Healey allocates £1.5bn for direct local borrowing

A new £1.5 billion borrowing facility will give English regional mayors direct access to capital without requiring Treasury approval for each individual project. Chancellor John Healey is scheduled to announce the details in his budget statement next Wednesday. The measure marks a shift away from the centralized model that Prime Minister Andy Burnham described as forcing local leaders to go "cap in hand to Westminster."

The borrowing facility will be structured with mayors over the next two years. Regional leaders have argued for years that limited borrowing powers constrained their ability to act. In the United States and parts of Europe, local authorities commonly issue their own bonds. The new UK system aims to replicate that flexibility.

The package also provides an initial £285 million in "good growth" funding for next year. Local leaders will determine how to spend this money, with potential uses including housing, transport links, or high street regeneration. This funding is designed to bridge the gap until 2028. That is when a new system is expected to pass some income tax revenue directly to local areas. The concept was first proposed by former Chancellor Rachel Reeves earlier this year.

Healey stated that the government is giving local leaders "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas." He noted that mayors understand the specific needs of their communities for economic growth. The package was developed in consultation with No 10 North, which has held weekly "situation room" meetings with local leaders to identify barriers to growth.

These meetings resulted in a change to the Treasury’s "green book" guidance on public spending. Under the new rules, projects that can be combined to boost growth, such as a housing scheme and a transport scheme, may now be assessed together. A white paper on "rewiring the state" is due after the budget. It will outline how the civil service will be reshaped as powers move from Whitehall to local governments.

Concerns persist within the Treasury regarding the ability of some local authorities to manage increasingly large budgets. To address this, Healey will announce £150 million to help these bodies scale up and build internal expertise. Burnham, who served as mayor of Greater Manchester, said he had pledged to make decisions closer to home when he became prime minister. He described the previous model as inefficient for running a country.

The budget is expected to include support for poorer households facing rising energy costs. Healey has indicated modest tax rises, including on banks, are likely. He has repeatedly stated a desire to provide "breathing space" for households and businesses after the war in the Middle East pushed up bills. Those higher costs have also raised interest rates on government borrowing, complicating the balance of the books.

Healey will also explain how the government plans to fully fund the four-year defence investment plan. This plan was announced in the final days of Keir Starmer’s premiership. The Chancellor is not expected to state when the UK will commit to spending 3% of GDP on defence. That decision is likely to wait for a spending review due next year.