The narrative power of fairness

At the Fairness Foundation, we have conducted extensive research and detailed attitudinal work on the concept of fairness. We make the case that the value of fairness should guide public policy, and that it is a potent candidate for a unifying government narrative about today’s economy.

We all know when something feels unfair; it is a gut reaction that jars with some of our most profound intuitions. As a human instinct, ‘fairness’ is one of the fundamental values that underpins many of our social relationships today. It is a concept that, for many, represents equal opportunities - the chance for everyone to live a decent life, regardless of background, including social class or geography of birth. However, our argument, borne out by the academic literature and supported by the public through attitudinal research, is that equal opportunities are impossible in a society characterised by very high levels of socio-economic and other forms of inequality (i.e. very unequal outcomes).

Previous Fairness Foundation polling has shown that 74% of the public agree with our five ‘Fair Necessities’ that represent our attempt to define fairness based on five principles: fair essentials, fair opportunities, fair reward, fair exchange and fair treatment. Meanwhile, polling conducted by Ipsos with the Fairness Foundation in 2023 found that 85% of people are concerned about inequality and view it as one of the most important challenges facing the country.

Given the salience of fairness as a British value, and its cross-party appeal, the unfairness of life as a postcode lottery, where accidental geography of birth is determinative to so many factors of success, is offensive to many. Polling suggests that regional disparities are among the inequalities which concern people most, with 60% of those polled saying that they are a moderate or big problem, second only to class and disability. As a result, ensuring a fairer distribution of wealth across both the economy and the country should be a core objective for any government.

Most of us would like to believe that hard work alone can overcome barriers of birth, including regional background. Yet research has identified that the UK is among the most regionally unequal countries in the industrialised world, and today’s economy still stacks the deck against many people from certain regions:

• There is a gap of £10,000 in disposable income between areas ranked in the top 20% of areas and areas ranked in the lowest 20%.
• There is a gap in healthy life expectancy of more than 18 years between the most deprived areas and the least deprived areas. There is a nine-year gap in life expectancy between Richmond upon Thames and Blackpool.
• There is significant variation in GDP per head between London (£54,700) and the rest of the UK (where the average is £32,000).
• Wealth inequality is growing between regions: In the ten years to 2016-18, mean property and financial wealth increased by 150% in London and rose by just 50% across the rest of Great Britain.
• As our Wealth Gap Risk Register highlighted, the North of England is home to 30% of the UK population, but this region holds only 20% of the nation’s wealth.
• Research from the Centre for Cities has evidenced how the most deprived areas are those which are also most poorly prepared for shocks, and therefore disproportionately negatively affected when they materialise.

These stark figures show that wealth is not only concentrated by certain people at the very top of society, but by particular places as well.

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Labour’s devolution mission

A narrative grounded in fairness should prioritise tackling the UK’s significant regional imbalances, which continue to undermine fairness and opportunity for all.

This is a challenge that the government has recognised. In advance of the election, Labour promised to “transfer power out of Westminster, and into our communities, with landmark devolution legislation to take back control”. Since its election, the Government has taken significant steps to deliver on that commitment and expand devolution in the English regions through the English Devolution and Community Empowerment Bill. The legislation introduces a new “devolution architecture for England”, establishing a new model of devolution, expanding some powers of Metro Mayors and introducing new duties for Mayors to develop local growth plans.

The Government has also pledged a more effective approach to regional balance in funding policy than previous administrations. The Chancellor has branded the Conservative efforts “a levelling up lie”, adapting her fiscal rules to unlock over £100bn of extra capital investment. Perhaps most consequentially, the government’s Pride in Place programme is claimed to see up to £5bn invested in almost 250 areas across the country. The Independent Commission on Neighbourhoods (ICON) has estimated that the Labour government has spent significantly more than the Johnson government 2019-22 “on its own version of the policy”.

In the Budget on 26 November, the Chancellor announced plans to give Mayoral Strategic Authorities in England the power to create local overnight visitor levies. She also announced the extension of pilot schemes on business rates retention in some areas, as well as the devolution of new flexible funding for seven Mayors and the establishment of the Leeds City Fund. These represent important, if incremental, steps forward.

Yet despite these significant commitments, the UK remains an outlier on fiscal devolution, collecting just 5% of total revenues at the local level. This is approximately one-third less than France and a sixth of the proportion collected by Germany. While the legislation introduces a new ‘community right to buy’ for assets of community value and commits to an ambition to “deepen devolution to generate wealth and prosperity across the country by freeing up more powers”, it stops short of introducing a more ambitious set of reforms.

When asked in the House of Lords for a precise target in relation to the proportion of taxation that might be devolved, the government’s representative was not able to give a fulsome response. And while the Bill has been broadly welcomed by a number of stakeholders, some have agreed it should go further, including on fiscal devolution. In June 2025, the Chief Executive of the Northern Powerhouse Partnership commented that fiscal devolution represents “a critical next step in strengthening the powers of mayors”.

“Largely the English Devolution White Paper and Bill duck the fiscal devolution question...the ability to raise revenue locally is still incredibly limited". Stephen Jones, Core Cities, 2025 [Interview with the author]

As it stands, the current lack of ambition shown by the government on this question represents a significant missed opportunity, and one that threatens to undermine the government’s aim to break the link between geography of birth and opportunity.

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The research base

The research generally supports the idea that addressing the question of fiscal decentralisation by devolving more levers of fiscal control could help to address regional inequalities in a number of ways.

Improving government efficiency and responsiveness

Firstly, many researchers have highlighted increased fiscal devolution as a mechanism for improving the allocative efficiency of government, which will boost socio-economic outcomes and thereby improve regional disparities. They have pointed to the informational advantage of local actors, and the fact that sub-national governments will better match the varied and sometimes conflicting preferences of citizens. The home-grown expertise of local and regional leadership allows decision-makers to both articulate and address the challenges of their local region, “grounded in the economic reality of their area”. In this sense, it has been suggested that government could be made more responsive to citizen concerns through fiscal devolution, including by innovating more readily and diversifying “their tax base in response to new public priorities”.

Overly centralised government weakens the connection between a local economy and its resources. This was particularly evident in the allocation of Levelling Up funding by the UK government from 2019-2021. A scathing report by the Public Accounts Committee found no compelling examples of this funding’s delivery, and highlighted that it struggled to even spend its allocated monies. In a wider analysis of 48 national funding streams between 2014 and 2024, other researchers found that there was “no obvious pattern in how funding is spatially targeted”. Other analyses have found that the asymmetric and disjoined nature of devolution has created a “patchwork of governance structures, capacities and resources” and an “extensive use of short-term, competitive, and fragmented public funding mechanisms”. These failures suggest that centralised funding is profoundly inefficient compared to decentralised governance. Fiscal devolution, then, could “reconnect local resource to local growth” and prove more effective in addressing regional challenges, which may in turn narrow spatial disparities.

Boosting economic growth

Secondly, fiscal decentralisation can have a positive impact on regional and national growth rates, helping to reduce spatial disparities by capitalising on the ‘catch-up potential’ of places. Previous OECD evidence has found that when properly designed, decentralisation has a positive impact on growth and that doubling the sub-central share of tax or spending is linked to a 3% increase in GDP per capita. Although the evidence for fiscal devolution’s effects on growth is contested, high levels of wealth inequality has been said to undermine growth, including by constraining the potential of local economies. Investing to boost the capacity of those places which are said to have been left behind can improve productivity of the overall economy, increase demand through higher local incomes and expand the base of economic activity across the UK. As the former UK Prime Minister Gordon Brown has stated in critiquing centralised government: “we must stop leaving half the country out of our economy, and we must stop flying on only one wing”. Fiscal devolution, and the local growth that it could encourage through improvements to productivity, could help the government to meet its overall mission of securing the fastest growth in the G7 while reducing regional imbalances.

Enhancing public policy and addressing dissatisfaction

Thirdly, fiscal devolution has been found to improve the quality of governance, since it can empower better informed sub-national governments. Research undertaken as part of this year’s Heywood Fellowship at Oxford identified that the high degree of fiscal centralisation is understood by some to result in “a tendency by other levels of government to attribute all inaction to ‘lack of funding’”. Greater fiscal devolution, then, could help improve government accountability.

Unsurprisingly, survey evidence has shown that it is those who feel they have lost out in the devolution settlement who also feel that central government is too distant. This democratic malaise pushes voters away from traditional parties and towards more polarised politics. Previous research that has considered regional inequalities in the context of economic development has pointed to extreme examples of interregional inequality indicating a heightened risk of civil unrest. Better public policy and improved public faith in government resulting from decentralisation can work hand in hand help to improve responses to regional inequalities.

There is a compelling set of arguments to suggest that greater fiscal devolution could help to boost economic growth, restore trust in politics and help to give more people a sense of control over their lives. However, greater fiscal devolution also comes with risks, which policymakers should consider carefully.

Consequences of full fiscal devolution

It is right to consider the risks of full fiscal devolution (i.e. a scenario where almost all revenues are raised locally). Such an approach would weaken the capacity of the state by stripping central government of the ability to redistribute wealth. Far from improving local economies, extreme decentralisation could harm communities, since they would “lose the advantage of economies of scale, have less capacity to attract capital and face significant constraints”.

Instead of eliminating the postcode lottery of opportunity, total fiscal decentralisation could exacerbate it by placing “onerous burdens upon poorer and/or smaller territories”. Compared to their larger or wealthier counterparts, smaller or poorer places would not be able to exploit the same scale of resources, meaning that they would fall even further behind as capital flowed to larger regions. What’s more, a decentralised state would be devoid of distributive power to address those challenges.

Some researchers have identified a perception that bolder fiscal devolution may not be feasible or appropriate in the UK context for these reasons, as well as because of the damaging impact of previous austerity-era policies on local capacity. Greater competition between regions with decentralised fiscal powers could also provoke a race to the bottom through inefficiently low tax rates, pursued by regional leaders who would be understandably keen to do whatever they could to attract economic investment. The Centre for Cities has noted that fiscal devolution “done poorly could worsen inequality, if poorer areas are forced to increase taxes and affluent areas are able to cut them”, explaining that “too much fiscal devolution means poorer places with greater need for services are starved of resource”.

However, other nations have introduced mechanisms to overcome this challenge. For example, in Germany, which is one of the most decentralised states in the EU, regions with revenue that fall below the average are entitled to receive fiscal transfers through the country’s equalisation system. Researchers at the IPPR have highlighted Germany as a state with both high levels of decentralisation and significant improvements in regional inequality over recent decades, and have also pointed out that traditionally centralised countries like France and Japan have started to devolve power in recent years, to the benefit of their second-tier cities.

Similarly, the Local Government Information Unit has examined Germany, Italy and Japan’s systems of vertical and horizontal equalisation in addressing some challenges of fiscal devolution, acknowledging that “without equalisation, autonomy only benefits those locations with buoyant income streams and relatively low demands on services”. A recent report exploring possible avenues to fund the extension of the Bakerloo line considered the powers that belong to cities such as Paris, detailing how the resources available to Paris to fund major transport and infrastructure dwarf those that London can raise from parking revenues, tourist levies and specific transport taxes.

“The case for the UK is that it is a powerful engine for redistribution.” Mark Drakeford, 2025 [Interview with the author]

It appears clear that a strong redistributive state is necessary to support fiscal transfers between areas that are prosperous and areas that have fallen behind. This consideration should form an important part of addressing the potential “dangers of decentralisation”, and could help to inform a possible system of equalisation between regions in the event of fuller decentralisation. The OECD has published research on the characteristics of effective equalisation systems, including the need for regular reviews by an independent body, while other research has highlighted that the success of equalisation mechanisms largely depends on institutional quality and adequate funding.

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Fiscal devolution in the devolved regions

“You can definitely see a point in the future where Metro Mayors are as powerful as Wales was, around fifteen to twenty years ago”. Torrin Wilkins, Centre Think Tank, 2025 [Interview with the author]

In considering the next steps for English devolution, it would be remiss of policymakers to fail to consider lessons from the devolved nations, where twenty-five years of devolution can provide insightful learnings. This is particularly important given the challenges faced by each devolved nation in terms of socio-economic inequalities, as revealed by a recent report. Below we consider the state of fiscal devolution in each of the UK nations, contextualised by its socio-economic challenges.

Northern Ireland

Northern Ireland (NI) faces significant socio-economic challenges, with poor socio-economic outcomes relative to the rest of the UK. Its productivity level remains 8th out of 12 UK regions, and more than 12% below the UK average. It has a much higher proportional share of the most deprived areas in the UK than other nations or regions, and the highest levels of education deprivation across the UK, while the national income per head is approximately 25% lower than the UK average. NI’s economic challenges stem in part from the consequences of decades of sectarian conflict, exacerbated by poor economic policy and unstable government. In some cases, devolution in NI has softened the impact of policies that might otherwise have adversely affected its already poor socio-economic outcomes. For example, it has retained lower levels of tuition fees, refused to introduce domestic water charges, and mitigated a series of changes to the social security system. These measures represent fiscal interventions which may boost socio-economic outcomes in the region, thereby improving overall regional balance. Yet those changes (which make only a marginal difference to regional inequalities) have also resulted in fiscal pressures on the NI Executive’s budget, which possesses only a small range of fiscal levers to meet those demands, with no control over income tax or stamp duty. In this context, it is little surprise that local actors have discussed whether greater fiscal devolution to Northern Ireland could improve local outcomes.

The Independent Fiscal Commission in NI considered the potential of the devolution of various taxes and concluded that a substantial fraction of current taxes could be devolved over the long term. It suggested that greater devolution could help the NI Executive better align local priorities and revenue. However, it also noted that additional powers might bring additional risk, and that the NI Executive’s political capacity may present a barrier to effective devolution. It also recommended that tax powers should be taken on board gradually over time, to ensure that fiscal stability is protected.

Last week, Northern Ireland's Finance Minister called for the implementation of the Fiscal Commission recommendations, and affirmed his support for the devolution of further fiscal powers, saying: "if there is one thing the latest Budget makes clear to me, it's that this Executive and this society is going to have to take greater control of its taxes". The Minister committed to intensifying his engagement with the Treasury on the issue.

Wales

Over the last two decades, fiscal devolution has made progress in Wales, whose government has had the power to vary rates of income tax, but not income tax bands, since April 2019 (10p of each income tax rate is currently paid by Welsh taxpayers). The Welsh Senedd also has power over Land Transaction Tax, the Landfill Disposals Tax, and Council Tax, as well as the potential for introducing new taxes with approval from the UK government.

In 2016, the Welsh government and the UK government agreed a new fiscal framework that details the funding arrangements between Wales and central government, and recognises need within the Barnett formula (though stopping short of introducing a needs-based formula). This needs-based factor has been recognised by the Welsh government as going “some way to delivering a fairer funding system for Wales”. Attempts to request new powers to support a Vacant Land Tax have not succeeded, although the Welsh government has recently legislated to introduce a devolved Visitor Levy.

Clearly fiscal devolution could go further in Wales, and there is a set of parallel priorities in exercising the powers that Wales currently possesses which can be informed by lessons drawn from the other nations and regions. When asked about some of the challenges in expanding fiscal devolution, the former First Minister of Wales Mark Drakeford stated that “English devolution is the single biggest thing that could change all of that”.

Scotland

Scotland has been granted significantly more fiscal devolution than both Wales and Northern Ireland. The Scottish Parliament has powers over a range of taxes, such as control over rates and bands of income tax, Landfill Tax, Council Tax, and the Land and Buildings Transaction Tax, as well as more recently introduced taxes such as an Air Departure Tax. Through these measures the Scottish government has pursued a more progressive tax distribution system, with an increased proportion of income tax paid by higher earners, including an ‘advanced’ rate of 45% for those earning between £75,000 and £125,140. The quantifiable impact of this higher rate is not entirely certain, and so its effectiveness at reducing inequalities in Scotland, or between Scotland and the rest of the UK, is unclear.

However, the former First Minister of Scotland Nicola Sturgeon recently suggested that “only having one substantial income tax lever puts far too much onus on that particular tax” and called for a greater basket of tax levers to be made available. Last year, the Cabinet Secretary for Finance and Local Government Shona Robinson affirmed the Scottish government’s view that Scotland “requires further fiscal flexibilities in order to provide greater funding certainty and stability for our public services”.

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Recommendations

Recommendation 1: Expand learnings across the nations and regions

The Council of Nations and Regions should undertake dedicated work on fiscal devolution by convening a sub-group of officials from across the regions and nations to explore opportunities for learnings on fiscal devolution.

The complex nature of each devolved administration should make UK policymakers wary about extrapolating wider lessons of fiscal devolution in each of these areas to the rest of the UK. However, if greater fiscal devolution is being explored for English regions, then lessons from the nations on their experiences of fiscal devolution should be learned. The recently established Council of Nations and Regions can help to address this challenge. For example, it could establish a shared sub-group of officials drawn from all nations and regions, who are local experts in fiscal devolution in each nation and region. This group could listen to experts and build cross-country learning, to help identify possible opportunities for expansion of devolution and consider barriers and risks. PolicyWISE and the Bennett School of Public Policy in Cambridge recently suggested that the Council could provide “enhanced collaboration around common priorities and the opportunity for devolved leaders to influence UK government thinking and UK-wide strategy”. It seems logical to start that collaboration on the important issue of fiscal devolution.

Recommendation 2: Improve understanding of devolved arrangements

The government should review the degree to which current training for the Civil Service affords an adequate understanding of devolved arrangements across government.

A greater understanding of devolved arrangements is needed across the machinery of Whitehall, particularly in the Treasury. The government should explore whether current training pathways for civil servants appropriately equip policymakers to consider the implications of policy on devolved settlements. Of course, it should be recognised that many of the challenges that undermine the effectiveness of devolution can stem from a lack of political will, more than a lack of understanding on the part of any civil servant. Such an institutional challenge is much more difficult to overcome and requires political leadership.

“The formal arrangements are there; whether or not these get utilised is entirely down to mindsets, personalities and relationships.” Nicola Sturgeon, 2025 [Interview with the author]

Recommendation 3: Help build local capacity by mapping gaps in fiscal powers

The Ministry of Housing, Communities and Local Government should work with local authorities to map fiscal powers in each area and report on the gaps in local capacity.

A clearer picture is needed of the existing fiscal levers available to Strategic Authorities, and how each of these might be most usefully deployed to help reduce regional inequalities. The government also needs a clearer understanding of any challenges that would be faced by Strategic Authorities in implementing new fiscal powers and devolved arrangements. As such, the Ministry of Housing, Communities and Local Government should work with the leadership of each Strategic Authority to map the powers in each area and produce a report on the gaps in local capacity in each area, such as local authority resources or skill gaps faced by local communities. Addressing these gaps could prove to be crucial for the successful rollout of funding initiatives and other interventions.

"Fiscal devolution will give places the tools to grow their economy… When you look at it from the perspective of the people who are planning and delivering projects on the ground, that all aggregates up to a better economy in their local area and in the national economy.” Luke Raikes, Fabian Society, 2025 [Interview with the author]

Each report should provide evidence on the existing financial funding streams and powers that are available to local areas, along with an assessment of where a lack of powers prevents regional leaders from implementing policies that might improve socio-economic outcomes. This exercise would knit different levels of government more closely together on the question of fiscal levers and could even identify some potential short-term wins. For example, Core Cities have raised the need for more flexibility on license charging to counteract the prevalence of bookmakers in deprived areas (Jones, S., Core Cities, 2025, interview with the author).

Recommendation 4: Establish a Tax Devolution Commission to review the tax code

The government should establish a firm commitment to longer-term fiscal devolution through a Tax Devolution Commission. The aim of the Commission should be to undertake a review of the tax code, with the objective of examining which taxes could be considered as candidates for devolution in the longer term, and which should remain with central government.

A 2014 report from the Communities and Local Government Committee stated that “the point has been reached for the government… to make it clear whether they are committed in principle to larger-scale and more comprehensive fiscal devolution in England”. Yet there is still too much uncertainty at the heart of Labour’s devolution project on its ambitions in this area. While giving evidence on the English Devolution and Community Empowerment Bill, the Mayor of Tees Valley Ben Houchen said that “we need to decide on what the future destination of devolution is”.

“Asymmetric and incremental devolution doesn’t seem to have a narrative around it. Beyond correctly recognising national sentiments in the nations… what’s the purpose of it?” Dewi Knight, PolicyWISE, 2025 [Interview with the author]

Greater clarity is needed on the intended direction of travel of devolution, and its purpose. As such, the government should establish a cross-party and time-bound Tax Devolution Commission to provide a strategic assessment of the potential for devolving parts of the tax code. The Commission would present advisory recommendations on which taxes might be candidates for devolution in the longer term, including those taxes which are already devolved in some regions.

Such a Commission could also consider local government finance in its entirety and explore the potential of further fiscal devolution for national and local growth rates, assessing international best practice and presenting options to the government on possible next steps. The Commission would help to counteract the possibility of further asymmetric and incremental devolution and give clarity to Strategic Authorities on the longer-term purpose of the devolution agenda. It would also usefully counteract the short-termism that plagues UK policymaking.

Recommendation 5: Plan for equalisation through legislation

The government should consider the role of legislation in equalising living standards between different regions.

One longer-term challenge to greater fiscal devolution is the possible tension between the opportunities offered by decentralisation and the need to safeguard living standards through fiscal transfers. In other countries, this has been achieved through equalisation systems underpinned in legislation, including in Germany’s constitution. Similarly, countries such as Latvia, Croatia and Finland have all also incorporated provisions on regional development into law. More recently, the Levelling Up and Regeneration Act in the UK passed by the previous government established duties in law for government Ministers to define ‘levelling-up’ missions before Parliament and publish annual reports on their delivery.

The UK government should consider the effectiveness of these examples and assess whether new legislation might be appropriate, either through a dedicated equalisation mechanism in legislation or through the forthcoming implementation in England of the Socio-Economic Duty (already implemented in Scotland and Wales), ensuring that it explicitly addresses regional inequality. The government should also explore whether legislation could establish a process that clearly spells out what actions the government intends to take should regional disparities grow wider or fail to narrow between different regions, potentially including a form of “geographical balancing mechanism that automatically triggers additional support when funding disparities between regions exceed certain thresholds”.

“Fiscal devolution can be helpful, but the design matters… not only in terms of the powers, but also the fiscal arrangements, because that will affect the incentives created, and more generally fiscal equalisation matters a lot”. David Phillips, Institute for Fiscal Studies, 2025 [Interview with the author]

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Conclusion

The 2014 report from the Communities and Local Government Committee concluded that “fiscal devolution in England is an idea whose time has come”. More than ten years later, we urge the government to deliver on that ambition. Through this report we have shown how fiscal devolution could help to power a fairer economic distribution of the proceeds of wealth in the UK by helping to reduce persistent geographic inequalities.

The Prime Minister has previously spoken of his desire to “rewire the British state”. It is our contention that fiscal devolution is a critical element of that rewiring. It can also help to play a powerful role in articulating the government’s narrative, one which we argue should be rooted in fairness and opportunities for all people, in all places. It is part of the story of a fairer UK, where people have control over the things that matter to them, and all communities enjoy higher living standards.

Fiscal devolution is a key tool to realise that vision, and it should be implemented without further delay.

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