The Guardian view on Labour’s fiscal devolution: the future of Burnhamism will play out in municipal England

Replacing government grants with revenue streams from taxation will not in itself reduce regional inequalities. But the political implications are radical

Following Wednesday’s budget, the Treasury minister, Torsten Bell, was challenged by the BBC’s Evan Davis on whether its modest series of “breathing space” measures could truly be said to have ended “40 years of neoliberalism”. This line of questioning is becoming a familiar one. Andy Burnham’s ringing declaration of long-term intent is now being regularly deployed by commentators to suggest an emerging gulf between rhetoric and action.

Mr Bell’s response was a good one. Recalling how “Margaret Thatcher in the 1980s hugely hollowed out local government [and] tried to emasculate our big cities”, he called the fiscal devolution roadmap unveiled in the budget a step change and a really big deal.From 2028, mayoral strategic authorities will for the first time receive a share of income tax receipts, and from next year they will be allocated 20% of business rates revenue. That figure will potentially rise to 100% by the end of the decade, while a new overnight visitors levy will add another local income stream.

These are structural changes that will transform the relationship between local government and a notoriously overly centralised state. They have so far failed to generate anything like the coverage that accompanied the Conservatives’ levelling-up programme, which degenerated into a tawdry pork barrel exercise for “red wall” Tory MPs. But it is on this municipal terrain that Mr Burnham’s aspiration to rebalance the country, reduce regional inequality and “roll back” the 80s will be played out.

Replacing government grants with guaranteed income streams will give strategic authorities more certainty over future revenue – against which they will be able to borrow – and the ability to plan flexibly according to locally set priorities. The devil will be in details to be announced in next year’s spending review, in particular regarding mechanisms to ensure poorer areas with a smaller tax base do not lose out. But the roadmap is a first move towards restoring proper agency to local authorities struggling to cope with the disastrous twin legacy of deindustrialisation and austerity.

Further steps will need to be taken if, as the prime minister intends, local government is to drive “good growth” that improves general living standards and prospects throughout communities. As the Local Government Association pointed out, cash-strapped councils on the frontline face a £7bn funding gap by 2028-29, and are in a perennial struggle merely to meet their statutory obligations on social care. Strategic authorities need to be given the capacity to gradually reassume control of priorities in sectors such as care, housing and the utilities. That will take time and investment at scale in forms of community provision that can offer an alternative to a model in which services have been outsourced and profits offshored.

Devolution will not of itself reduce inequalities or restore a degraded public realm. But this week’s budget measures began the necessary process of rewiring British politics. Mr Burnham’s core conviction is that radical devolution can redistribute power to those who know their own community best, and allow councils to rebalance the relationship between the public and the private sector. After decades in which the latter has profited hugely from calling nearly all the shots, that is very much the right direction of travel. The starting gun has been fired in a process that can lead to a genuine renaissance of municipal England.