Fiscal Autonomy: Chancellor Healey to Grant Mayors £1.5bn Borrowing Authority

Chancellor John Healey is set to announce a £1.5 billion borrowing facility for local leaders in England during his budget statement on Wednesday. This financial instrument represents a central component of a devolution package designed to alter how regional governments access capital. Under the new rules, regional mayors will no longer require individual approval from the central Treasury for each specific project. Instead, they will have direct access to the facility, a structure that will be finalized in consultation with mayors over the next two years.

Prime Minister Andy Burnham described the shift as an end to local leaders going cap in hand to Westminster. He stated that the new arrangements would allow decisions to be made closer to the communities they affect. This approach aligns with practices in the United States and parts of Europe, where local authorities routinely issue their own bonds. The UK has historically maintained a more centralized tax and spending system than these other major economies.

The package also includes an initial allocation of £285 million in growth funding for the coming year. Local leaders will determine how to deploy these resources, with potential applications including housing construction, transport links, and high street regeneration. This immediate funding is intended to serve as a bridge until 2028. By that date, a new revenue-sharing system is scheduled to begin, passing a portion of income tax directly to local areas to provide longer-term financial security.

Treasury officials have expressed concern regarding the administrative capacity of some local authorities to manage larger budgets. To address this, Healey will announce a separate £150 million package to help regions build internal expertise and scale their operations. The government is also modifying its economic guidance, known as the green book. The updated rules will allow projects that can be combined to boost growth, such as housing and transport schemes, to be assessed together rather than in isolation.

Healey stated that the government is providing more money, power, and capacity to help local leaders build homes and make decisions for their areas. The policy development involved a weekly situation room meeting between the No 10 North office and local leaders to identify barriers to economic growth. A white paper on reshaping the civil service is due to follow the budget, detailing how administrative powers will move from Whitehall to regional bodies.

The budget statement will also address support for households facing rising energy costs, which have increased following the war in the Middle East. Healey is expected to propose modest tax increases, including measures targeting the banking sector, while providing relief to consumers. The chancellor must also outline the funding for the four-year defense investment plan announced during the final days of Keir Starmer’s premiership.

Further details on the revenue-sharing model will be provided in the budget documents. Local leaders are expected to retain a portion of the additional revenue generated by a stronger local economy, creating a direct incentive to support pro-growth policies. Healey’s statement will not determine when the UK commits to spending 3% of GDP on defense, a decision that is likely to wait for a spending review scheduled for next year.

The budget marks the first major fiscal statement from Healey since taking office. The measures aim to balance immediate economic support with structural changes to local government financing. The government intends to give households and businesses breathing space after recent cost increases while addressing the higher interest rates on government borrowing.