Chancellor Healey to Hand Mayors £1.5bn Borrowing Control

Chancellor John Healey will present a plan on Wednesday to grant English mayors direct control over a new borrowing fund worth 1.5 billion pounds. The measure aims to reduce the dependence of local leaders on central government approval for individual infrastructure and development projects. Prime Minister Andy Burnham described the shift as an end to the practice of local officials seeking permission from Westminster for every initiative.

The borrowing facility will be designed in collaboration with regional mayors over the next two years. These leaders have long argued that their current borrowing limits restrict their ability to stimulate local economies. In contrast to the UK, local authorities in the United States and parts of Europe regularly issue their own bonds to finance public works.

Alongside the borrowing power, the budget includes an initial allocation of 285 million pounds designated for growth funding next year. Local leaders will have discretion over how to spend this money, with options including housing projects, transport links, and high street regeneration. This funding is intended to bridge the gap until 2028, when a new system is scheduled to pass a portion of income tax revenue directly to local areas.

The 2028 revenue sharing model was first proposed by Rachel Reeves, Healey's predecessor. Under the proposed rules, local authorities would retain part of the additional revenue generated by a stronger local economy. This mechanism is designed to give leaders a financial incentive to support policies that drive growth. Further details on how this revenue sharing will work are expected in Wednesday's budget statement.

Concerns remain within the Treasury about the capacity of some local authorities to manage larger budgets. To address this, Healey will announce a 150 million pound package to help councils build expertise and scale up their administrative capabilities. The goal is to ensure local governments can handle the increased responsibility without compromising service delivery.

Burnham stated that the changes reflect his commitment to making decisions closer to home. He cited his experience as mayor of Greater Manchester, where he felt the limits of a highly centralized tax and spending system. "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country," he said.

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 process led to a change in the Treasury's "green book," its guidance on public investment. 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.

Healey stated that the government is providing mayors with more money, power, and capacity to build homes and make local decisions. A white paper on reshaping the civil service is due after the budget to outline how powers will move from Whitehall to local levels. The budget will also include support for households affected by rising energy costs and modest tax rises, including on banks.

The chancellor must also explain how he will fully fund the four-year defence investment plan announced at the end of Keir Starmer's premiership. Healey 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.