New rules give local leaders control over billions in growth funds

Residents in English cities and towns may see faster progress on housing, transport, and high street projects due to a new fiscal framework announced by the government. Under this plan, local leaders will gain greater autonomy to allocate funds and borrow money without seeking approval for every single initiative from central authorities. The shift aims to streamline decision-making and allow regional priorities to drive local economic growth more directly.

The core of the package, set to be detailed in Chancellor John Healey’s statement on Wednesday, includes a new borrowing facility worth 1.5 billion pounds. This funding will be developed in collaboration with regional mayors over the next two years. The move addresses long-standing complaints from local leaders that limited borrowing capabilities have hindered their ability to compete with counterparts in the United States and parts of Europe, who routinely issue their own bonds. Additionally, the plan provides an initial 285 million pounds in growth funding for next year, which local authorities can spend on self-determined priorities such as new homes or improved transport links.

This immediate funding is designed to bridge the gap until 2028. At that point, a new system is expected to channel a portion of income tax revenue directly to local areas. This model was initially proposed by former Chancellor Rachel Reeves earlier this year. The budget will provide further details on how this revenue sharing will work, with the goal of allowing local leaders to retain part of the income generated by a stronger local economy. This financial stake is intended to incentivize the adoption of policies that support long-term growth.

Prime Minister Andy Burnham described the changes as a decisive step away from the previous centralized model of public spending. He stated that the era of local leaders going to Westminster for permission on each project is ending. Burnham, who previously served as the mayor of Greater Manchester, noted that the UK’s tax and spending structures are more centralized than in many other leading economies. He argued that decisions which can be made closer to home should be handled locally to improve efficiency and responsiveness.

Concerns remain within the Treasury regarding whether all local authorities possess the necessary skills to manage larger budgets. To address this, Healey will announce a 150 million pound fund to help these bodies build expertise and scale up their administrative capabilities. The government has developed this package with No 10 North, a unit holding weekly meetings with local leaders to identify barriers to economic growth. This collaboration also led to changes in the green book, the Treasury’s guidance on public investment. The new rules allow combined projects, such as housing and transport schemes, to be assessed together to better reflect their combined economic impact.

Healey emphasized that the government is providing local leaders with more money, power, and capacity to execute projects. While the chancellor’s first budget will focus on these structural changes, it is also expected to include support for households facing rising energy costs. Modest tax increases, including on banks, are anticipated to help balance the books. The chancellor will also explain how the four-year defense investment plan will be funded, though a decision on committing to spend 3% of gross domestic product on defense is likely to wait for a future spending review.

The government plans to publish a white paper on reshaping the civil service after the budget. This document will outline how the state will be reorganized as more powers move away from central departments in Whitehall. The overall strategy reflects a broader effort to decentralize economic control and empower regional leaders to drive growth within their specific communities.