Mayors to control 1.5 billion pounds in new borrowing fund

Local leaders in England will gain direct control over a new 1.5 billion pound borrowing facility in Chancellor John Healey's upcoming budget statement.

The package aims to reduce the reliance of regional authorities on central government approval for major infrastructure and development projects. Prime Minister Andy Burnham stated that the changes will end the need for local leaders to seek Treasury permission for each individual initiative. He described the previous process as inefficient, noting that it forced officials to go to Westminster for approval on matters that could be handled locally.

The borrowing facility is designed to be structured over the next two years in consultation with mayors. Regional leaders have long argued that limited access to capital markets hampers their ability to invest in growth. The new system mirrors practices in the United States and several European nations, where local authorities frequently issue their own bonds to finance public works.

In addition to the borrowing powers, the government will provide 285 million pounds in immediate funding for what officials call good growth. Local authorities will have the discretion to allocate these funds to priorities such as housing, transport links, or high street regeneration. This initial sum is intended to bridge the gap until 2028, when a new revenue-sharing model will take effect.

The 2028 model, first proposed by former Chancellor Rachel Reeves, will allow local areas to retain a portion of the additional income tax generated by a stronger local economy. This structure is designed to incentivize local leaders to support policies that drive economic activity. Healey said the government is providing local leaders with more money, power, and capacity to make decisions for their communities.

The Treasury acknowledges that some local authorities may lack the internal expertise to manage larger budgets. To address this, Healey will announce 150 million pounds to help councils build the necessary administrative capacity. The plan was developed in close coordination with Number 10 North, which has held weekly meetings with local leaders to identify barriers to economic growth.

The budget will also include measures to support households facing rising energy costs, along with modest tax increases on the banking sector. Healey has emphasized the need to provide breathing space for families and businesses after the war in the Middle East pushed up global bills. The statement will also outline the funding plan for the four-year defence investment package announced during the final days of Keir Starmer's premiership.