Chancellor Healey to Grant Mayors Direct Authority Over New £1.5bn Borrowing Fund

Chancellor John Healey will announce a new borrowing framework in his budget statement next Wednesday that gives English mayors direct control over a £1.5bn facility. The plan removes the requirement for local leaders to seek individual project approvals from the central Treasury. Prime Minister Andy Burnham stated the measure ends the practice of local officials asking Westminster for permission on every initiative.

The borrowing facility will be established over the next two years. Regional mayors have long argued that limited borrowing powers restrict their ability to invest in local infrastructure. In the United States and parts of Europe, local authorities routinely issue their own bonds to fund projects. This new mechanism aligns UK local finance practices more closely with those international models.

The package includes an initial £285m in growth funding available for local use next year. Leaders will decide how to allocate these funds, with potential uses including housing, transport links, and high street regeneration. This funding is intended to bridge the gap until 2028. At that time, a new system will pass a portion of income tax revenue directly to local areas. Chancellor Rachel Reeves first proposed this revenue-sharing concept earlier this year.

Further details on the revenue-sharing model will appear in the budget. Local leaders are expected to retain a share of the additional revenue generated by local economic growth. This structure provides an incentive for local authorities to support policies that drive economic expansion. The government aims to create a longer-term financial security for regional budgets through this direct link to local economic performance.

Treasury officials have raised concerns about the capacity of some local authorities to manage larger budgets. To address this, Healey will announce a £150m fund to help local governments build expertise and scale up their operations. This capacity building is designed to ensure that local leaders can effectively manage the increased financial responsibilities granted under the new devolution package.

Burnham, who served as mayor of Greater Manchester, cited his personal experience with centralized tax and spending decisions. He described the new approach as a way to make decisions closer to home. The package was developed with No 10 North, which held weekly meetings with local leaders to identify barriers to economic growth. These discussions led to a change in the Treasury's green book guidance. Projects that can be combined to boost growth, such as housing and transport schemes, can now be assessed together under the new rules.

Healey stated that the government is providing local leaders with more money, power, and capacity. A white paper on reshaping the civil service is scheduled for release after the budget. The budget will also include support for households facing rising energy costs and modest tax increases on banks. Healey will explain how the government plans to fully fund the four-year defence investment plan announced during the final days of Keir Starmer's premiership.

The chancellor is not expected to specify when the UK will commit to spending 3% of GDP on defence. That decision is likely to be made during a spending review scheduled for next year. The budget statement will provide the final figures for the borrowing facility and the initial growth funding, marking a shift in the relationship between central government and local authorities in England.