English mayors to gain direct access to 1.5 billion pounds in new borrowing scheme

The United Kingdom government is set to shift economic control away from Westminster, granting regional leaders in England direct authority over public funds. Chancellor John Healey will present the new framework during his budget statement next Wednesday.

The central element of the plan is a 1.5 billion pound borrowing facility. Regional mayors will have two years to structure this loan, ending a long-standing practice where local leaders sought Treasury approval for each individual project. This approach mirrors systems used in the United States and parts of Europe, where local authorities commonly issue their own bonds.

The package also provides an initial 285 million pounds in growth funding for the coming year. Local leaders will determine how to allocate these resources, with options including housing developments, transport links, or high street regeneration. The funds are intended to bridge the gap until 2028, when a new system will transfer a portion of income tax revenue directly to local areas. Prime Minister Andy Burnham stated that this shift ends the need for local leaders to seek permission from the center.

Burnham described the previous model as inefficient, noting that decisions made closer to home should be made locally. He referenced his time as mayor of Greater Manchester to illustrate the constraints of a highly centralized tax and spending system. The government developed the package in consultation with local leaders through a weekly meeting format, which also led to a change in the Treasury's guidance on public project assessment.

Healey acknowledged that some local authorities may lack the infrastructure to manage larger budgets. To address this, the government will allocate 150 million pounds to help these bodies build technical expertise and capacity. Healey said the move gives local leaders more money, power, and capacity to make decisions for their specific areas.

The budget will also outline how the government plans to fund a four-year defense investment plan. Healey is not expected to announce when the UK will commit to spending 3 percent of GDP on defense, a decision likely to be deferred until a spending review next year. The statement will also include support for households facing rising energy costs and modest tax increases, including a levy on banks.

A white paper on reshaping the civil service is scheduled for release after the budget. The document will detail how administrative powers will move from central government to local regions. The new revenue-sharing model aims to give local leaders a financial incentive to support policies that drive economic growth in their areas.