Healey to Grant Mayors Direct Access to £1.5bn Borrowing Pool

Prime Minister Andy Burnham announced on Friday that local leaders in England will gain new borrowing powers and direct access to growth funding in the upcoming budget statement. Chancellor John Healey is scheduled to deliver the devolution package on Wednesday.

The central component of the plan is a new £1.5 billion borrowing facility. Regional mayors will draw up this facility over the next two years. This structure addresses long-standing complaints from local leaders that limited borrowing powers have restricted their ability to fund projects. In contrast, local authorities in the United States and several European countries frequently issue their own bonds.

The package includes an initial £285 million in funding for next year. Local leaders will have the discretion to spend this money on priorities such as housing, transport links, or high street regeneration. This funding is designed to bridge the gap until 2028, when a new system will pass a portion of income tax revenue directly to local areas. Chancellor Healey’s predecessor, Rachel Reeves, first proposed this revenue-sharing idea earlier this year.

Further details on the revenue-sharing model will be included in the budget. Local leaders are expected to retain a share of the extra revenue generated by a stronger local economy. This arrangement provides an incentive for local authorities to support policies that drive economic growth. The government will also announce £150 million to help local authorities build the expertise needed to manage larger budgets, addressing concerns within the Treasury about their current capacity.

Burnham stated that the changes will end the requirement for local leaders to seek Treasury approval for each individual project. He said, “I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country.” Healey noted that mayors and local leaders understand their community needs. He described the government as providing “more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas.”

The package was developed with No 10 North, which has held weekly meetings with local leaders to identify barriers to economic growth. This process led to a change in the Treasury’s “green book” guidance, which now allows projects like housing and transport schemes to be assessed together if they boost growth. A white paper on reshaping the civil service is due after the budget. Healey’s statement will also cover support for households facing rising energy costs and modest tax rises, including on banks. He will explain how the four-year defence investment plan will be funded, though a decision on spending 3% of GDP on defence is expected to wait for a spending review next year.