More Money and Power for England's Local Leaders: Healey's First Budget to Include Big Devolution Package

Chancellor John Healey is set to announce a major plan in next week's budget to give England's local leaders more money, more power and more capacity, in a devolution package aimed at boosting regional economic growth.

Prime Minister Andy Burnham has already promised that local leaders will no longer have to come cap in hand to Westminster for approval of every individual project. Healey's statement on Wednesday will build on that promise.

The centrepiece of the package will be a new £1.5 billion borrowing facility, to be drawn up in collaboration with mayors over the next two years, allowing regions to finance their own priority projects.

Regional mayors have long complained that their borrowing power is constrained, in contrast to local authorities in the United States and some European countries, which commonly issue their own bonds.

Alongside the borrowing plan, an initial £285 million in 'good growth' funding will be allocated next year, to be spent on local leaders' priorities, which could include housing, transport links or high street regeneration.

Amid fears in the Treasury about whether some local authorities have the capacity to administer increasingly large budgets, Healey will also announce £150 million of support to help them scale up and build expertise.

Hailing the plans, Burnham said they would mean local leaders would no longer need Treasury approval for each project. He said he was calling time on local leaders going cap in hand to Westminster, arguing that if a decision can be made closer to home, it should be.

The £285 million is intended to tide local authorities over until a new system comes into force in 2028, under which some income tax revenue will be handed directly to their areas to give them longer-term security, an idea first mooted by Healey's predecessor, Rachel Reeves.

More details of how this will work will be announced at the budget. Local leaders are expected to be allowed to keep some of the additional revenues created by a stronger local economy, giving them an incentive to back pro-growth policies.

Tax and spending in the UK is more centralised than in many other leading economies, and Burnham experienced those constraints first-hand as mayor of Greater Manchester, an experience that lies behind the current reforms.

Healey said mayors and local leaders know what their communities need to grow, which is why the government is giving them more money, more power and more capacity to get projects moving, build homes and make the right decisions for their areas.

The package has been drawn up in collaboration with No 10 North, which has held weekly 'situation room' meetings with local leaders to ask about barriers to growth. A government white paper on 'rewiring the state', due after the budget, will set out more details of how the civil service will be reshaped as more powers are passed down from Whitehall. The budget is also expected to include support for poorer households hit by rising energy costs and modest tax rises, including on banks.