Rachel Reeves has declared that she has “unfinished business” as chancellor, singling out fiscal devolution as the policy she is most determined to see through, in remarks that will be read closely by a business community bracing for a change at the top of government.
Speaking at the British Chambers of Commerce annual conference in London on Thursday, Reeves pointed to the handing of tax-raising powers to local leaders as the area of “unfinished business” she wants to complete. The intervention comes at a delicate moment, with Andy Burnham set to enter Downing Street next month following Sir Keir Starmer’s resignation on Monday, and with the City still guessing over who will take the keys to No 11.
For the SME owners who make up the bulk of the chambers’ membership, the politics matter less than the policy signal. A chancellor talking openly about devolving revenue, and a prime minister-in-waiting who built his reputation on it, points to a meaningful shift in where decisions about local growth, and local taxation, will be taken.
The visitor levy and the case for going local
The former mayor of Greater Manchester is moving quickly to assemble a programme for government that is widely expected to push more powers and revenue away from Westminster. Reeves made clear she is travelling in the same direction.
“The area where there’s certainly unfinished business is on fiscal devolution,” she said. “And I set out in last year’s Budget a consultation, for example, on the visitor levy, which is something that mayoral combined authorities will have responsibility for, moving us more in line with the US and Europe that have single visitor levies on hotel bookings, for example, and then that money being invested in the local area.”
A visitor levy on overnight stays has become one of the more contested ideas in the devolution debate, with metro mayors pressing for the power and parts of the hospitality sector warning about the impact on bookings. The tension was on full display earlier this year when mayoral calls for a hotel ‘tourist tax’ drew a wary response from the hospitality trade.
Reeves indicated her ambitions stretch well beyond hotel rooms. “But beyond that, we are also consulting on devolving some revenues from key taxes, including income tax, but also looking at some business and land taxes and devolving that to a local level so that local leaders who know their areas best can decide where that money is going to be spent.”
The chancellor, the first woman to hold the office, said she intends to set out the detail in this year’s Budget. The direction of travel echoes the government’s own English Devolution White Paper, which created a route for mayors to propose new powers while leaving the Treasury notably cautious on tax.
Reeves stops short on the chancellorship
For all the talk of alignment, Reeves declined to say outright that she wants to keep her job under a Burnham premiership. “When he becomes prime minister, he will make those decisions around the top team around him. But I’m not going to pre-empt those. Those are his decisions,” she said.
She was warmer on the personal and political relationship. “I backed Andy in 2015 as well to be the leader of our party, and I’ve known him for more than a decade and a half, since before I became a member of parliament in 2010. So we’ve worked closely together, but particularly worked closely together the last two years.”
That history sits alongside a wider reshaping of the relationship between the centre and the regions that has been building for some time, with the Treasury and combined authorities edging closer together. Business has already seen that direction in moves such as Reeves’s plan to draw the National Wealth Fund and regional mayors into closer partnership on local growth.
Fiscal rules and the stability message
Mindful of an audience that prizes predictability, Reeves used the platform to reassure business that the incoming prime minister will not loosen the public finances. Burnham, she said, had been “really clear” in his commitment to the fiscal rules.
“That is a good thing because it means that businesses here can be confident that that stability, that rigour to policy-making, that tight grip on the public finances, which is essential for getting inflation and interest rates down, will be continued,” she said.
It is a message pitched squarely at a market still digesting the abrupt change at the top, a backdrop in which business leaders have urged an end to ‘drift and delay’ following Starmer’s exit.
North Sea reserves and energy security
Reeves also restated her support for making greater use of North Sea reserves. “I’ve been very clear that I think that the North Sea is a crucial asset for the UK and that oil and gas will be an important part of our energy mix for years to come,” she said. “And I’m very keen to make sure that we use that resource to ensure our energy security.”
The chancellor spoke ahead of an address by Andy Haldane, the BCC’s president and a former chief economist at the Bank of England, whom Burnham has been consulting as he assembles his policy platform. Senior figures from the other main parties were also due to take the stage, underlining how far the conference has become a staging post for a political contest that businesses will be watching with unusual intensity.
