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W hen the Government announced ‘trailblazer' deals for Greater Manchester and the West Midlands combined authorities three years ago, it believed that single funding settlements for each region paved the way for deeper devolution.This may have been true but, if we are ever to remould our political system away from what many commentators describe as one of the most centralised developed countries in the world, then fiscal devolution is the logical next step.And, while the All-Party Parliamentary Group on local government's inquiry into fiscal devolution in England represented a welcome starting point when it was launched recently, we must quickly move on to the next stage of this discussion by considering how this can also be rolled out across the devolved nations.What we mean by fiscal devolution is not immediately obvious. Few would suggest putting local areas in charge of every piece of tax revenue generated by their residents and businesses when this varies wildly from one place to another.Yet the status quo offers local decision-makers very limited freedom to use its own fundraising to exercise devolved powers.Even the Greater Manchester and West Midlands metro mayors – who enjoy greater autonomy on transport planning, housing land acquisition and post-16 skills provision – remain reliant on ringfenced grant funding from central government.Perhaps the most progressive aspect of the 2023 trailblazer deals was 100% business rates retention, which gives authorities a meaningful stake in future business expansion and thereby an incentive to grow their local economies.If this vision encompassed new free trade zones around high-growth sectors identified by those at the heart of the economy, they would have to go cap in hand to Westminster.While the UK's freeport policy is welcomed by many as an opportunity for attracting inward investment via a suite of special tax and customs incentives for businesses that relocate to designated sites, others argue that shifting financial policy from the Treasury to strategic authorities would ensure the benefits are felt in the right places.A 2023 report (Fiscal Devo Nation: a blueprint for devolving tax) by the Northern Powerhouse Partnership and EY went further by calling for the devolution of stamp duty to councils, as well as 1p of employer national insurance contributions towards local transport and infrastructure.Fiscal devolution is most firmly entrenched in Scotland, which has responsibility for raising about 40% of its devolved budget and uses these freedoms to design targeted initiatives around tackling child poverty and reducing tax bands for lower earners.In 2015, stamp duty land tax was replaced in Scotland by a land and buildings transaction tax – now designed to make first-time buyers pay less while taxing higher-value transactions more – along with a Scottish landfill tax to replace its UK equivalent.Revenue Scotland was established to administer these taxes and further Scottish levies across aggregates, air passenger duty and building safety on new residential developments are being rolled out between this year and 2028. Half of VAT revenues raised in Scotland could also be allocated to Holyrood in future.The concept of fiscal devolution is less mature in Wales and Northern Ireland, with the latter in particular enjoying very limited fiscal variation. Legislation passed in 2015 to devolve corporation tax to Stormont so it could match the Republic of Ireland has yet to be implemented.Wales – which has had fully devolved land transaction tax and land disposals tax since 2018, along with partial income tax powers – is at least further down the track. UK income tax rates have been reduced by 10p in each band, on top of which the Welsh Parliament sets its own rate. Unlike in Scotland, however, the Senedd cannot alter income thresholds for existing bands or introduce new bands.The Visitor Accommodation (Register and Levy) (Wales) Act 2025 will enable councils to introduce a tourist tax on overnight stays from April 2027, which the Welsh Government estimates could raise up to £33m annually for reinvesting in tourist destinations.This power is also included in the English Devolution and Community Empowerment Bill, although Manchester and Liverpool have already started collecting such levies from specific hotels via business improvement districts. The Scottish Parliament has also passed similar legislation.There is ultimately no single meaning of ‘fiscal devolution', but whichever way it is framed, this is the next logical step to the devolution agenda across England and the devolved nations.If Westminster is prepared to trust local people to make important decisions in their areas, then it is important they are equipped with the financial resources for this policy to have a genuine impact.Laura Hughes is partner and head of public law at law firm Browne Jacobson

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FISCAL DEVOLUTION

Roll out fiscal devo across nations

By Laura Hughes | 06 May 2026

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