Andy Burnham's vision for devolution promises a dramatic redistribution of power, but Scotland's experience with tax-setting authority suggests potential pitfalls, writes Joseph Dinnage, senior press officer at the Prosperity Institute.

Andy Burnham has taken an unconventional approach to central government for a politician of the left. Rather than consolidating power at the centre, the Mayor of Greater Manchester — often dubbed the "King of the North" — has pledged the "biggest rebalancing of power this country has ever seen." His plan includes establishing "Number 10 North" in Manchester, described as a "situation room" for regional growth.

Burnham's resistance to Westminster is well established. During the Covid-19 pandemic, he built a national profile by challenging central government decisions. When then-Prime Minister Boris Johnson moved to impose tier-three restrictions — the most stringent measures — on the Manchester region, Burnham pushed back, arguing that the financial support offered did not match the economic damage the restrictions would inflict on local businesses and communities.

Building on that legacy, Burnham now intends to transfer significant political responsibilities to local leaders. Control over local transport systems, including his Manchester-based Bee bus network, along with essential services such as water and energy, would be handed to local authorities with the stated aim of driving economic growth. Greater Manchester has already exercised devolved transport powers to begin franchising its bus network under the Bee Network from 2023, marking the most significant practical test of the region's existing devolution settlement so far.

However, evidence that such devolution will deliver the promised growth remains thin. Scotland's experience offers an instructive case study.

Lessons from the Laffer Curve

Scotland's tax-setting powers have expanded steadily since 1999, most significantly through the Scotland Acts of 2012 and 2016, which gave the Scottish Parliament control over income tax rates and bands on earned income. According to tax expert Dan Neidle — himself a Labour Party member — the Scottish government's decision to raise the top rate of income tax to 48 per cent has resulted in declining tax receipts. Data from the 2024-25 fiscal year indicates this policy cost the Scottish government approximately £22 million. It "may have fallen over the Laffer curve," Neidle observed — a reference to the economic theory, popularised by economist Arthur Laffer, that beyond a certain point, raising tax rates reduces rather than increases revenue because it alters taxpayer behaviour.

Over nearly a decade, Scotland has maintained its top rate of income tax above the UK-wide level of 45 per cent on earnings exceeding £125,140. Wealthy individuals north of the border have responded by restructuring their finances — paying themselves through dividends or increasing pension contributions — to reduce their tax exposure. Writing on his website Tax Policy Associates, Neidle described the £22 million figure as a "conservative estimate" and suggested the actual loss could reach approximately £30 million.

The Adam Smith Institute recently reported that the number of British millionaires has fallen to its lowest level in nearly two decades, further underscoring concerns about the effects of high-tax policies on wealth retention. The episode has fed a broader UK debate over whether incremental tax powers granted to devolved administrations genuinely benefit public finances or primarily create behavioural distortions.

Devolution as Deregulation, Not Taxation

Burnham's devolution project effectively positions his opponents as representatives of the Westminster establishment. However, those opponents should not shy away from arguing that growth, public services, and technological advancement require a programme of radical reform originating in Westminster.

True devolution, the argument goes, should mean granting Britain's nations and regions the freedom to shed burdensome laws and regulations so they can respond nimbly to local needs. It should not mean punitive taxation and expanded bureaucratic management of public services.

Margaret Thatcher was also an advocate of devolution — the same figure whose "neoliberalism" Burnham has blamed for Britain's current economic difficulties. When Thatcher spoke of "dispersing power and decisions," she envisioned reducing the state's role in people's lives, not replicating it across regional administrations.

Without an agenda that embraces the benefits of business and lowers taxes on the most productive individuals and sectors, the "King of the North" risks presiding over political gimmickry rather than genuine economic growth.

Joseph Dinnage is senior press officer at the Prosperity Institute.