Grant Thornton: Fiscal Devolution - exploring the options in England's counties

This report, featuring analysis from Grant Thornton, explores the potential of fiscal devolution for England’s counties.

It examines a series of scenarios for devolving selected fiscal powers, such as elements of income tax, National Insurance Contributions (NICs), Stamp Duty Land Tax (SDLT), a tourism tax, and the Apprenticeship Levy. None of these scenarios modelled are funded by a rise in national taxation.

It finds that these powers, in isolation or together, could empower local leaders, stimulate economic growth, and address regional inequalities. It finds that in some areas specific measures perform better than others, and vice-versa.

The analysis highlights the scale of County Councils Network (CCN) areas’ contributions to the national economy and demonstrates how devolved fiscal levers could bolster county economies and act as an incentive for local areas to improve productivity even further.  

Key findings from the report’s scenarios and analysis includes:  

• CCN areas generate £387bn in tax revenue (43% of England’s total) yet receive only 39% of identifiable government expenditure.
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• Giving county areas the ability to retain any better-than-expected income tax growth could raise £3.8bn a year and could dramatically incentivise job creation.
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• Allowing local authorities to retain 50% of stamp duty on new homes would see county and unitary councils retain around £237m per annum and provide an incentive for local areas to deliver more housing, and of all types.
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• The introduction of a flat-rate tourist tax, common throughout the world – and even at a rate of just £2 a night – would generate around £209m in extra revenue in county areas per year.
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• If councils were empowered to keep just 10% of locally-generated Apprenticeship Levy funds, local areas would be able to more accurately direct around £120m a year to support local skills and growth ambitions.
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• Combining measures reduces disparities between counties, with all CCN areas gaining at least £3m (£8 per person).  

Recommendations in the report include:

• Government should consider devolving further fiscal powers to local areas as outlined in the report, should those places wish to use them.
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• A combination several fiscal levers, rather than one, balances opportunity and reduces regional disparities.
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• Central government must retain a redistributive role to ensure fairness.