Chancellor Healey to Grant Mayors £1.5bn Borrowing Authority

Chancellor John Healey will unveil a £1.5 billion borrowing facility for English mayors in his first budget statement scheduled for Wednesday. The measure is designed to allow local leaders to finance infrastructure without seeking individual permission from the central Treasury for each project.

Prime Minister Andy Burnham described the initiative as a shift away from a system where local authorities must seek approval from Westminster for every expenditure. He stated that the government aims to end the practice of local leaders going to the central government with requests for funds, arguing that decisions should be made closer to where they affect the public.

The borrowing facility will be established over the next two years in collaboration with regional mayors. These leaders have long contended that restricted access to capital limits their ability to execute large-scale development projects. In contrast, local authorities in the United States and several European nations frequently issue their own bonds to fund public works.

The budget also allocates an initial sum of £285 million in growth funding for the coming year. Local executives will have discretion over how this money is spent, with potential uses including housing construction, transport improvements, and commercial street regeneration. This funding serves as a transitional measure until a new revenue-sharing system takes effect in 2028.

Under the planned 2028 system, a portion of local income tax revenue will be transferred directly to regional governments. This structure is intended to provide longer-term financial stability. The arrangement was initially proposed by Rachel Reeves, Healey’s predecessor as chancellor, earlier this year. Details on how the revenue split will be calculated will be included in the upcoming budget documents.

Treasury officials have expressed concerns regarding the administrative capacity of some local authorities to manage larger budgets. To address this, Healey will announce a separate £150 million package to help these bodies build internal expertise and scale their financial operations. The goal is to ensure that local governments can effectively handle the increased fiscal responsibility.

The policy framework was developed in consultation with No 10 North, a unit that holds weekly meetings with local leaders to identify barriers to economic activity. This collaboration resulted in a recent update to the government's green book guidance. The revised rules allow for the combined assessment of linked projects, such as housing and transport schemes, to better evaluate their collective economic impact.

Healey’s statement will also outline measures to support households facing higher energy costs and include modest tax increases on banks. The chancellor intends to explain how the four-year defense investment plan will be fully funded. However, he is not expected to specify when the United Kingdom will commit to spending 3 percent of GDP on defense, a decision likely to be deferred until a spending review next year.