Mayors Gain Direct Control of £1.5bn Fund

Chancellor John Healey will present a devolution package in his budget statement on Wednesday that grants English mayors direct control over a new £1.5 billion borrowing facility. The measure allows regional leaders to access capital without seeking Treasury approval for each individual project. Prime Minister Andy Burnham stated that this change ends the era of local leaders going "cap in hand to Westminster." He argued that decisions made closer to home are more effective and that the new system reflects a shift away from centralized control.

The new borrowing facility will be established over the next two years. Mayors have long argued that limited borrowing powers hinder local development, unlike in the United States and parts of Europe where local authorities issue their own bonds. Alongside the borrowing authority, the government will release £285 million in "good growth" funding for next year. Local leaders can allocate these funds to priorities such as housing, transport links, or high street regeneration. This initial funding is designed to bridge the gap until 2028, when a new system will pass some income tax revenue directly to local areas.

The revenue-sharing model will allow local leaders to retain part of the extra revenue generated by a stronger local economy. This structure aims to incentivize support for pro-growth policies. To address concerns within the Treasury about the capacity of some local authorities to manage larger budgets, Healey will announce £150 million to help councils build expertise and scale up operations. Healey described the package as providing local leaders with "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas."

The proposals were developed in consultation with No 10 North, a unit holding weekly meetings with local leaders to identify economic barriers. These discussions led to a change in the Treasury's "green book" guidance. Under the new rules, projects that can be combined to boost growth, such as housing and transport schemes, can now be assessed together. A white paper on "rewiring the state" will follow the budget to outline how the civil service will be reshaped as powers 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, including on banks. The Chancellor aims to provide "breathing space" for the economy after the Middle East conflict pushed up bills and raised government borrowing costs. Healey will also explain how he plans to fully fund the four-year defence investment plan announced under Keir Starmer. He is not expected to specify when the UK will commit to spending 3% of GDP on defence, a decision likely to wait for a spending review next year.