The mindset shifts that can secure fiscal devo

For decades, fiscal devolution has been the rubicon that England dared not cross. Now, with the advent of Andy Burnham as Prime Minister, there is a real chance that elected politicians at regional and local levels will have access to the same sorts of tools that their peers in other Organisation for Economic Co-operation and Development countries routinely and safely deploy to generate revenue for public services and investment in growth.But even those of us who are the most diehard advocates of fiscal devolution should not underestimate the mindset shifts that will need to come with it.England's relationship with anything approaching fiscal freedom has always been somewhat sclerotic, largely driven by deep risk aversion. Tempting as it is, that attitude cannot be laid at Treasury's door alone. Take the example of councils investing outside their local areas. The impulse from many even within local government was to tighten the rules, citing specific examples that did indeed go badly wrong. There will be deep muscle memory threatening to activate and impose strict guidance and guardrails on any new fiscal levers put in hands other than those of central government.There may be calls to start small on fiscal devolution and move gradually. But that could, in fact, be even riskier given that the historical pattern in this country is to start with a flawed compromise and shy away from any substantive corrective measures in perpetuity.It should also be acknowledged that even the limited powers that local and combined authorities have had to date have been used somewhat gingerly. Apart from Ultra Low Emission Zones in London and the workplace parking levy in Nottingham, it is hard to think of any examples. If genuine and meaningful fiscal powers are put on the table, local and regional politicians must be prepared to use them.Three mindset shifts will be key.First, we need to be less scared of risk. Taxes interact with market conditions and inform behaviour in complex ways. Rational decisions will get taken that may not generate the expected revenue or may impact on certain sectors or segments of population adversely. This is normal and happens with national tax decisions all the time. As we see with the health debate where the bogeyman of the American health system is conjured up whenever the sacredness of the NHS is questioned, the spectre of Detroit – which in July 2013 became the largest municipal bankruptcy filing in US history, estimated at $18-20bn – may haunt future policy debates about fiscal devolution. We should resist the histrionics.Second, on a related point, we should stop designing in anticipation of failure. Based on experience, there will be huge temptation to be overly prescriptive and possibly restrictive in statute. This will almost certainly be Treasury's natural inclination, but it could well find proponents within local government. Councils still have an unfortunate tendency to ask for government guidance for fear of getting things wrong. More charitably, sometimes guidance is sought to try to arrive at more consistency but without always questioning whether consistency should be the desired goal.Finally, the third shift: rise above the noise. As is often the case when it comes to taxes, the debate may get shrill. Lobby groups will feel pressure to secure wins for their own memberships. It certainly will not feel auspicious to introduce new fiscal powers alongside promises to address the cost of living. But here's the thing: there will never be a ‘right' time.There may be calls to start small on fiscal devolution and move gradually. But that could, in fact, be even riskier given that the historical pattern in this country is to start with a flawed compromise and shy away from any substantive corrective measures in perpetuity.No one can believe that the example of council tax is one to follow.Piali Das Gupta is associate director at Roretti

Title

FISCAL DEVOLUTION

The mindset shifts that can secure fiscal devo

By Piali Das Gupta | 28 July 2026

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