Burnham says 'cap in hand' era is over as mayors take charge of £1.5bn

English mayors will gain direct authority over a new borrowing fund worth 1.5 billion pounds.

Chancellor John Healey plans to reveal the details in his first budget statement next Wednesday. The measure aims to reduce the reliance of local leaders on central government approvals for individual projects. Prime Minister Andy Burnham described the previous process as leaders going cap in hand to Westminster. He stated that this method is no longer the way to run a country.

The new facility will be developed with mayors over the next two years. Regional leaders have long argued that limited borrowing powers restricted their ability to invest. In the United States and parts of Europe, local authorities commonly issue their own bonds. This new structure attempts to align English local finance with those international practices.

The package includes 285 million pounds in initial funding for good growth next year. Local leaders will decide how to spend this money on priorities such as housing, transport links, or high street regeneration. This funding is designed to bridge the gap until 2028. A new system is scheduled to pass some income tax revenue directly to local areas at that time. That concept was first proposed by former Chancellor Rachel Reeves earlier this year.

Further details on the revenue-sharing model will appear in the budget. Local leaders are expected to retain a portion of extra revenue generated by a stronger local economy. This arrangement aims to give them an incentive to support pro-growth policies. However, concerns exist within the Treasury regarding the capacity of some local authorities to manage larger budgets. To address this, Healey will announce 150 million pounds to help councils build expertise and scale up operations.

The plan was developed with No 10 North, which held weekly meetings with local leaders to identify barriers to economic growth. This collaboration led to a change in the Treasury green book guidance. Under the new rules, projects that can be combined to boost growth, such as housing and transport schemes, can be assessed together. A white paper on rewiring the state will follow the budget to explain how the civil service will be reshaped as powers move from Whitehall.

Healey said the government is giving local leaders more money, power, and capacity to build homes. The budget is also expected to include support for poorer households affected by rising energy costs. Modest tax rises, including on banks, are anticipated. Healey has stated he wants to provide breathing space for households and businesses after the Middle East war pushed up bills. These higher costs have raised interest rates on government borrowing, complicating the balancing of the books.

The Chancellor will also explain how he plans to fully fund the four-year defence investment plan. This plan was 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. That decision is likely to wait for a spending review due next year.