Labour's devolution plans could mark the start of a generational shift in power

The devolution highlight of a busy year for the Ministry of Housing, Communities and Local Government was the publication of the English Devolution white paper, which outlined proposals for how the government would widen, deepen and entrench devolution in all parts of England. These included putting a standard devolution framework into law, simplifying the funding system, and reforming accountability arrangements. 

The government is making welcome reforms to devolved funding – but should consider the case for fiscal devolution

Perhaps the most significant commitment to deepening the powers of existing mayoralties is the new ‘integrated settlement’ funding model in Greater Manchester and West Midlands. This merges nearly 30 separate budget lines from across Whitehall into – in theory – a single pot that can be allocated in line with local priorities, providing greater flexibility and medium-term budgetary certainty. The government has promised to extend this this model to five further regions starting in April 2026.

This is radical in principle. How liberatory it will be in practice remains to be seen. Perhaps understandably, parts of Whitehall have resisted the idea of giving up all control over how ‘their’ budgets are allocated locally, for instance by imposing detailed and specific targets across areas including transport, skills, housing, net zero and business support. 

But it is too easy to see the glass as half empty. In time, the system will likely be streamlined and expanded, as devolved bodies demonstrate their ability to take effective resource allocation decisions in a more strategic way, and as other accountability mechanisms such as local public accounts committees are put in place. 

What the government has so far flatly rejected is any devolution of additional revenue-raising powers, beyond a plan to make it slightly easier for mayors to impose a precept on council tax bills. Many of the mayors have argued for the power to levy a tourism tax on hotel rooms, which is common in Europe. 

Some would no doubt favour more radical fiscal devolution options – such as greater local control of property taxation or the ability to retain a share of income tax or national insurance. For now, mayoral strategic authorities will remain largely dependent on central government grants – as well as local authority contributions – but the debate on fiscal devolution is likely to re-emerge given the rising delivery expectations placed on MSAs at a time of central government fiscal constraints.

‘Completing the map’ is the right ambition – but political and practical obstacles lie ahead 

The government has made welcome progress toward its declared ambition to extend devolution to all parts of England. It pressed ahead with two provisional mayoral deals – in East Yorkshire and Lincolnshire. In addition, deputy prime minister and local government secretary, Angela Rayner, invited local leaders in all ‘devolution deserts’ to come forward with proposals weeks after entering office. 

Rayner followed up on this in February 2025 by announcing that six areas – Cumbria, Cheshire, Essex, Hampshire, East Anglia and Sussex – would be placed on a fast track for devolution as part of its devolution priority programme (DPP). The government also supports a deeper, mayoral deal in Lancashire as part of its aim to complete devolution to the north of England.

In most of these places, there is limited history of or institutional infrastructure for regional joint working. This means that both new institutions and a whole new culture of collaboration at a regional scale must be built at pace, given the plan for mayoral elections in May 2026. 

If these seven deals advance, then 21 mayors will be in place, representing almost 70% of England’s population, including several large urban areas left out to date, including Portsmouth, Southampton, Southend and Brighton. 

But the path ahead is not guaranteed. The current process for establishing mayoralties requires unanimous consent from upper tier councils – creating a veto point for local leaders. Local tensions could therefore pause or derail government ambitions, as has occurred many times before, including in some of these same areas. The recently elected Reform UK leader of Lancashire county council is critical of the mayoral model. Elsewhere, contentious local government reorganisation discussions – particularly regarding the number of new councils in an area – could weaken the collective commitment that will be required for devolution to proceed and to succeed.

There has been a positive shift in the relationship between Westminster and devolved leaders around the UK

With mayors becoming increasingly important for delivering its objectives, the government has sought a new partnership approach. Bringing the mayors together in 10 Downing Street during its first week in government sent a positive early signal, and was followed by the establishment of new formal consultative bodies such as the Mayoral Council and the Council of Nations and Regions.

The establishment of the Council of Nations and Regions, which is due to meet twice each year, is also an important part of the government’s declared ‘reset’ of relations with Edinburgh, Cardiff and Belfast. There is some evidence that this reset is more than rhetorical. Scottish first minister John Swinney reportedly remarked in December that relationships are “incomparably better” ⁴ BBC News, ‘PM and FM have ‘helpful’ talks over two-child cap’, 6 December 2024, retrieved 26 June 2025, www.bbc.co.uk/news/articles/cjr241g0x8zo  and many interministerial groups are now meeting regularly. 

This government has also avoided breaching the Sewel Convention (which states that Westminster “does not normally” legislate on devolved matters without consent), a regular occurrence during recent Conservative governments that severely dented UK–devolved relations. 

The government’s industrial strategy also makes clear that the devolved governments – and mayors – will be key partners for achieving the economic growth that is Labour’s central mission. However, devolved ministers have publicly complained of being kept in the dark during the UK negotiations with the EU and US over trade deals, and of lack of consultation over spending review decisions. 

Upcoming elections will be the next big test

All in all, Labour has in its first year moved quickly to deliver its pre-election commitments to place devolution and local leaders at the heart of its approach to government – even if much of what it has promised remains to be implemented. 

However, upcoming electoral contests may create new challenges. Scottish and Welsh parliamentary elections take place in May 2026, meaning that political tensions with the devolved capitals might rise further. In addition, if next May’s mayoral elections deliver a new cohort of Reform UK mayors, some Labour ministers might start to question the political wisdom of further empowering these increasingly important regional leaders.