Mayors gain direct £1.5bn borrowing authority

Local leaders in England will gain direct control over a new £1.5 billion borrowing facility under a devolution package set for announcement this Wednesday. Prime Minister Andy Burnham stated the changes are designed to stop mayors from seeking central government approval for every individual project. He described the previous process as a period of local leaders going cap in hand to Westminster, a practice he said was an inefficient way to run the country.

The new borrowing facility will be developed with mayors over the next two years. Regional leaders have long argued that limited borrowing powers restricted their ability to deliver infrastructure. In contrast, local authorities in the United States and several European countries routinely issue their own bonds without central oversight.

The package also allocates an initial £285 million in funding for the coming year. Local leaders will have the discretion to spend this money on their own priorities, such as housing, transport links, or high street regeneration. The funds are 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.

Chancellor John Healey said the government is giving local leaders more money, power, and capacity to build homes and make decisions for their areas. He noted that mayors understand the specific needs of their communities for economic growth. The plan aims to give local authorities a reason to support policies that strengthen the local economy, as they would retain part of the extra revenue generated.

Treasury officials have raised concerns about the capacity of some local authorities to manage larger budgets. To address this, Healey will announce £150 million to help these organizations build expertise and scale up their operations. The package was developed with No 10 North, which has held weekly meetings with local leaders to identify barriers to economic growth.

These meetings led to a change in the Treasury's green book guidance on public funding. Under the new rules, projects that can be combined to boost growth, such as a housing scheme and a transport project, can be assessed together. A white paper on reshaping the civil service is due after the budget to detail how powers will move from Whitehall to local levels.

Healey's first budget is also expected to include support for households facing rising energy costs and modest tax increases on banks. The chancellor will explain how the government plans to fully fund the four-year defense investment plan announced at the end of Keir Starmer's premiership. A decision on spending 3% of GDP on defense is likely to wait for a spending review next year.