Chancellor Healey to Grant Mayors Direct Control Over 1.5 Billion Pound Borrowing Fund

Chancellor John Healey plans to deliver a new borrowing facility for English mayors in his budget statement on Wednesday. The package, announced by Prime Minister Andy Burnham, is designed to reduce the reliance of local leaders on central government approval for major projects. Burnham stated that the changes would end the practice of local officials seeking Treasury permission for individual schemes, a process he described as inefficient for running the country.

The core of the financial package is a 1.5 billion pound borrowing facility that will be structured with mayors over the next two years. Regional leaders have previously argued that limited borrowing powers constrained their ability to invest in infrastructure. The new arrangement allows local authorities to issue their own borrowing, a practice common in the United States and parts of Europe. This shift aims to give mayors direct control over capital investment for housing, transport, and high street regeneration.

In addition to the borrowing facility, the government will allocate 285 million pounds in initial growth funding for the coming year. Local leaders will have discretion over how to spend these funds, allowing them to address specific local priorities. This funding is intended to bridge the gap until 2028, when a new system will transfer a portion of income tax revenue directly to local areas. This longer-term revenue sharing model was first proposed by Rachel Reeves, Healey's predecessor, earlier this year.

To support the transition, Healey will announce 150 million pounds to help local authorities scale up their administrative capacity. The Treasury has expressed concern that some local governments may lack the expertise to manage significantly larger budgets. This funding is designed to build the necessary skills and infrastructure within local councils to handle the increased financial responsibility effectively.

The devolution package was developed in consultation with No 10 North, a unit that has held weekly meetings with local leaders to identify barriers to economic growth. This collaboration led to a recent update to the Treasury's green book, its guidance on public investment. The new rules allow combined projects, such as housing and transport schemes, to be assessed together to boost overall growth. A white paper on reshaping the civil service is due to be published after the budget to outline how powers will move from Whitehall.

Healey said the government is providing mayors with more money, power, and capacity to make decisions for their communities. Burnham, who served as mayor of Greater Manchester, emphasized that decisions should be made closer to home. The budget will also include measures to support households facing rising energy costs and modest tax rises on banks, as Healey seeks to provide economic breathing space following recent global disruptions.

The chancellor will also outline how the government intends to fully fund the four-year defence investment plan. He is not expected to announce when the UK will commit to spending 3 percent of gross domestic product on defence, a decision likely to wait for a spending review scheduled for next year.