Burnham pledges £1.5bn fund to end mayoral reliance on Westminster

Local leaders in England will gain access to a new £1.5bn borrowing facility starting next week, according to Prime Minister Andy Burnham. The fund is designed to replace the current system where regional mayors must seek Treasury approval for individual projects. Burnham described the previous process as local leaders going "cap in hand to Westminster," a phrase he used to argue that the current model is inefficient for running the country.

The announcement is set to be made by Chancellor John Healey in his first budget statement on Wednesday. This marks the first major fiscal shift under the new leadership, following a period of rising energy costs and increased government borrowing rates caused by the war in the Middle East. Healey aims to provide households and businesses with "breathing space" while balancing the books.

Regional mayors have long argued that limited borrowing powers hold them back compared to counterparts in the US and Europe, who commonly issue their own bonds. The new facility will be drawn up in consultation with mayors over the next two years. This direct control is intended to give local authorities the flexibility to respond to specific community needs without waiting for central sign-off.

The package includes an initial £285m of "good growth" funding for next year. Local leaders will be able to allocate this money to their own priorities, such as housing, transport links, or high street regeneration. This funding is meant to bridge the gap until 2028, when a new system will pass some income tax revenue directly to local areas.

The idea of direct revenue sharing was first proposed by Rachel Reeves, Healey's predecessor, earlier this year. Further details on the revenue-sharing model will be included in the budget. Local leaders are expected to keep part of the extra revenue generated by a stronger local economy, creating an incentive to support pro-growth policies.

Concerns within the Treasury regarding the capacity of some local authorities to manage larger budgets have led to an additional £150m allocation. This money is intended to help authorities scale up and build necessary expertise. Burnham stated that decisions which can be made closer to home should be, a view he formed while serving as mayor of Greater Manchester.

Healey emphasized that mayors and local leaders know what their communities need to grow. He said the government is providing "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, which has held weekly "situation room" meetings with local leaders to identify barriers to economic growth.

This collaborative work resulted in a change to the Treasury's "green book" guidance this week. The new rules allow projects that can be combined to boost growth, such as a housing scheme and a transport scheme, to be assessed together. A white paper on "rewiring the state" is due after the budget, outlining how the civil service will be reshaped as more powers move down from Whitehall.

Beyond local government, Healey's budget is expected to include support for poorer households affected by rising energy costs. Modest tax rises, including on banks, are also anticipated. The chancellor will explain how he plans to fully fund the four-year defence investment plan announced in the final days of Keir Starmer's premiership.

Healey is not expected to state when the UK will commit to spending 3% of GDP on defence, a decision that contributed to his resignation from Starmer's cabinet. That determination is likely to wait for a spending review scheduled for later next year.