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Visitors to Dunkirk this summer may be surprised to discover that bus travel in the French northern coastal city is completely free.Key to the introduction of universal free bus travel in the city has been the ability of local leaders to access a slice of payroll taxes to provide funding for public transport.In the year following the 2018 introduction of fare-free public transport, paid largely by funds raised via the so- called Versement Transport scheme, bus usage rose by 65% on weekdays and 125% at weekends. This success led Montpellier to follow in Dunkirk's footsteps two years ago.Initiatives such as these could be within the grasp of England's mayoral authorities following a pledge by Rachel Reeves in her recent Mais lecture to develop a ‘roadmap for future fiscal devolution' to be published in the Budget later this year.Details about the roadmap are clearly scarce, although the chancellor's emphasis on city regions points towards combined authorities as the level of local government that any taxes will be assigned to.According to the chancellor, this roadmap will set out plans to give regional leaders control of a share of some national taxes, potentially including income tax ‘alongside other taxes' currently allocated by central government.Reeves told the lecture's City of London audience the reform would be ‘initially targeted at those places that have the greatest capacity to deliver them and the greatest potential to benefit', pinpointing city regions as ‘the fundamental geographic unit for attracting investment, stoking innovation and sustained economic success'.Alongside the roadmap, Reeves announced an additional £2.3bn of funding for ‘major' north and West Midlands city regions.The Mais lecture marks a break with a Treasury orthodoxy, which sees the UK devolving very little of its national tax take when compared with similar countries, says Thomas Pope, deputy chief economist at the Institute for Government (IfG).Details about the roadmap are clearly scarce, although the chancellor's emphasis on city regions points towards combined authorities as the level of local government that any taxes will be assigned to.For Henry Kippin, chief executive of the North East Combined Authority, the chancellor's announcement is a ‘big deal'.He says: ‘It opens a crack in the dam that allows us to start to think profoundly about what the devolved model is, how that might work in future and the broad-based set of activities that combined authorities do.'Stephen Jones, director of Core Cities UK, has never heard a UK chancellor be so ‘positive and proactive' about devolution policy during the 20-plus years he has worked in the field.‘This has the potential to be huge and the biggest step that any government has made on devolution.'So, what kind of impact could the Treasury's move on fiscal devolution have on the regeneration and economic development of the city regions that Reeves' proposals are focused on?Allowing places to keep a greater share of tax revenue provides a tangible incentive for authorities to pursue growth, argues Andrew Carter, chief executive of the Centre for Cities,‘If places are able to keep a proportion of those tax revenues, they are more likely to do those sorts of projects and they would be rewarded as a result of doing them,' he says.‘You ought to get a positive feedback loop, which is, the more schemes we do, the more revenue is generated and we get to keep a bit more than otherwise.'Henri Murison, director of the Northern Powerhouse Partnership (NPP), says being able to keep a bigger proportion of their tax base will increase authorities' ability to build transport networks that open up the regeneration of otherwise unattractive brownfield sites.Mayoral strategic authorities (MSAs) could use assigned revenue to beef up the scarce skills required to carry out complex regeneration schemes, says Carter: ‘That allows you to make that upfront investment to acquire those people.'Nigel Wilcock, executive director of the Institute of Economic Development (IED), argues that the lack of certainty surrounding future revenue streams holds back many projects.Being assigned a slice of central revenues may facilitate ‘much better decision-making' than is possible even under the relatively flexible integrated settlements that the more mature MSAs now receive, says Pope: ‘Assignment of revenue, as long as it's done in a way that conveys certainty, isn't just revenue for two or three years, it is revenue for 10 or 15.'Such visibility over those future revenue streams may allow authorities to commit to projects that take longer to deliver, he adds.And, depending on the extent of the flexibilities that the Treasury offers in the roadmap this autumn, authorities may be able to borrow against these streams of revenue, says Pope: ‘It provides a flexibility to think and potentially deploy resources differently even if it's not more money than the grants the revenue replaces.'Agreeing, Jones says: ‘That sort of revenue stream is the reason why every major city in every other part of Europe in the last quarter of a century has invested in their metro transport system. It is because they've got the money they can invest and borrow against.'Greater control over revenue may mean less need for the Department for Transport (DfT) to vet projects in order to ensure they do not breach its Treasury-set spending limits, says Murison: ‘The most obvious example of a sub-optimal outcome is where the Government is giving significant amounts to combined authorities and a lot of them have spent high proportions of that buying new buses.‘It is not because new buses are the thing they need most, it's because if you've got a budget settlement and the capital has to be spent relatively quickly with no certainty of future money, then you end up buying something that is easy to buy.‘The fact that so many combined authorities have gone out and bought buses with settlements from the DfT suggests something might not be working quite as intended. If the funding was doing what it is supposed to, people would pay for the thing they most want and need, rather the thing that is easiest to buy as quickly as possible.'Carter suggests that having a firmer hand on the fiscal levers makes it ‘more likely' that MSAs will be able to issue bonds, which offer a more suitable mechanism for financing longer and more complicated regeneration projects than the Government's Public Works Loan Board (PWLB) that local government currently relies on for borrowing.The chancellor's Mais lecture contained a warning that any fiscal devolution to eventually emerge from the roadmap should not result in additional tax and spending.A solution could be that strategic authorities receive a share of national insurance revenues equivalent to the funding they receive from the £5.7bn City Regional Sustainable Transport (CRST) settlements they currently receive, says Murison.While awarded over several years, the CRST is still paid annually, he says: ‘You just get a cheque and you can't borrow against that because you've got no actual guarantee that it is going to come in every year.‘At the moment, it is very easy for central government with a stroke of a pen to eliminate much of the devolution settlement that's been created in this country because they could cancel the funding.'Turning this settlement into a proportion of national insurance means it becomes a more reliable source of finance, says Murison, estimating that up to £15bn could be borrowed on the back of this projected revenue for transport investment in West Yorkshire.Access to these kinds of sums would remove a major impediment to Leeds' unhappy status as the biggest city in western Europe not to have its own metro-style public transport network, he says: ‘We can build as many trams as you want with that money.‘There is an obvious way to replace an existing grant that isn't working the way we would all want and can be more effective.'Jonathan Seager, research and policy delivery director at London umbrella body Business LDN, argues that devolving fiscal powers may also speed up the rates and quality of economic development and regeneration decision-making.‘The regional tier of government is able to take decisions locally, rather than wait for the Whitehall machine to crank up and do its thing,' he says, adding that local leaders are less prone to siloed operations than central governmentThe most glaring example of a project that could benefit from such greater devolution is the redevelopment of derelict land around London's Euston Station, which is now no longer needed for HS2's terminal, as well as the long-mooted extensions of the underground's Bakerloo Line and Docklands Light Railway to Thamesmead, Seager says.However, there will be ‘nervousness' within the Treasury about allowing MSAs additional borrowing powers, given the impact this could have on fuelling wider public sector debt, says the IfG's Pope. ‘If a combined authority were at risk of default, central government probably is the backstop.'And, while acknowledging that the German Länder, for example, can issue their own bonds, he points out these sub-national units of government are at a ‘very different' level of maturity and much more embedded in the country's constitution.The starting point for assessing the likely extent of fiscal devolution to MSAs is the limited borrowing flexibility that the Scottish and Welsh governments have – a quarter of a century on from their establishment, Pope says.This means, he suspects, it is ‘more likely' that any borrowing by MSAs will happen via the PWLB.To ease the Treasury's ‘palpitations', the PWLB's Willcock suspects the outcome of the Treasury's roadmap may be offering city regions sums linked to growth in taxation from development.This could be achieved via a broader rollout of US-style Tax Increment Financing (TIF), which enables authorities to receive a slice of additional property revenues resulting from development that requires public support to get off the ground.This mechanism was piloted under the coalition government, when Transport for London financed an extension of its Northern Line to Battersea Power Station, borrowing against the future increases in business rates raised at the iconic site following its regeneration.Agreeing, Core Cities' Jones says: ‘Going further in that space feels more naturally incremental than a complete dividing up of the pie of VAT or income tax.‘They now need to deliver on that ambition.'

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REGENERATION

Regeneration: Developing devolution

By David Blackman | 13 May 2026

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