Report

Fiscal devolution and place investment: Will it unlock growth everywhere and redistribute prosperity?

This report from UK think tank City-REDI argues that fiscal devolution works when it is designed as ‘capability devolution’ and fails when it is merely risk transfer.

The Chancellor’s Growth Plan commits to ‘unlocking growth in every part of Britain’ and Andy Burnham has highlighted the same direction of travel in his speech on 29th June. Government has promised a Treasury roadmap for fiscal devolution, including, for the first time, looking at income tax alongside other taxes. But will these reforms genuinely empower places to invest, or will they simply push financial risk downward?

This evidence review examines the international and UK evidence on fiscal devolution to answer that question. It draws on OECD cross-country analysis, Scotland’s lived experience of income tax devolution since 2017, and a detailed assessment of England’s current fiscal architecture, including the 2026 business rates reset, Integrated Settlements, the English Devolution and Community Empowerment Act 2026, and the unresolved problem of council tax.

The headline finding is that fiscal devolution can support growth, but only conditionally. The review identifies seven risks where the current trajectory could fail, including the danger of ‘risk devolution’, where financial exposure is transferred to local government without genuine fiscal control, and the exclusion of council tax, which funds over half of local government spending, from the reform conversation. It finds that cities, towns, and rural areas will be affected very differently, and that without deliberate design, fiscal devolution risks producing new patterns of spatial inequality rather than correcting existing ones.

The review sets out ten practical recommendations organised in three tiers, foundational architecture, structural design for redistribution, and institutional capacity for democratic legitimacy, designed to move the Treasury’s roadmap from risk transfer to genuine capability-building. The central argument is that fiscal devolution works when it is designed as ‘capability devolution’ and fails when it is merely risk transfer.