UK Chancellor to Grant Local Mayors Direct Access to £1.5bn Borrowing Facility

Chancellor John Healey will announce a £1.5 billion borrowing facility that allows local leaders in England to issue debt without seeking individual approval from the central government. This measure marks the first major shift in fiscal devolution for English mayors and is set to be presented in the budget statement scheduled for Wednesday.

Prime Minister Andy Burnham described the new arrangements as a conclusion to the era where local officials must seek permission from Westminster for every project. He stated that the government is moving away from a model where local leaders go "cap in hand" to central authorities for funding decisions.

The borrowing facility will be structured in consultation with mayors over the next two years. Regional leaders have long argued that their current borrowing limits restrict their ability to fund essential infrastructure. In contrast, local authorities in the United States and various European nations routinely issue their own bonds to finance development.

In addition to the borrowing powers, the budget includes an initial allocation of £285 million in growth funding for the coming year. Local authorities will have discretion over how to spend these funds, with potential uses including housing construction, transport improvements, and high street regeneration.

This funding is designed to bridge the gap until 2028. By that year, a new system will pass a portion of income tax revenue directly to local areas. This long-term revenue stream was initially proposed by former Chancellor Rachel Reeves earlier this year. The budget is expected to provide further details on this revenue-sharing model, which aims to give local leaders a financial incentive to support policies that drive economic growth.

Treasury officials have raised concerns about the administrative capacity of some local authorities to manage larger budgets. To address this, Healey will announce a £150 million package to help these bodies build the necessary expertise and scale up their operations.

The devolution package was developed in cooperation with No 10 North, a unit that has held weekly meetings with local leaders to identify barriers to economic growth. This process led to a change in the government's "green book" guidance this week. Under the new rules, projects that can be combined to boost growth, such as a housing scheme and a transport link, can now be assessed together.

A white paper on reshaping the civil service is due for release after the budget. It will outline how the state will be reorganized as more powers move from Whitehall to local levels. Healey stated that the government is giving mayors "more money, more power and more capacity" to make decisions specific to their communities.

The budget is also expected to include support for households affected by rising energy costs and modest tax increases, including on the banking sector. Healey has indicated a desire to provide "breathing space" for households and businesses after Middle East conflicts pushed up energy bills.

The Chancellor will also address how the government intends to fully fund the four-year defence investment plan announced during the final days of Keir Starmer's premiership. He is not expected to commit to a timeline for the UK to reach a defence spending target of 3 percent of GDP, a decision likely to be deferred until a spending review next year.