Healey Sets Up £1.5bn Fund for English Mayors to Borrow Directly

Chancellor John Healey will introduce a new borrowing mechanism for English mayors in his budget statement on Wednesday.

The package includes a £1.5bn borrowing facility that regional mayors will help structure over the next two years.

This move addresses long-standing complaints from local leaders that limited borrowing powers restricted their ability to fund infrastructure.

Local authorities in the United States and parts of Europe frequently issue their own bonds, a practice rare in England until now.

The government will also release £285m in initial funding for local priorities next year.

Mayors can allocate these funds to housing, transport links, or high street regeneration projects.

This money is designed to bridge the gap until 2028, when a new system will direct some income tax revenue to local areas.

That revenue-sharing model was first proposed by Rachel Reeves, Healey’s predecessor, earlier this year.

Local leaders will retain a portion of the extra revenue generated by a stronger local economy.

This structure is intended to encourage local authorities to support policies that drive growth.

Prime Minister Andy Burnham stated that the changes would end the need for local leaders to seek Treasury approval for individual projects.

Burnham said, “I’m calling time on local leaders going cap in hand to Westminster. That is no way to run a country.” He noted that decisions made closer to home should be made there, a principle he supported after serving as mayor of Greater Manchester. Healey added that local leaders understand their communities’ needs better than central planners. He described the package as providing “more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas.” The Treasury has allocated £150m to help local authorities build the expertise needed to manage larger budgets. Officials inside the Treasury expressed concern that some authorities may struggle with the increased financial responsibility. The plan was developed in coordination with No 10 North, which held weekly meetings with local leaders to identify barriers to economic growth. These discussions led to a change in the Treasury’s “green book” guidance on project funding. Under the new rules, projects that can be combined to boost growth, such as housing and transport schemes, can be assessed together. A white paper titled “rewiring the state” will follow the budget to outline how the civil service will be reshaped as powers move from Whitehall. Healey’s budget is also expected to include support for households facing higher energy costs and modest tax increases on banks. The chancellor aims to provide “breathing space” for the economy after rising bills and higher government borrowing rates. Healey will also detail plans to fund the four-year defence investment plan announced under Keir Starmer’s premiership. The government is not expected to commit to spending 3% of GDP on defence at this time, a decision that may wait for a spending review next year.