Chancellor Healey Grants Local Leaders £1.5bn Borrowing Authority

Chancellor John Healey will unveil a significant expansion of local financial powers in his first budget statement on Wednesday. The centerpiece of the proposal is a new £1.5bn borrowing facility designed to reduce the reliance of English local leaders on central government approval for major projects. This move marks a substantial shift in fiscal policy, granting regional authorities greater autonomy over their economic development.

The new borrowing mechanism will be established in consultation with mayors over the next two years. Regional leaders have long contended that limited access to debt markets hinders their ability to invest in local infrastructure. This approach aligns England more closely with practices in the United States and parts of Europe, where local authorities routinely issue their own bonds to fund public projects. By providing this facility, the government seeks to remove a key barrier to local investment.

In addition to borrowing powers, the package includes an initial allocation of £285m in growth funding for the coming year. Local leaders will have discretion to direct these funds toward priorities such as housing, transport links, or high street regeneration. This short-term funding is intended to bridge the gap until 2028. By that time, a new system will transfer a portion of income tax revenue directly to local areas, providing them with longer-term financial security. This revenue-sharing concept was first proposed earlier this year by Healey’s predecessor, Rachel Reeves.

Prime Minister Andy Burnham stated that the changes would end the era of local leaders seeking Treasury approval for every individual project. He described the previous model as an inefficient way to govern, emphasizing that decisions made closer to home are often better suited to local needs. To support this transition, Healey will announce £150m to help local authorities build the expertise required to manage larger budgets. The government aims to give communities more money, power, and capacity to drive growth and build homes.

The policy package was developed in collaboration with No 10 North, which held weekly meetings with local leaders to identify barriers to economic growth. This work resulted in changes to the Treasury’s green book guidance. Under the new rules, projects that can be combined to boost growth, such as housing and transport schemes, can now be assessed together. A white paper on reshaping the civil service is also expected after the budget. Healey’s statement will also address support for households facing higher energy costs and include modest tax rises, including on banks, to provide breathing space after recent global conflicts.

The chancellor will also outline how he plans to fully fund the four-year defense investment plan announced in the final days of Keir Starmer’s premiership. He is not expected to commit to a specific timeline for reaching the 3% of GDP defense spending target. That decision is likely to await a spending review scheduled for next year. The budget will balance these long-term structural changes with immediate measures to stabilize public finances and support economic growth.