Healey Budget Gives Mayors Direct Control of £1.5bn Borrowing Fund

Prime Minister Andy Burnham said local leaders in England will no longer have to seek permission from Westminster for individual projects under a devolution package to be unveiled on Wednesday. Chancellor John Healey is scheduled to present the plans in his first budget statement. The centerpiece of the announcement is a new borrowing facility worth 1.5 billion pounds.

Regional mayors have long argued that their current borrowing limits hinder development. In the United States and parts of Europe, local authorities routinely issue their own bonds. The new facility will be drawn up with mayors over the next two years. Burnham stated that this change ends the practice of local leaders going to the Treasury for approval on every project. He described the previous process as an inefficient way to run a country.

The package includes an initial 285 million pounds in funding for good growth next year. Local leaders will determine how to spend this money. Priorities may include housing, transport links, or high street regeneration. The funds are intended to bridge the gap until 2028. By then, a new system will pass some income tax revenue directly to local areas. This revenue-sharing model was first proposed by Rachel Reeves, Healey’s predecessor.

Healey will provide further detail on how the revenue-sharing model will function in the budget. Local leaders are expected to retain a portion of the extra revenue generated by a stronger local economy. This financial incentive is designed to encourage local governments to support pro-growth policies. The shift aims to give areas longer-term financial security.

Treasury officials have raised concerns about the capacity of some local authorities to manage larger budgets. To address this, Healey will announce 150 million pounds to help local governments build expertise. This funding is meant to support the scaling up of administrative functions as powers move from central government to local levels.

The devolution package was developed with No 10 North. This unit has held weekly meetings with local leaders to identify barriers to economic growth. That work resulted in a change to the Treasury’s green book guidance. Under the new rules, projects that can be combined to boost growth can be assessed together. For example, a housing scheme and a transport scheme can be evaluated as a single entity.

A white paper on rewiring the state is due after the budget. It will outline how the civil service will be reshaped as more powers move from Whitehall to local areas. Healey said the government is giving mayors more money, power, and capacity to build homes and make decisions for their communities. He noted that local leaders are best positioned to understand community needs for growth.

Burnham said he had pledged to make decisions closer to home when he became prime minister. He experienced the limits of centralized tax and spending during his time as mayor of Greater Manchester. The UK’s fiscal structure is more centralized than in many other leading economies. The new framework aims to align local decision-making with local economic realities.

The budget is also expected to include support for poorer households affected by rising energy costs. Healey has indicated plans for modest tax rises, including on banks. He wants to provide breathing space for households and businesses after the war in the Middle East increased bills. Higher energy costs have also raised interest rates on government borrowing, complicating fiscal balance.

Healey will explain how he plans to fully fund the four-year defence investment plan announced at the end of Keir Starmer’s premiership. He is not expected to announce when the UK will commit to spending 3% of GDP on defence. That decision is likely to wait for a spending review due later next year.