Mayors to receive £1.5bn borrowing facility in Healey budget

A new borrowing facility worth 1.5 billion pounds will be established for local leaders in England, a move designed to reduce reliance on central government approval. Chancellor John Healey will announce the package during his budget statement next Wednesday. The facility is intended to allow regional mayors to draw up borrowing plans over the next two years without seeking permission from Westminster for individual projects.

Prime Minister Andy Burnham described the change as an end to local leaders having to go "cap in hand to Westminster." He stated that this approach is no way to run a country. Burnham noted that he experienced these limits firsthand while serving as mayor of Greater Manchester. He argued that decisions best made closer to home should not be centralized in London.

The budget package includes an initial 285 million pounds in "good growth" funding for the coming year. Local leaders will have the discretion to spend this money on priorities such as housing, transport links, or high street regeneration. The funds are meant to bridge the gap until 2028, when a new system is scheduled to pass some income tax revenue directly to local areas. This long-term security was first proposed by Rachel Reeves, Healey’s predecessor, earlier this year.

Healey stated that the government is giving local leaders "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas." He emphasized that mayors and local officials understand the specific needs of their communities for economic growth. The package was developed in consultation with No 10 North, which has held weekly "situation room" meetings with local leaders to identify barriers to growth.

Concerns within the Treasury regarding the ability of some local authorities to manage larger budgets led to an additional 150 million pounds in support. This funding is intended to help local bodies scale up and build necessary expertise. The Treasury also updated its "green book" guidance this week. Under the new rules, projects that can be combined to boost growth, such as a housing scheme and a transport link, can now be assessed together.

A white paper titled "rewiring the state" is due after the budget. The document will outline how the civil service will be reshaped as more powers move away from Whitehall. The revenue-sharing model will allow local leaders to retain part of the extra revenue generated by a stronger local economy. This structure is designed to give them a direct incentive to support pro-growth policies.

Healey’s first budget is also expected to include support for poorer households affected by rising energy costs. These increases were driven by the war in the Middle East, which also raised interest rates on government borrowing. The chancellor plans to announce modest tax rises, including on banks, while providing "breathing space" for households and businesses. He must also explain how he will fully fund the four-year defence investment plan announced in 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. This issue was central to his resignation from Starmer’s cabinet. The decision on that target is likely to wait for a spending review scheduled for sometime next year.