Burnham ends cap in hand era with 1.5bn fund

Prime Minister Andy Burnham said English local leaders will stop asking Westminster for permission on every project. The new system lets mayors borrow money directly without waiting for Treasury approval. This change is part of a devolution package set for announcement in next week's budget.

The plan includes a £1.5 billion borrowing facility. Mayors will work with the government to draw up this fund over the next two years. Regional mayors have long complained that strict borrowing limits held their areas back. In the United States and parts of Europe, local governments frequently issue their own bonds.

The package also provides £285 million in growth funding for the coming year. Leaders can spend this money on housing, transport links, or high street regeneration. This cash serves as a bridge until 2028. A new system will then pass some income tax revenue directly to local areas. Chancellor John Healey’s predecessor, Rachel Reeves, first proposed this idea earlier this year.

Healey will explain the revenue-sharing model in his statement on Wednesday. Local leaders will keep part of the extra revenue from a stronger local economy. This structure gives them a financial reason to support pro-growth policies. The government aims to link local tax income to local economic performance.

Treasury officials worry that some local authorities lack the staff to manage larger budgets. To address this, Healey will announce £150 million to help these areas build expertise. The goal is to ensure local governments can handle increased responsibility without losing control of their finances.

Burnham, who served as mayor of Greater Manchester, said he experienced the limits of centralised tax and spending firsthand. He stated, "I'm calling time on local leaders going cap in hand to Westminster. That is no way to run a country." Healey added that the government is giving local leaders more money, power, and capacity to build homes and make decisions for their areas.

The package was developed with No 10 North, a unit holding weekly meetings with local leaders to identify barriers to growth. This work led to changes in the Treasury's green book guidance. Projects that can be combined to boost growth, such as housing and transport schemes, can now be assessed together. A white paper on reshaping the civil service is due after the budget.

Healey’s first budget will also cover support for households facing rising energy costs. The statement is expected to include modest tax rises, including on banks. The chancellor aims to give businesses and families breathing space after the Middle East war pushed up bills. He will also explain how he plans to fund the four-year defence investment plan announced during the final days of Keir Starmer's premiership.