How tax can fuel Yorkshire growth

22 November 2016

What role can the tax system play in re-balancing growth from south to north?

That is a key question we recently put to our 'employee jury' of some 70 staff across Yorkshire, who heard from public and private sector leaders at an event held in our Leeds office. The event was part of our Paying for Tomorrow campaign exploring tax reform following the referendum.

Generally there was broad support for further devolution of tax powers, so the region could target taxes to local needs. But others cautioned that Yorkshire could simply become a microcosm of central government; with challenges in divvying up tax revenues across the region, and local authorities conflicted between the need to raise money and keep the region tax competitive.

Use tax incentives to encourage local graduates to stay in the region

Among the novel ideas discussed was a 'hotel tax' where visitors to Leeds and other popular cities are charged a £1 a night. Tourists wouldn't notice the cost, but it could make a huge difference to the region’s revenues. Most popular was the idea of tax incentives to encourage local graduates to stay in the region, stemming the talent drain to London. This could take the form of a reduction in student debt, or allowing graduates to 'bank' a proportion of their income tax as a deposit for their home - but only if they live in the region for a certain length of time.

Tax is not a burden, it's an enabler

"Tax is not a burden, but an enabler", said Roger Marsh, former Leeds office senior partner and now working for the Northern Powerhouse Investment Fund. "Every pound of taxpayer money can be doubled if leveraged with private sector money". In his view the North was the solution not the problem, sentiments echoed by Hull business leader, Anita Pace, who explained her region had the most development land in the UK and would also soon be home to the world's largest offshore wind-farm. But there are also challenges for the region, with Doncaster City Council CEO Jo Miller explaining that 60% of council income used to come from government but this is now zero. Skills shortages are also a concern, hence the appeal of tax changes that could encourage graduates to stay put.

Kevin Nicholson, Head of Tax at PwC, said: "A lot of tax policy debate takes place around Westminster - our debate shows the ideas and fresh thinking that come from extending the debate further. I was particularly struck by the ideas to encourage local graduates to remain in the region and we’ll be developing this thinking.”

If you're interested in how tax is being devolved to the regions, Sharon Blain from our tax practice explains more on the 
Paying for Tomorrow microsite

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