Healey’s first budget to include big devolution package to boost growth

Chancellor John Healey is set to unveil a substantial devolution package in his first budget, aiming to bolster regional economic growth, as outlined in a recent wire report. The package, to be introduced in next week's budget, includes a new £1.5bn borrowing facility, to be negotiated with mayors over the next two years. This borrowing plan will complement an initial allocation of £285m in "good growth" funding for local leaders' priorities, which could encompass housing, transport, or high street regeneration.

Additionally, the chancellor will provide £150m of support to assist local authorities in scaling up their administrative capacity. Local leaders, including regional mayors, have long expressed concerns over their limited borrowing power, contrasting their situation with that of local authorities in the US and some European nations, where they can issue their own bonds.

The devolution package is designed to alleviate these constraints, enabling local leaders to make decisions more independently without needing to seek approval from Westminster for each project. This shift in power aligns with Andy Burnham's promise that local leaders in England would no longer have to "come cap in hand to Westminster."

Burnham views this move as essential for effective governance, stating that decisions should be made closer to home. The £285m in "good growth" funding is intended to sustain local authorities until a new system is implemented in 2028, where some income tax revenue will be directly allocated to their areas, ensuring long-term financial security.

This arrangement aims to incentivize local leaders to champion pro-growth policies, as they will retain some of the additional revenues generated by a thriving local economy. The devolution package has been crafted in consultation with No 10 North, which has been holding weekly meetings with local leaders to gather insights on the barriers hindering economic growth.

The Treasury has also introduced new rules allowing projects that can be combined to boost growth to be considered together. Furthermore, a government white paper on "rewiring the state," set to be published after the budget, will detail the restructuring of the civil service to accommodate the increased devolution of powers. Alongside these devolution plans, Healey's first budget is anticipated to address the concerns of poorer households grappling with rising energy costs and potential tax increases on banks.

The chancellor has pledged a "breathing space" to alleviate the financial burdens faced by these households and businesses, which have been exacerbated by the geopolitical tensions in the Middle East. These tensions have driven up energy costs and interest rates on government borrowing, posing challenges in balancing the budget.

Healey is expected to reveal his strategy for fully funding the four-year defence investment plan, which was announced in the final days of the previous administration. However, the timing of the UK's commitment to spending 3% of GDP on defence, a matter central to Healey's resignation from the previous cabinet, remains uncertain and is likely to be postponed until a subsequent spending review.