Healey Prepares to Grant Mayors Direct Borrowing Authority in Upcoming Budget

Chancellor John Healey is set to unveil a major shift in how local governments operate in England during his budget statement this Wednesday. The centerpiece of the plan is a new £1.5 billion borrowing facility that will be developed with regional mayors over the next two years. This move directly addresses long-standing complaints from local leaders who argued that their limited access to debt markets held back economic progress. Unlike authorities in the United States and parts of Europe, English local governments have rarely been able to issue their own bonds.

Alongside the borrowing power, the package includes an initial £285 million in growth funding for next year. Local leaders will have the freedom to allocate these funds to their own priorities, such as housing, transport links, or high street regeneration. This money is designed to bridge the gap until 2028, when a new system is expected to pass some income tax revenue directly to local areas. This idea was first proposed earlier this year by Rachel Reeves, Healey’s predecessor. Further details on how this revenue sharing will work are expected in the budget.

The goal of the revenue-sharing model is to allow local leaders to retain a portion of the extra revenue generated by a stronger local economy. This creates a direct incentive for local authorities to support policies that drive growth. However, there are concerns within the Treasury about whether some local authorities have the capacity to manage increasingly large budgets. To address this, Healey will announce £150 million to help these bodies scale up and build the necessary expertise.

Prime Minister Andy Burnham described the changes as an end to the era where local leaders had to seek Treasury approval for every individual project. He stated that he is calling time on local leaders going to Westminster with their hands out, arguing that this is not an efficient way to run the country. Burnham noted that he had previously said decisions that can be made closer to home should be, drawing on his own experience as mayor of Greater Manchester where he felt the limits of centralized power.

Healey emphasized that mayors and local leaders understand the specific needs of their communities better than central officials. He said the government is providing them with more money, more power, and more capacity to get projects moving and build homes. The package was developed in consultation with No 10 North, which has held weekly meetings with local leaders to identify barriers to economic growth. This collaboration led to a change in the Treasury’s green book guidance, allowing projects like housing and transport schemes to be assessed together if they boost growth.

A white paper on reshaping the civil service is also due after the budget to outline how more powers will move from Whitehall. The budget is expected to include support for poorer households dealing with rising energy costs, along with modest tax rises on banks. Healey aims to provide breathing space for households and businesses after the war in the Middle East pushed up bills and raised interest rates on government borrowing.

The chancellor will also explain how he plans to fully fund the four-year defense investment plan announced during the final days of Keir Starmer’s premiership. He is not expected to specify when the UK will commit to spending 3 percent of GDP on defense, a decision that was central to his resignation from Starmer’s cabinet. That determination is likely to wait for a spending review scheduled for next year.