Chancellor to hand mayors direct borrowing authority

Chancellor John Healey will present a new fiscal framework on Wednesday that grants English regional mayors direct authority to borrow 1.5 billion pounds. The move ends a long-standing requirement for local leaders to seek approval from the Treasury for each individual project. Prime Minister Andy Burnham described the change as a decisive break from the previous model of centralized control.

The borrowing facility will be negotiated over the next two years. Mayors in England have frequently argued that limited access to capital markets slows their ability to fund infrastructure. In contrast, local governments in the United States and several European nations routinely issue their own bonds to finance public works without national oversight.

The package includes an initial grant of 285 million pounds designated for good growth projects. Local authorities will spend this sum on priorities such as housing, transport links, and high street regeneration. This funding is intended to bridge the gap until 2028, when a new revenue-sharing system will take effect.

The 2028 system will pass a portion of income tax revenue directly to local areas. This arrangement is designed to provide long-term financial security for regional governments. The concept was first proposed by Rachel Reeves, who served as chancellor before Healey. Further details on how the revenue-sharing model will operate will be included in the budget statement.

Local leaders will retain a share of the additional revenue generated by a stronger local economy. This structure is meant to incentivize pro-growth policies at the regional level. The Treasury has expressed concern that some local authorities may lack the capacity to manage larger budgets. To address this, Healey will announce 150 million pounds to help local bodies build internal expertise.

Prime Minister Burnham stated that the changes would allow decisions to be made closer to home. He said, "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country." Burnham, who previously served as mayor of Greater Manchester, experienced the limits of centralized tax and spending policy firsthand. Healey added that the government is providing more money, power, and capacity to help mayors build homes and make area-specific decisions.

The plan was developed in coordination with No 10 North, which holds weekly meetings with local leaders to identify barriers to growth. This process led to a change in the Treasury's green book guidance this week. The new rules allow projects that can be combined to boost growth, such as housing and transport schemes, to be assessed together. A white paper on reshaping the civil service will follow the budget.

Healey's first budget will also address rising energy costs for households. The statement will include support for poorer families and modest tax increases, including on banks. Healey has stated he wants to provide breathing space for households and businesses after the war in the Middle East pushed up bills. These higher costs have increased interest rates on government borrowing, complicating efforts to balance the national accounts.

The chancellor will explain how to fully fund the four-year defence investment plan announced in the final days of Keir Starmer's premiership. He is not expected to specify when the United Kingdom will commit to spending 3 percent of GDP on defence. That decision is likely to wait for a spending review due next year.