New tax powers for London’s mayor
In his Budget speech, Healey said 100% of business rates would be retained locally by the end of the decade. Mayors will receive 20% of business rates revenue from next year and a share of income tax receipts from 2028. He named the Bakerloo line extension, led by the Mayor of London, as one project these funding streams could support.
The Treasury also plans legislation to let the mayor replace the Business Rate Supplement that helped fund the Elizabeth line, which is due to end by 2041. The government said the successor levy would help City Hall finance the Bakerloo line extension and the West London Orbital. According to the Evening Standard, the new powers are expected to increase City Hall’s borrowing capacity by around £10 billion.
Route and cost
Transport for London (TfL) plans to extend the line to Lewisham, with two new stations on the Old Kent Road and a new station at New Cross Gate. A February 2026 TfL estimate put the cost of extending the line to Lewisham at £4.2 billion to £7.5 billion in 2025 prices. Extending it further to Hayes could cost an additional £1.9 billion to £3.3 billion. TfL says the scheme would support more than 50,000 new homes along the route, but delivery depends on a viable funding package.
Mayor of London Sadiq Khan said keeping more locally raised money would help “finally unlock transformational infrastructure projects such as the West London Orbital, the Bakerloo Line Extension and the Euston knowledge quarter project”.
Details still to come
The fiscal devolution roadmap published with the Budget says London may need a separate arrangement from 2028-29, to be worked out with the Greater London Authority and the boroughs. The Budget does not say when the levy legislation will be introduced.
Tony Travers of the London School of Economics told The Times that “there are still many rules to be set by HM government that nothing can be predicted too firmly”. Centre for London, a think tank, said the Budget left open how much income tax mayors would actually retain. BusinessLDN chief executive John Dickie welcomed the reforms but said: “We can’t wait for this to kick in towards the end of the decade.”