully designed equalisation arrangements, a system based heavily on locally generated revenue could result in substantial differences in the funding available to different areas.

The Institute for Fiscal Studies has argued that the government should consider equalisation payments to address differences between the tax revenues assigned to different mayoral areas and the grants they replace.

The purpose would be to prevent wealthier regions from gaining a disproportionate financial advantage while still allowing local leaders to benefit from policies that successfully increase economic activity.

David Phillips, the IFS’s devolution expert, has said that giving mayors a greater financial stake in economic growth could provide stronger incentives for local investment and policy decisions.

However, he has also stressed that the system will require careful design to prevent funding disparities between regions from becoming too wide.

The government will ultimately have to determine how much variation in funding it is prepared to accept between regions as local tax revenues change.

Andy Burnham has made accelerating English devolution a central part of his government’s regional economic strategy. His approach includes strengthening the regional role of Downing Street and giving greater responsibilities to England’s mayoral authorities.

His new No 10 North office is intended to focus more closely on regional aspects of economic growth policy and strengthen the government’s engagement with local leaders.

Further details of the funding arrangements are expected as the government develops its plans for fiscal devolution and determines how revenue sharing and equalisation will operate.