English Mayors to Directly Manage 1.5 Billion Pound Borrowing Fund

Local authorities in England will gain direct control over a new 1.5 billion pound borrowing facility in the budget statement delivered on Wednesday. Chancellor John Healey will present the plan, which aims to eliminate the need for local leaders to seek Treasury approval for each individual project. Prime Minister Andy Burnham stated that the change ends the practice of local leaders going cap in hand to Westminster.

The new borrowing facility will be structured in consultation with mayors over the next two years. Regional mayors have previously cited limited borrowing powers as a barrier to development. In contrast, local authorities in the United States and parts of Europe commonly issue their own bonds. The new system allows mayors to access funds without waiting for central government sign-off on specific initiatives.

An initial 285 million pound fund for good growth will be available to local leaders next year. They can spend this money on housing, transport links, or high street regeneration. This funding is designed to bridge the gap until 2028. At that point, a new system will pass some income tax revenue directly to local areas to provide longer-term financial security. Healey’s predecessor, Rachel Reeves, first proposed this revenue-sharing idea earlier this year.

Local leaders will retain a portion of the extra revenue generated by a stronger local economy under the new model. This arrangement gives local governments a direct financial incentive to support policies that promote economic growth. Further details on how this revenue-sharing will function will be included in the budget statement. The Treasury has expressed concern that some local authorities may lack the capacity to manage larger budgets.

To address these capacity issues, Healey will announce 150 million pound in support to help local authorities scale up and build expertise. Burnham said he made decisions that can be made closer to home when he became prime minister. He experienced the limits of centralized tax and spending as mayor of Greater Manchester. The UK tax and spending system is more centralized than in many other leading economies.

Healey stated that the government is giving local leaders more money, more power, and more capacity to build homes and make decisions for their areas. The package was developed with No 10 North, which has held weekly situation room meetings with local leaders. These meetings identified barriers to economic growth, including the need to combine projects to boost growth. A white paper on rewiring the state will be published after the budget to outline how the civil service will be reshaped as powers move from Whitehall.

The budget is also expected to include support for poorer households affected by rising energy costs. Healey plans to implement modest tax rises, including on banks, to provide breathing space for households and businesses after the war in the Middle East pushed up bills. Higher energy costs have also raised interest rates on government borrowing. Healey will explain how he plans to fully fund the four-year defence investment plan announced during Keir Starmer’s premiership. He is not expected to state when the UK will commit to spending 3% of GDP on defence, a decision likely to wait for a spending review next year.