Budget 2026 devolution and business rates explained

In its Budget 2026 fact sheet, the UK Government is making a big claim: more decisions about growth should be made closer to where people live. Strip away the official wording and the message is simple. Ministers want mayors, councils and wider regional bodies to have a stronger hand in shaping buses, housing, skills and local investment. That matters because local government is often blamed for problems it does not fully control. If your bus service is poor, your high street is fading or homes are not being built fast enough, the answer is often tied up with who holds the power and who holds the purse strings. The Budget says local leaders should be put 'in the driving seat', but the real test is whether enough money and freedom come with that promise.

If the word devolution sounds technical, it helps to translate it into everyday English. Devolution means moving some decisions down from Whitehall to local or regional bodies. In this case, the government says it wants every part of England to have a Strategic Authority as soon as possible, with full devolution coverage aimed for by the end of 2028. The headline number is large. According to the fact sheet, these plans would take devolution coverage to more than 90 per cent of England's population and would cover the whole of the North for the first time. **What this means:** if your area joins one of these arrangements, choices about transport, training, housing and growth may be made closer to home rather than by civil servants in London.

One of the biggest changes sits in business rates, the tax charged on properties used for shops, offices, warehouses and other business premises. The Budget says business rates will become a fully locally retained tax by the end of the decade. From April 2027, mayors would receive 20 per cent, while the share going to local authorities would rise to at least 70 per cent in the coming years. This is not just a finance detail for specialists. When councils keep more of the money raised locally, they have a clearer incentive to support new business activity and commercial development. The government also says it will help councils tackle business rates avoidance by introducing a General Anti-Avoidance Rule as soon as possible and by covering external legal costs when local authorities challenge avoidance in court. In plain terms, ministers are saying councils should not lose out because some firms find loopholes or because legal action is too expensive.

Housing is another major part of the package. The Budget sets out an extra £1.5 billion to deliver 10,000 homes across England, with funding prioritised for Social Rent and especially council homes. That would take total investment in the Social and Affordable Homes Programme to more than £40 billion over 10 years. Ministers also say they will keep the cheaper Public Works Loan Board borrowing rates for council housebuilding in place for another year. There is a quieter but important promise here too. The government says it will reduce the number of grants local authorities have to deal with, streamline reporting requirements and give councils more room to make decisions on behalf of their communities. **What this means:** many councils spend huge amounts of time bidding for small pots of money and reporting back to Whitehall. If that burden genuinely falls, local government could spend more time delivering and less time filling in forms.

Some of the Budget measures would be easier for residents to spot on the ground. The government says £125 million will go to 60 English local authorities through a new Derelict Buildings Fund. The idea is to turn buildings that are empty or falling into disuse into things communities actually need, including health centres and civic spaces. Ministers are also promising support to revitalise town centres through a High Streets Strategy. Alongside that, the fact sheet sets out £80 million of new money for a Local Renewal Fund to back projects across the UK, including in places without a mayor. That funding is meant to support jobs, economic regeneration, heritage assets and other local schemes linked to growth. These sums are smaller than the biggest tax and housing announcements, but they are often the measures people notice first because they affect the look and use of everyday places.

The Budget also tries to answer a much more immediate pressure: rising energy bills. Ministers say households in council tax bands A to D in England will receive a £100 Household Energy Payment from January 2027. The government says that could reach up to 20 million households. On top of that, there would be £100 million for local authorities in England to support households most sharply affected by higher energy costs. If council tax bands are not something you think about often, this is basically a way of aiming help at lower- and middle-banded homes rather than the highest-value properties. It is straightforward and easy to explain, which is useful politically. The harder question is whether £100 offers lasting relief or only a short pause at a time when many families are still feeling squeezed.

For mayoral areas, the most technical part of the package may also be one of the most important. The Fiscal Devolution Roadmap sets out a new funding model for regional and local government. According to the fact sheet, all mayors would begin receiving an assigned share of income tax from 2028. The government also plans for mayors to retain a share of locally retained business rates from next year and says it will legislate so all Strategic Authorities can introduce an Overnight Visitor Levy. There is more behind that headline. The first wave of Mayoral Strategic Authority Business Rates Retention Zones would cover nine authorities, subject to legislation and full business case approval, with areas such as Stratford, Derby and Selby named in the fact sheet. Ministers are also confirming £165 million in 2027-28 for Good Growth Funds in places with a mayor in 2027, extending support to areas that did not receive the City Densification Fund announced earlier in the year. Added to that is a bespoke borrowing facility worth £1.5 billion, expected to be operational by 2028, and a £150 million uplift in capacity and capability funding in 2027-28. **What this means:** local power is not only about who gets to make speeches. It is also about whether local bodies have staff, borrowing room and stable revenue.

The devolution map is still expanding. The government says it is in the final stages of agreeing 10 new devolution arrangements, and it will provide a £120 million share of Good Growth Fund incubator capital for areas moving towards a devolution deal or Strategic Authority status. The fact sheet also says Foundational Strategic Authorities and local authorities will have a chance to put forward Business Rates Retention Zone proposals as they work through that process. No10 North's Priority Projects Programme will be extended to areas that sign new devolution deals and to places electing mayors for the first time in 2027 and 2028, with support to identify priority projects and prepare business cases. Existing mayoral authorities will also receive backing for projects in Don Valley, Bristol Temple Quarter and Leeds South Bank. Taken together, this is less a single announcement than a reshaping of how local England may be funded and governed. We should read it with two thoughts at once. More local control could make government feel less distant, but devolution only means something if the money is steady, the rules are clear and local leaders can be held to account.