Ministers could give billions raised by business rates to England’s regions

Exclusive: devolving tax is part of plans to give local areas more power in areas including justice, health and education

Ministers are considering handing over billions of pounds raised by business rates to regional mayors as part of one of the biggest shake-ups of the English tax system in recent years.

Steve Reed, the local government secretary, said the government was working on plans to devolve the tax, which has been the subject of recent protests by pubs and other hospitality businesses .

The move is part of a wider plan to shift tax income to local leaders, due to be announced by the chancellor, Rachel Reeves , at this year’s budget.

Reeves’ position is in doubt given the questions surrounding Keir Starmer’s premiership, but the proposals are likely to be taken up by Andy Burnham if he takes over as prime minister, given Burnham’s commitment to devolution.

Reed told the Guardian: “The chancellor pointed to devolving aspects of income tax, as we discussed, but certainly we look at business rates, too – or elements of business rates.”

He added that local areas would not simply be allowed to keep whatever they raised in business rates, given this could exacerbate regional inequality, but that the new tax system would reward those areas that grew their economies more quickly.

“There will always have to be an equalisation mechanism, because you cannot allow areas that are poorer to just sink because they can’t generate the additional revenue from their starting point,” he said.