Chancellor Allocates 1.5 Billion Pounds in Direct Borrowing Authority to Mayors

Prime Minister Andy Burnham announced that English local leaders will gain direct control over a 1.5 billion pound borrowing facility, eliminating the need for case-by-case approval from Westminster. Chancellor John Healey will present the devolution package in his budget statement on Wednesday, marking a structural shift in how local infrastructure and development are financed.

The new borrowing facility is designed to be structured with mayors over the next two years. Regional leaders have long cited limited borrowing powers as a barrier to economic activity, noting that local authorities in the United States and parts of Europe routinely issue their own bonds. This new mechanism aims to close that gap by giving English mayors a more direct line to capital markets.

Alongside the borrowing powers, the package includes 285 million pounds in initial funding designated for growth projects next year. Local leaders will have discretion over how to allocate these funds, with potential uses including housing development, transport links, and high street regeneration. This money is intended to serve as a bridge until 2028, when a new revenue-sharing system is expected to pass a portion of local income tax directly to areas for longer-term financial stability.

The revenue-sharing model, first proposed by former Chancellor Rachel Reeves earlier this year, will allow local leaders to retain a share of the extra revenue generated by a stronger local economy. This structure is meant to incentivize pro-growth policies by linking local financial outcomes to economic performance. Further details on this model are expected in the upcoming budget.

Treasury officials have raised concerns about the capacity of some local authorities to manage increasingly large budgets. To address this, Healey will announce a 150 million pound fund to help local governments build expertise and scale up their operations. Burnham stated that the changes would end the era of local leaders seeking Treasury approval for individual projects, describing the previous process as an inefficient way to run the country.

The devolution package was developed in consultation with No 10 North, which has held weekly meetings with local leaders to identify barriers to economic growth. This work resulted in a recent change to the Treasury's green book guidance, which now allows projects that boost growth, such as combined housing and transport schemes, to be assessed together. A white paper on reshaping the civil service is also expected after the budget.

Healey's budget is also set to include support for households facing rising energy costs, along with modest tax increases on banks. The chancellor has stated the goal is to provide breathing space for households and businesses after the Middle East conflict pushed up bills and increased government borrowing costs. Healey will also outline plans to fully fund the four-year defense investment plan announced at the end of Keir Starmer's premiership, though a decision on spending 3% of GDP on defense is likely to wait for a spending review next year.