Chancellor John Healey is set to unveil a transformative economic blueprint next week, as Healey’s first budget to include big devolution package to boost growth aims to end decades of fiscal centralization in the United Kingdom. The centerpiece of the proposal is a new £1.5 billion ($1.95 billion) borrowing facility designed to allow regional mayors to fund critical infrastructure projects without direct oversight from the Treasury.
This shift in fiscal policy represents a fundamental change in how the British government manages regional development. By collaborating with local mayors over the next two years, the Treasury intends to create a framework where local leaders can leverage debt to stimulate their own economies.
The move comes as prominent regional figures, including Greater Manchester Mayor Andy Burnham, have stepped up their criticism of the current system. Burnham and other leaders have argued for years that the "cap in hand" approach to Westminster stifles innovation and prevents regions from reacting to local economic needs in real-time.
Empowering Mayors: Healey’s First Budget to Include Big Devolution Package to Boost Growth
The proposed £1.5 billion borrowing facility is intended to mirror the financial autonomy seen in the United States and parts of Europe. In those jurisdictions, local authorities frequently issue municipal bonds to fund schools, roads, and public utilities, a practice that has been largely restricted in the U.K.
By providing mayors with expanded borrowing powers, the government hopes to unlock a wave of regional investment. This strategy is a cornerstone of the broader "good growth" initiative, which seeks to decouple local success from the whims of the central government in London.
In addition to the borrowing facility, the Chancellor will announce an initial allocation of £285 million in "good growth" funding for the upcoming fiscal year. These funds are designated for local priorities such as housing developments, transport link expansions, and the regeneration of struggling high streets.
Strategic Funding: Healey’s First Budget to Include Big Devolution Package to Boost Growth
To ensure that local governments are prepared for this influx of responsibility, the budget will include £150 million specifically earmarked for administrative scaling. This funding addresses concerns within the Treasury regarding the capacity of local authorities to manage significantly larger budgets and complex financial instruments.
The capacity-building fund is designed to help regional offices hire financial experts, urban planners, and project managers. This expertise is seen as vital for the successful implementation of the devolution package and for maintaining fiscal discipline at the local level.
Chancellor Healey has emphasized that this is not merely a transfer of funds, but a transfer of decision-making authority. The goal is to move the locus of power to those who possess the most granular knowledge of their communities’ needs and potential for expansion.
Long-Term Vision: Healey’s First Budget to Include Big Devolution Package to Boost Growth
The £285 million in immediate funding serves as a bridge to a more permanent fiscal arrangement slated for 2028. Under the proposed long-term plan, local authorities will eventually be allowed to retain a portion of the income tax revenue generated within their specific regions.
This revenue-sharing model was originally suggested by Healey’s predecessor, Rachel Reeves, and has been refined to provide regions with a direct incentive to foster business growth. If a local economy performs well, the local government will see a direct increase in its available budget, creating a "virtuous cycle" of investment and returns.
By allowing regions to keep the fruits of their economic successes, the government aims to move away from the traditional model of redistributive grants. This transition is expected to be a major point of discussion in the upcoming budget statement on Wednesday.
Redefining Infrastructure and the "Green Book"
A significant technical change accompanying the budget involves the revision of the "Green Book," the Treasury’s official guidance for project appraisal. Historically, the Green Book has been criticized for favoring projects in already-prosperous areas where the "value for money" metrics are easier to meet.
Under the new rules, the Treasury will allow for the "bundling" of related projects. For example, a new housing development and a corresponding transport scheme can be evaluated as a single unit, acknowledging the synergistic effects they have on regional growth.
This change is the result of intensive collaboration with "No. 10 North," a government unit that has been conducting "situation room" meetings with local leaders. These sessions identified the rigid silos of project funding as a primary barrier to coherent regional planning.
Macroeconomic Headwinds and Energy Support
While the devolution package focuses on long-term growth, the Chancellor must also navigate immediate economic pressures. The ongoing conflict in the Middle East has continued to disrupt global energy markets, leading to sustained high bills for U.K. households and businesses.
Healey is expected to announce a major intervention to assist low-income households with these rising costs. This support is framed as providing "breathing space" for a population that has endured years of inflation and stagnant wage growth.
The cost of these interventions, combined with rising interest rates on government borrowing, has made balancing the budget a complex task. To offset some of the spending, the Chancellor is anticipated to introduce modest tax increases, including a targeted levy on the banking sector.
Defense Spending and Geopolitical Commitments
The budget will also address the U.K.’s defense obligations in an increasingly volatile global environment. Healey is expected to provide a full funding roadmap for the four-year defense investment plan established toward the end of Keir Starmer’s tenure as Prime Minister.
However, a definitive timeline for increasing defense spending to 3% of GDP—a target that has been a point of contention within the cabinet—is likely to be omitted. Observers expect this decision to be deferred until a formal spending review scheduled for next year.
The Chancellor’s previous resignation from Starmer’s cabinet was partly linked to disagreements over defense priorities, making this section of the budget particularly scrutinized by political analysts and military leaders alike.
"Rewiring the State" and Civil Service Reform
Following the budget, the government plans to publish a white paper titled "Rewiring the State." This document will detail how the civil service must adapt as power is decentralized from Whitehall to the regions.
The white paper is expected to outline a significant reduction in the size of the central bureaucracy, with more staff and resources being moved to regional hubs. This structural overhaul is intended to ensure that the devolution of power is permanent and not easily reversed by future administrations.
By reshaping the state, the government hopes to create a more agile and responsive public sector. The focus is on reducing the layers of approval required for local projects, thereby accelerating the delivery of infrastructure and public services.
Regional Reactions and Public Impact
The response from regional leaders has been largely positive, though some caution that the devil will be in the details of the borrowing facility’s terms. Andy Burnham’s endorsement of the plan suggests a rare moment of alignment between the central government and the influential mayors of the North.
For the general public, the impact of these policies may not be felt immediately, but the long-term implications are significant. Improved transport links, more affordable housing, and revitalized town centers are the intended outcomes of shifting the "spending power" closer to the people.
As Wednesday’s budget statement approaches, the focus remains on whether these structural changes can truly ignite growth in regions that have felt left behind by the London-centric economic model. The devolution package represents a high-stakes gamble on the idea that local leaders, when given the tools, are the best architects of their own prosperity.
