Andy Burnham’s announcement that English mayors will keep a share of the income tax generated in their regions has been billed as the biggest transfer of power for a generation. In principle, it is welcome. Giving local leaders a direct financial stake in the success of the businesses and people around them is a far better incentive than the annual scramble for competitive funding pots that has defined the last fifteen years.

But there is a question buried inside that announcement which almost nobody is asking, and it matters enormously to Cornwall.

How, exactly, do you decide where income tax is “generated”?

There are only two credible answers. You can attribute it to where the employer is – the registered office, or the address attached to the PAYE scheme. Or you can attribute it to where the employee lives. These sound like technical alternatives. They are not. They are two entirely different pictures of the British economy, and the choice between them will quietly determine which parts of the country are treated as contributors and which are treated as dependants.

Why the current default is the wrong one

The instinct in Whitehall will be to attribute tax to the employer. It is administratively simpler, it aligns with how corporation tax is thought about, and it matches the grain of a lot of existing regional statistics. The Office for National Statistics used to publish regional economic output on both a workplace and a residence basis precisely so that commuting could be seen. Since 2014 it has published workplace-based figures only. The convention is now so embedded that most people have stopped noticing it is a convention at all.

Apply that logic to income tax and here is what happens in Cornwall.

A Software Engineer lives in Falmouth. She works from a converted outbuilding, four days out of five, for a company registered in Shoreditch. Her income tax is substantial. Under employer-based attribution, every penny of it is credited to London. Her neighbour, a Management Consultant, is on the payroll of a Manchester firm he visits twice a quarter. His tax belongs to Greater Manchester. The Marketing Director down the road works for a Bristol agency. Bristol gets the credit.

None of these people commute. All of them spend their salaries in Cornwall, raise children in Cornish schools, use Cornish GPs and drive on Cornish roads. Yet on the Treasury’s ledger, Cornwall would have produced almost nothing from any of them.

Multiply that across a county where remote and hybrid working has genuinely reshaped the labour market since 2020, and the distortion stops being a rounding error. It becomes a major issue for Cornwall and many other rural areas.

Cornwall’s double exposure

Cornwall’s position is more precarious than most, because we do not have a mayor. Our devolution settlement puts the strategic authority role with Cornwall Council rather than a new mayoral body. A decision taken deliberately, and for good reasons about Cornish identity and territorial integrity.

That means Cornwall is not first in the queue for a retained share of income tax. We depend on what remains in the national pot after the mayoral areas have taken theirs, and on how fairly that residual is redistributed.

So we lose twice. Once when tax earned by Cornish residents is credited to metro mayors who did nothing to earn it. And again when the shrunken remainder (the pot that is supposed to correct for regional inequality) has to stretch further than it should. A policy designed to reward growth would end up transferring resource out of one of the lowest-income parts of the United Kingdom and into some of the wealthiest urban economies. That cannot be the intention. But it would be the effect.

The data already exists

Here is the encouraging part. This is not a hard problem to solve.

Every employer in the country already reports each employee’s current residential address and a valid UK postcode through PAYE Real Time Information. HMRC already matches taxpayer postcodes to administrative geographies to produce its personal income statistics. RTI covers the entire employed population, not a sample. The infrastructure for residence-based attribution is not something that needs building. It is sitting in HMRC’s systems right now, and it is more accurate than the employer address, which is frequently a registered agent’s office with no operational meaning whatsoever.

There is a further prize here, and it is one the Treasury should want. Cornwall is routinely described as unproductive – output per head somewhere around a fifth below the UK average. But a meaningful share of that gap is an artefact of how we count. Measure the value created by people who live in Cornwall, rather than the value created inside Cornish workplaces, and the picture changes. We suspect it changes considerably. If the government genuinely wants to understand where the country’s economic potential sits, residence-based data would tell it something it does not currently know.

What we are asking for

The fiscal devolution roadmap is due alongside the autumn Budget. Before then, the Treasury should commit to one clear principle: income tax is attributed to where the taxpayer lives.

It is fairer. It is more accurate. It reflects how people actually work in 2026 rather than how they worked in 1995. And it is the difference between a devolution settlement that lifts rural Britain and one that quietly writes it out of the accounts.

Cornwall’s businesses and Cornwall’s workers should not have their contribution credited to a postcode they have never visited.