Budget to include £1.5bn borrowing facility and £285m fund for local leaders in England
The Treasury says Wednesday's Budget will give mayors and councils more control over spending, ahead of a new system from 2028 that lets areas keep some income tax.
Mayors and local leaders in England are to get a new £1.5bn borrowing facility and an initial £285m to spend on their own priorities, under plans the Treasury says will be in Wednesday's Budget.
The package is the government's latest move to shift spending decisions out of Whitehall. The Chancellor, John Healey, will set it out in his first Budget on 28 October. The Prime Minister, Andy Burnham, who was mayor of Greater Manchester before entering Downing Street, has said local leaders should no longer have to bid to Westminster for each individual project.
What is in the package
Three pieces of funding have been announced so far.
£285m of transitional funding next year. The Treasury calls this seed money for mayors and local leaders. It is meant to replace part of what it describes as a patchwork of separate bidding pots run by Whitehall departments. Areas that are not yet strategic authorities, the formal name for the bodies that cover a city region or county group, will also be able to claim a share. The money could go on housing, transport links or reviving high streets.
A £1.5bn borrowing facility from 2028. The government says it will design this with mayors, so they can raise capital for larger local schemes. Mayors have long argued that their borrowing powers are narrow compared with city and regional governments in the United States and parts of Europe, which often issue their own bonds.
£150m to build expertise. This is meant to help local bodies take on bigger budgets, with the Treasury concerned about whether some have the staff and skills to manage larger sums.
Councils will also be able to borrow from central government at preferential interest rates to invest in housebuilding, the BBC reported.
What happens after 2028
The £285m is designed to tide areas over until a new funding system starts in 2028. Under that system, some income tax raised locally will go directly to the area, giving it a more stable income than one-off grants. Local leaders are expected to keep a share of any extra tax revenue that comes from a growing local economy, which is intended to reward policies that support growth.
The details of how that will work, including which areas qualify and how the shares are calculated, are due in the Budget documents on Wednesday.
How it fits with other changes
The announcement follows changes earlier this week to the Treasury's Green Book, the guidance that decides which projects receive public money. Under the revised rules, linked schemes such as a housing development and the transport needed to serve it can be assessed together rather than separately.
A government white paper on reorganising the civil service, which will cover how more powers pass from Whitehall to local areas, is due to be published after the Budget.
The UK Mayors Network welcomed the plans, and London's mayor said the extra borrowing ability could help unlock major transport projects in the capital.
