Healey Grants Mayors Direct Control of £1.5bn Borrowing Facility

Chancellor John Healey will deliver a major shift in local fiscal authority in his budget statement on Wednesday. The plan centers on a new £1.5 billion borrowing facility that grants regional mayors direct control over funds without requiring case-by-case approval from the Treasury.

This borrowing power is designed to address long-standing complaints from mayors that limited access to capital hindered regional development. Under the new rules, mayors will negotiate the terms of the facility with the government over the next two years. This approach mirrors practices in the United States and parts of Europe, where local authorities routinely issue their own bonds to finance infrastructure.

The package includes an initial £285 million in funding allocated for next year. Local leaders will have discretion to spend this money on priorities such as housing, transport links, or high street regeneration. This short-term cash is intended to bridge the gap until 2028. By that point, a new system will redirect a portion of income tax revenue directly to local areas, providing longer-term fiscal security.

Prime Minister Andy Burnham framed the changes as a rejection of centralized control. "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country," Burnham said. He noted that the United Kingdom taxes and spends more centrally than many other leading economies, a constraint he experienced firsthand while serving as the mayor of Greater Manchester.

Healey stated that the government is providing local leaders with "more money, more power and more capacity" to make decisions for their communities. To support this transfer of power, Healey will announce £150 million to help local authorities build the expertise needed to manage larger budgets. Treasury officials have expressed concerns about whether some councils possess the capacity to handle such responsibilities independently.

The devolution package was developed in collaboration with No 10 North, which holds weekly meetings with local leaders to identify barriers to economic growth. This process recently led to changes in the Treasury's "green book" guidance. Under the new rules, projects that boost growth, such as combined housing and transport schemes, can be assessed together rather than in isolation.

A white paper on "rewiring the state" will follow the budget to outline how the civil service will be reshaped as powers move away from Whitehall. The budget is also expected to include modest tax rises on banks and support for households facing higher energy costs.

Healey will explain how he plans to fully fund the four-year defense investment plan announced during the final days of Keir Starmer's premiership. He is not expected to announce a timeline for meeting the target of spending 3% of GDP on defense, a decision that remains under review for the spending assessment due next year.