Chancellor Healey's First Budget to Hand Mayors £1.5bn Borrowing Power

Chancellor John Healey's first budget, delivered Wednesday, will include a £1.5bn borrowing facility for England's regional mayors — the largest shift in local spending power in a generation. Prime Minister Andy Burnham said the package ends an era in which local leaders had to come "cap in hand to Westminster."

The borrowing plan will be drawn up in collaboration with mayors over the next two years. It addresses a long-standing complaint: UK regional mayors lack the borrowing tools that local authorities in the US and some European countries take for granted, where cities commonly issue their own bonds.

What does the devolution package contain?

Three headline figures frame the package:

• £1.5bn — a new borrowing facility for regional mayors, developed jointly over two years
• £285m — initial "good growth" funding next year, spent on local leaders' own priorities: housing, transport links or high street regeneration
• £150m — support for local authorities the Treasury fears lack the capacity to administer increasingly large budgets, helping them scale up and build expertise

Burnham, who experienced the constraints first-hand as mayor of Greater Manchester, said the changes mean local leaders will no longer need Treasury approval for each individual project.

"I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country," Burnham said. "When I became prime minister, I said that if a decision can be made closer to home, it should be."

He added: "Today we're putting that into practice, shifting power out of Westminster and into the hands of the people who know their communities best."

The £285m is a bridge. It tides local authorities over until a new system launches in 2028, when some income tax revenue will flow directly to their areas — an idea first mooted by Healey's predecessor, Rachel Reeves, earlier this year. More detail on the mechanics comes at the budget. Local leaders are expected to keep a share of the additional revenue a stronger local economy generates, giving them a direct incentive to back pro-growth policies.

Why now?

Tax and spending in the UK is more centralised than in many leading economies. The package was built with No 10 North, which has run a weekly "situation room" meeting with local leaders to identify barriers to economic growth.

That work already produced a change this week to the Treasury's "green book", the guidance determining which projects taxpayers fund. Under the new rules, projects that combine to boost growth — a housing scheme paired with a transport scheme, for example — can now be considered together rather than in isolation.

A government white paper on "rewiring the state", due after the budget, will detail how the civil service gets reshaped as powers move down from Whitehall.

Healey framed the package in practical terms: "Mayors and local leaders know what their communities need to grow, which is why we are giving them more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas."

What else is in the budget?

Devolution is not the whole story. Healey's budget is expected to include:

• Support for poorer households hit by rising energy costs
• Modest tax rises, including on banks
• Full funding plans for the four-year defence investment plan announced in the dying days of Keir Starmer's premiership

The chancellor has repeatedly said he wants to offer a "breathing space" to households and businesses that have struggled as the war in the Middle East has driven up bills.

Those same costs have pushed up interest rates on government borrowing, making it harder for Healey to balance the books.

One thing he is not expected to say: when the UK will commit to spending 3% of GDP on defence. That issue was central to his resignation from Starmer's cabinet, and the commitment will likely be delayed until a spending review due next year.

What's the so-what?

For mayors, the budget converts a decade of devolution rhetoric into borrowing capacity and a guaranteed revenue stream from 2028 — but the Treasury's £150m capacity fund signals it still doubts every council can handle the money.