Chancellor Rachel Reeves will grant regional mayors unprecedented authority over tax revenues, enabling them to prioritize spending according to their communities’ needs. This bold move, unveiled ahead of the autumn Budget, shifts control of certain national tax income from central government directly to local leaders—without raising taxes.
Local Leadership to Drive Economic Growth
At the Bayes Business School in London, Reeves outlined how devolving tax powers forms part of a broader strategy to invigorate the UK’s stagnant economy. Alongside embracing greater alignment with European Union regulations and investing £2.5 billion into cutting-edge fields like artificial intelligence (AI) and quantum computing, this plan seeks to unlock regional potential.
“Treasury officials are crafting a roadmap that hands over a share of national taxes to regional leaders, correcting decades of overly centralized financial control,” Reeves explained. The initial focus will be on areas with the strongest capacity to implement reforms and the highest prospects for economic benefit.
Collaboration with Mayors and Businesses
The Treasury will engage directly with regional mayors and local businesses to design and implement the tax devolution framework, scheduled for publication later this year. Income tax is among the primary levies under consideration, alongside other national taxes.
Retaining Tech Talent and Boosting Innovation
Reeves also emphasized her commitment to halting the exodus of top British technology firms and scientists to foreign markets. Government investments in AI and quantum computing aim to establish the UK as a global leader in these transformative technologies.
Quantum computing, capable of processing vast amounts of data far beyond traditional computers, stands as a potential economic game-changer. The government anticipates these technologies will create 100,000 new jobs across the UK.
Historically, many UK-founded tech companies relocate abroad—often to the US—due to limited domestic investment, perceived weaknesses in the London Stock Exchange, and more attractive tax incentives overseas.
AI and Quantum: The Future of UK Jobs
Reeves pledged the UK will achieve “the fastest AI adoption in the G7,” leveraging government funding to accelerate growth. Former Deputy Prime Minister Sir Nick Clegg, now on the board of cloud platform provider Nscale, highlighted AI’s potential to spawn entirely new industries and job categories currently unimaginable.
Global Conflicts Threaten Economic Momentum
The escalating US-Israel-Iran conflict casts a shadow over Reeves’ growth ambitions. Rising oil prices driven by geopolitical tensions risk triggering inflation spikes and economic downturns in the UK.
Reeves acknowledged discussions are underway regarding the controversial North Sea oil developments at Rosebank and Jackdaw, with government decisions expected imminently. While she refrained from advocating fast-tracking these projects, she stressed the global imperative for reliable energy supplies amid disruptions like the closure of the Strait of Hormuz.
“Every nation must contribute to stabilizing energy availability,” Reeves said, citing increased production efforts in Canada and Norway as examples. She also highlighted plans to reintegrate the UK into European energy markets as a key lever to control costs.
Strategic Alignment with EU Regulations
In a significant policy shift, Reeves called for the UK to align more closely with EU economic rules “where it serves national interests, benefits businesses, and protects jobs.” While acknowledging the need for divergence in select sectors—such as food and agricultural standards—the chancellor emphasized alignment should become the default approach rather than the exception.
This stance suggests upcoming negotiations to harmonize regulations in industries like chemicals and manufacturing, potentially easing trade frictions and boosting competitiveness.
Political Reactions
Shadow Chancellor Sir Mel Stride criticized the proposals, accusing the government of “blaming Brexit for economic troubles” while failing to accept responsibility for mismanagement. He warned that Labour’s approach risks drawing the UK closer to the EU through increased regulatory alignment.
