Chancellor Healey Prepares to Grant Regional Mayors Significant New Financial Autonomy

Chancellor John Healey is set to unveil a substantial transfer of fiscal authority to regional mayors during his upcoming budget statement on Wednesday. This measure represents the first major economic announcement of his tenure and aims to reduce the reliance of local governments on central approval for individual initiatives.

The core of the proposal involves a new borrowing facility valued at 1.5 billion pounds. Over the next two years, this mechanism will be established in collaboration with regional mayors, who have frequently cited restricted borrowing capabilities as a hindrance to local development. This approach mirrors practices in the United States and various European nations, where local authorities routinely issue their own debt instruments.

In addition to the borrowing powers, the package allocates 285 million pounds in immediate funding designated for productive growth. Local leaders will have the discretion to direct these resources toward priorities such as housing, transport infrastructure, or commercial district revitalization. This initial sum is intended to serve as a transitional measure until 2028. At that point, a new framework will allow some income tax revenue to flow directly to local areas, providing longer term financial stability. This concept was initially introduced by Healey’s predecessor, Rachel Reeves, earlier this year.

Prime Minister Andy Burnham framed the changes as a necessary correction to the current centralized model. He stated that the government is ending the practice of local officials seeking permission from Westminster for every project. Burnham noted that he recognized these constraints during his time as mayor of Greater Manchester and believes decisions should be made as close to the community as possible. Healey echoed this sentiment, asserting that local leaders possess the best understanding of their specific regional needs. He described the package as providing more money, power, and capacity to accelerate projects and build homes.

The Treasury has acknowledged internal concerns regarding the ability of some local authorities to manage expanding budgets. To address this, the budget will include 150 million pounds to help these bodies build necessary expertise and scale their operations. Further details on the revenue sharing model will be provided, with the expectation that local leaders will retain a portion of additional revenue generated by a stronger local economy. This arrangement is designed to incentivize support for policies that foster growth.

The development of this package involved collaboration with No 10 North, which has held weekly meetings with local leaders to identify economic barriers. This dialogue led to recent adjustments in the Treasury’s green book, its guidance on public investment. Under the new rules, complementary projects, such as housing and transport schemes, can now be assessed together. A white paper on reshaping the civil service is expected to follow the budget, outlining how more powers will move from Whitehall to local levels.

The budget is also expected to address the financial impact of recent energy price increases on poorer households and include modest tax rises, particularly on the banking sector. Healey has emphasized the need to provide breathing space for businesses and families after the Middle East conflict drove up costs. These higher expenses have also increased the interest rates on government borrowing, complicating fiscal balance. The Chancellor will explain how he intends to fully fund the four year defence investment plan announced under the previous government. A decision on spending three percent of GDP on defence is likely to be deferred until a spending review scheduled for next year.