Mayors gain direct control over new £1.5bn borrowing fund

Local leaders in England will stop asking Westminster for permission on individual projects when Chancellor John Healey delivers the budget next Wednesday. Prime Minister Andy Burnham announced the shift in a package designed to give regional mayors direct control over a new £1.5bn borrowing facility.

Burnham described the change as an end to the era where local officials had to go "cap in hand to Westminster." He stated that this practice is no longer a viable way to run the country. The new borrowing facility will be structured over the next two years in consultation with mayors.

Regional mayors have long argued that limited borrowing powers hold their regions back. In contrast, local authorities in the US and parts of Europe commonly issue their own bonds. The new fund aims to close that gap by providing direct access to capital for local infrastructure and development.

The budget will also include an initial £285m in "good growth" funding for the coming year. Local leaders will have the discretion to spend this money on priorities such as housing, transport links, or high street regeneration. This short-term support is intended to bridge the gap until 2028. By then, a new system will pass some income tax revenue directly to local areas.

That revenue-sharing model was first proposed by Rachel Reeves, Healey's predecessor as chancellor. Under the new rules, local leaders would keep a portion of the extra revenue generated by a stronger local economy. This structure is designed to incentivize local support for pro-growth policies.

The Treasury has expressed concerns about the ability of some local authorities to manage larger budgets. To address this, Healey will announce £150m to help local governments scale up their operations and build internal expertise. The package was developed with No 10 North, a unit that has held weekly meetings with local leaders to identify barriers to economic growth.

Healey noted that local leaders understand their communities' specific needs. He said the government is providing them with "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas." The budget will also detail how the civil service will be reshaped as powers move from Whitehall to local levels.

The statement is expected to include support for poorer households facing rising energy costs and modest tax rises on banks. Healey aims to provide "breathing space" for businesses and families after Middle East conflict pushed up bills. He will also explain how he plans to fully fund the four-year defence investment plan announced during the final days of Keir Starmer's premiership.