Chancellor Healey Unveils Major Local Power Shift in First Budget

Chancellor John Healey will hand English local leaders significantly more financial control in his first budget statement scheduled for Wednesday. The move marks a decisive break from previous practices, allowing mayors and regional authorities to manage their own funds without seeking approval from the central government for every individual project. Prime Minister Andy Burnham announced the package, describing it as a necessary step to modernize how the UK manages its economy and empowers local communities.

The core of the new framework is a 1.5 billion pound borrowing facility. This financial tool will be established in partnership with regional mayors over the next two years. For a long time, local leaders have argued that restricted borrowing capabilities limited their ability to fund large-scale infrastructure and development projects. In contrast, local authorities in the United States and several European nations routinely issue their own bonds to finance local needs, a practice England has largely avoided until now.

Alongside the borrowing powers, the government is allocating an initial 285 million pounds in growth funding for the coming year. Local leaders will have the discretion to direct this money toward their specific regional priorities. These could include new housing developments, improved transport links, or the regeneration of struggling high streets. The immediate funding is designed to serve as a bridge until 2028. At that point, a new system will transfer a portion of income tax revenue directly to local areas, providing them with greater long-term financial security. This concept was first introduced by former Chancellor Rachel Reeves earlier this year.

The budget will also provide further details on the revenue-sharing model. Under the new rules, local leaders will retain a share of the additional revenue generated by a stronger local economy. This structure creates a direct financial incentive for regional authorities to support policies that drive growth. However, officials within the Treasury have raised concerns about whether some local authorities possess the capacity to manage increasingly large budgets. To address this, Healey will announce a 150 million pound package to help these bodies scale up and build necessary expertise.

Prime Minister Burnham emphasized that the changes would end the era of local leaders going to Westminster for permission on every initiative. He stated that he is calling time on local leaders going cap in hand to Westminster, asserting that this is no way to run a country. Burnham noted that when he assumed the role of prime minister, he pledged that decisions which could be made closer to home should be made there. As the former mayor of Greater Manchester, he experienced the limits of a centralized tax and spending system firsthand, which is more concentrated in the UK than in many other leading economies.

The development of this package involved close collaboration with No 10 North, which has held weekly situation room meetings with local leaders to identify barriers to economic growth. This work recently led to a change in the Treasury's green book guidance. The updated 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 expected to follow the budget, outlining how the civil service will be reshaped as powers move away from Whitehall.

Beyond local devolution, Healey's first budget is expected to include support for poorer households facing rising energy costs. The plan also includes modest tax increases, including measures affecting banks. Healey has repeatedly stated his goal of providing breathing space for households and businesses after the war in the Middle East pushed up bills. These higher costs have also raised interest rates on government borrowing, making it more difficult to balance the national books.

The chancellor will also explain how he intends to fully fund the four-year defence investment plan announced in the final days of Keir Starmer's premiership. He is not expected to specify when the UK will commit to spending 3 percent of GDP on defence. This issue was central to his resignation from Starmer's cabinet and is likely to wait for a spending review due sometime next year.