A 1 per cent share of income tax would be worth approximately £48m a year to the North East Mayoral Strategic Authority and £15m to Tees Valley, based on the latest estimates from HM Revenue & Customs (HMRC).

The government has promised regional mayors a share of income tax raised in their areas. It has yet to say what proportion they will receive, how it will be calculated or when payments will begin.

North East taxpayers owed an estimated £6.32bn in income tax in 2023 to 2024, the smallest total of any English region. The region's tax take has recently been growing faster than the UK's, but a system that rewards existing revenues could produce a different result from one that rewards future growth.

HMRC's latest geographical estimates, published in April, cover the 2023 to 2024 tax year.

The seven councils covered by the North East Mayoral Strategic Authority accounted for £4.79bn, paid by approximately 1.01 million taxpayers. Tees Valley's five councils accounted for £1.53bn, from around 328,000 taxpayers.

The figures are calculations based on historical tax liabilities, not forecasts of government funding. The eventual scheme could use a different tax base, a different measurement period or a formula linked to growth rather than total receipts.

The figures also describe tax owed by residents, rather than money collected from businesses or workplaces in each area. HMRC assigns taxpayers geographically according to their residential postcode.

Within the North East, County Durham accounts for the largest income tax contribution of any council area, at approximately £1.14bn. That reflects its relatively large taxpayer population.

Newcastle and Northumberland have the highest average liabilities per taxpayer, at £5,520 and £5,570 respectively.

The North East's income tax base looks particularly modest alongside other parts of England.

London's taxpayers owed £71.1bn in 2023 to 2024, more than 11 times the North East's total. Greater Manchester, which Andy Burnham led before becoming prime minister, accounted for approximately £7.9bn.

The difference is partly about population and partly about earnings.

Across the North East, the average income tax liability was approximately £4,740 per taxpayer. That was the lowest of England's nine regions, compared with £14,700 in London.

Only Wales, at £4,660, and Northern Ireland, at £4,730, recorded lower averages across the UK.

Some 88 per cent of North East taxpayers were in the basic-rate or savers categories, compared with 71 per cent in London. Additional-rate taxpayers accounted for 1 per cent in the North East and 6 per cent in London.

Higher earners contribute a disproportionate share of income tax. Regions with more of them therefore generate considerably more revenue, even when differences in taxpayer numbers are taken into account.

North East income tax liabilities increased by an estimated 15.1 per cent between 2022 to 2023 and 2023 to 2024, compared with 13.2 per cent across the UK.

Within the region, the estimated increase was 16.3 per cent across the North East Mayoral Strategic Authority's seven councils and 11.6 per cent across Tees Valley.

The comparison needs care. HMRC's Survey of Personal Incomes uses a sample of taxpayers to estimate regional liabilities, with confidence intervals reflecting uncertainty around the results. Changes between individual years, particularly across smaller geographical areas, can be affected by sampling variation.

More importantly, rising income tax liabilities are not a direct measure of economic growth.

Frozen income tax thresholds mean that pay increases bring more earnings into taxation and can move people into higher tax bands. This effect, known as fiscal drag, increases tax receipts without necessarily indicating equivalent growth in economic output.

The personal allowance of £12,570 and higher-rate threshold of £50,270 remained frozen during the period covered by these figures. HMRC identifies these freezes as factors behind increases in taxpayer numbers and liabilities nationally.

The North East's faster increase therefore provides evidence of a growing tax base, but it does not establish that its economy grew faster than the UK's.

A formula based on changes in tax receipts could recognise increases caused by wages, employment and investment. It could also capture changes driven by national tax policy, unless the government adjusts for them.

North East Mayor Kim McGuinness welcomed the July announcement, telling ITV Tyne Tees that "this is what we've been fighting for".

"The days of asking Whitehall's permission are over," she said.

Tees Valley Mayor Ben Houchen also welcomed fiscal devolution but took a different position on how the money might be used.

Houchen suggested creating a rebate scheme that would return some of the revenue to residents, or ideally reducing the income tax rate locally.

He said he wanted to "give people a little bit of relief by being able to keep that money, put it in their pocket".

First Secretary of State Louise Haigh rejected the idea. "There's not a system that would currently allow that. They certainly wouldn't be able to set tax rates locally or regionally." Review North covered that exchange in August.

The government has committed to giving mayors a share of income tax, while greater retention of locally generated business rates is intended to begin in spring 2027.

The government's July announcement promised a fiscal devolution roadmap at the Budget, which takes place on 28 October. ITV reports that a white paper setting out the wider reforms will follow the Budget.

Two decisions will determine the financial effect on the North East.

The first concerns how the income tax share is calculated. Allocating a percentage of the existing tax base would provide a different starting amount from a scheme that shares only additional revenue generated above an agreed baseline. A system could also combine an initial allocation with a reward for subsequent growth.

The second concerns equalisation.

Ministers will keep an equalisation system so that lower-tax areas still receive support, ITV reports. Without some adjustment, places with higher incomes and larger tax bases would receive substantially more revenue from an equivalent percentage share.

Equalisation could narrow those differences, but the government has not explained how it will operate alongside the proposed incentive for mayors to increase local revenues.

There is also the question of whether devolved tax receipts will represent additional resources or replace some existing government grants. That will determine how much extra spending capacity the policy provides.

Every 1 per cent of existing income tax liabilities represents approximately £63m across the North East's two mayoral areas.

The Budget now needs to establish whether either mayor will receive a share of that total, a reward linked to its future growth or some combination of the two.