Mayors get direct access to £1.5bn borrowing fund

Prime Minister Andy Burnham announced that local leaders in England will gain direct control over a new £1.5bn borrowing facility. Chancellor John Healey is scheduled to present the details in his budget statement on Wednesday. The move ends the requirement for mayors to seek individual Treasury approval for specific projects.

The borrowing powers will be established over the next two years. Regional mayors have long argued that limited access to capital restricts local development. In comparison, local authorities in the United States and parts of Europe frequently issue their own bonds.

The package also includes £285m in initial funding for local priorities next year. Leaders can allocate this money to housing, transport links, or high street regeneration. This funding serves as a bridge until 2028, when a new system will transfer a portion of income tax revenue directly to local areas. This long-term security measure was first proposed by Rachel Reeves earlier this year.

Healey will provide further details on the revenue-sharing model during the budget. Local leaders are expected to retain part of the extra revenue generated by a stronger local economy. This structure aims to incentivize support for pro-growth policies.

Burnham stated that the changes would stop local leaders from having to beg Westminster for funds. "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country," he said. He noted that he experienced these limits firsthand as mayor of Greater Manchester. Healey added that the government is giving leaders "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas."

The plan was developed with No 10 North, which has held weekly meetings with local leaders to identify barriers to growth. This work resulted in changes to the Treasury's "green book" guidance. Under the new rules, projects that boost growth together, such as a housing scheme and a transport link, can be assessed jointly. A white paper on reshaping the civil service is due after the budget.

Healey's first budget is also expected to include support for poorer households facing higher energy costs and modest tax rises on banks. He aims to provide "breathing space" after the Middle East war pushed up bills. The chancellor will also explain how to fund the four-year defence investment plan. He is not expected to commit to spending 3% of GDP on defence, a decision likely to wait for a spending review next year.