£1.5bn fund to end mayoral reliance on Westminster for capital projects

A new borrowing facility worth £1.5 billion will allow mayors in England to fund major projects without seeking individual approval from the central Treasury, according to plans to be revealed in next week’s budget.

The funding package, set to be announced by Chancellor John Healey on Wednesday, includes an initial allocation of £285 million for local growth initiatives. Regional leaders will have discretion over how these funds are deployed, with potential uses including housing development, transport links, and high street regeneration. This initial cash is designed to bridge the gap until 2028, when a new revenue-sharing system is expected to pass some income tax directly to local areas.

The borrowing facility will be developed over the next two years. Regional mayors have long argued that limited access to capital markets has constrained their ability to invest in infrastructure. In contrast to the United Kingdom, local authorities in the United States and parts of Europe routinely issue their own bonds to finance public works.

Prime Minister Andy Burnham stated that the new framework would end the practice of local leaders seeking Treasury permission 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," he said. Burnham, who previously served as mayor of Greater Manchester, noted that tax and spending in the UK are more centralized than in many other leading economies.

Healey described the package as 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 policy development involved No 10 North, a government unit holding weekly meetings with local leaders to identify barriers to economic growth. This collaboration led to a change in the Treasury’s "green book" guidance, which now allows combined assessment of projects, such as pairing a housing scheme with a transport project, to boost growth.

The Treasury has expressed concern over the administrative capacity of some local authorities to manage larger budgets. To address this, Healey will announce £150 million to help councils scale up operations and build internal expertise. A white paper on reshaping the civil service, due after the budget, will outline how powers move from Whitehall to local levels.

The budget is also expected to include support for poorer households affected by rising energy costs, alongside modest tax increases, including on banks. Healey has stated the goal is to provide "breathing space" for households and businesses after the war in the Middle East pushed up costs. These higher expenses have increased interest rates on government borrowing, complicating efforts to balance the national books.

The Chancellor will also outline funding for the four-year defence investment plan announced under Keir Starmer. He is not expected to specify when the UK will commit to spending 3% of GDP on defence, a decision that is likely to wait for a spending review next year.