Local Finance: Mayors Gain Direct Access to £1.5bn Borrowing Fund

English regional mayors will gain direct control over a new borrowing facility worth 1.5 billion pounds, a shift that removes the need for case-by-case approval from the central government. Prime Minister Andy Burnham announced the plan on Friday, stating that local leaders will no longer have to go "cap in hand to Westminster" for funding. Chancellor John Healey is scheduled to deliver the detailed budget statement on Wednesday.

The 1.5 billion pound facility will be structured over the next two years in consultation with mayors. Regional leaders have long cited limited borrowing authority as a barrier to development. In the United States and several European nations, local authorities routinely issue their own bonds, a mechanism that remains restricted in the UK.

Alongside the borrowing powers, the package includes 285 million pounds in initial growth funding for the upcoming fiscal year. Local authorities will have discretion over how to allocate these funds, with potential uses including housing development, transport infrastructure, and high street regeneration. The funding is intended to bridge the gap until 2028, when a new revenue-sharing model is set to take effect.

Under the 2028 plan, local areas will retain a portion of income tax revenue. This system was first proposed by former Chancellor Rachel Reeves earlier this year. The goal is to provide longer-term financial security and incentivize local policies that drive economic growth. Healey will provide further specifics on this revenue-sharing model in the budget.

To address concerns within the Treasury regarding the capacity of local authorities to manage larger budgets, Healey will allocate 150 million pounds to build administrative expertise. The funding is designed to help councils scale up their operations and handle increased financial responsibilities.

Burnham framed the changes as a correction to a historically centralised system of tax and spending. He noted that he experienced these limitations firsthand while serving as mayor of Greater Manchester. "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country," Burnham said. He emphasized that decisions capable of being made locally should be made locally.

Healey stated that the government is providing local leaders with "more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas." The package was developed in collaboration with No 10 North, a unit holding weekly meetings with local leaders to identify barriers to economic growth.

This week, the Treasury also revised its "green book" guidance on public investment. The new rules allow for the joint assessment of projects that combine different sectors, such as housing and transport, to boost overall growth. A white paper on restructuring the civil service, titled "rewiring the state," will follow the budget to outline how powers will move from Whitehall to local levels.

The budget is expected to include measures to support households facing rising energy costs, as well as modest tax increases on banks. Healey has cited the need to provide "breathing space" after Middle East conflict drove up bills and increased government borrowing costs. The statement will also detail funding for a four-year defence investment plan, though a decision on committing to 3% of GDP for defence spending is likely to wait for a future review.