Burnham won’t be bold enough to make devolution shift the dial on growth

Within a year of Cornwall abolishing the 45p additional rate of income tax and reducing corporation tax to 15 per cent, hundreds of entrepreneurs and businesses, including dozens of major financial and professional services firms, had relocated to the county. The influx of private sector dynamism delivered an astonishing economic boost to a region that had long ranked as one of the poorest in Europe. Demand was so high that Cornwall Council began issuing a form of visa – with a growing waiting list – based on investment levels, hiring intention and social contribution weighting.

The situation was, in the words of Prime Minister Andy Burnham, evidence of “the biggest economic and political change seen in this country for 40 years.” OK, the fantasy news has to stop there. Although, Burnham really has promised change on that scale.

But could radical fiscal devolution like this be on the cards? The PM’s rhetoric is lofty – he said last week that “for 40 years, power and resources have been sucked into the centre” and declared that he will empower “every postcode” to rewire the country. A new paper by Oxford Economics suggests he has a point.

The UK is an outlier in collecting (and then redistributing) so much of its taxes centrally. Switzerland, Australia, Canada and Germany all raise between 35 and 55 per cent of their total tax take locally. In the UK this figure is around 8 per cent.

To redress the balance, Burnham is considering allowing local authorities to retain a share of income tax generated in their area, but the taxes would still be collected nationally and the rates would of course still be set in Westminster. This could be a bureaucrat’s dream come true What we’ll get is a complex new calculation for old-fashioned redistribution. There goes my Cornish utopia dream.

Oxford Economics warns that “simply redistributing the existing spending pool across regions will not raise national growth – in fact, it may even reduce it” if money is diverted away from succes