UK Budget to Grant Mayors Direct Control Over 1.5 Billion Pounds

1.5 billion pounds. That is the size of the new borrowing facility Chancellor John Healey plans to announce in his budget statement next Wednesday. The fund will be negotiated with regional mayors over a two-year period, marking a major shift in how local infrastructure is financed in England.

The move is designed to eliminate the bureaucratic hurdle that currently forces local authorities to request permission from the central government for individual projects. Prime Minister Andy Burnham described the current process as leaders going "cap in hand to Westminster." He argued that this method is an inefficient way to manage a country and stated that decisions should be made closer to home whenever possible.

Beyond the borrowing powers, the package includes an initial allocation of 285 million pounds in "good growth" funding for the next year. Local leaders will have the discretion to spend these funds on their specific priorities, which may include housing development, transport links, or the regeneration of high streets. This immediate funding is intended to bridge the gap until 2028, when a new revenue-sharing system will come into effect.

That long-term system, first proposed by former Chancellor Rachel Reeves, will allow local areas to retain a portion of income tax revenue generated within their regions. Healey is expected to provide further details on this model in the budget. The logic is that if local authorities keep part of the extra revenue from a stronger local economy, they will have a direct financial incentive to support policies that drive growth.

However, Treasury officials have raised concerns about whether some local authorities currently have the capacity to manage larger budgets. To address this, Healey will announce a 150 million pound package to help local governments build expertise and scale up their administrative functions. Healey stated that the government is giving mayors "more money, more power and more capacity" to make decisions for their areas.

The development of this package involved No 10 North, a government unit that has held weekly meetings with local leaders to identify barriers to economic growth. This work recently led to a change in the Treasury's "green book" guidance, which allows for combined assessment of projects that boost growth, such as pairing a housing scheme with a transport link. A white paper on reshaping the civil service is also due after the budget.

Other elements of the upcoming statement include support for households facing rising energy costs and modest tax increases, including on banks. Healey has cited the need to provide "breathing space" after the Middle East conflict pushed up bills and raised interest rates on government borrowing. He will also outline funding for the four-year defence investment plan announced during the final days of Keir Starmer's premiership, though the timing of a commitment to spend 3% of GDP on defence remains undecided.