Sadiq Khan Welcomes Budget Unlocking £10bn for Major London Infrastructure Projects

Key Points:

• Unprecedented Fiscal Devolution: London Mayor Lord Sadiq Khan announced that the latest government Budget grants the capital legal authority to borrow in excess of £10bn for transformative infrastructure projects.
• Guaranteed Income Streams: The financial capacity will be underwritten by new powers allowing City Hall to retain local income tax and business rates revenues, coupled with a newly introduced overnight visitor levy (“tourist tax”).
• Key Transport & Science Projects Unlocked: Priority schemes include extending the Bakerloo line into south-east London, building the West London Orbital rail line, launching international train services from Stratford, and developing a “knowledge quarter” life-sciences hub surrounding Euston station.
• Successor to Elizabeth Line Model: Legislation will enable City Hall to establish a modern financing framework modeled after Crossrail, leveraging public grants, business contributions, and borrowing backed by future fare revenues.
• Praise for Northern Leadership: Khan praised Chancellor John Healey and Prime Minister Andy Burnham, noting the irony that two leaders representing northern constituencies delivered “without doubt the most pro-London Budget” since he took office in 2016.

London (The Londoner News) October 31, 2026 – Mayor of London Lord Sadiq Khan has hailed the latest national Budget as an unprecedented financial breakthrough for the UK capital, revealing that new fiscal powers will allow City Hall to embark on a borrowing spree exceeding £10bn for major transport and urban development projects. Speaking in an exclusive interview with Financial Times political correspondent Jim Pickard on Saturday, 31 October 2026, Khan confirmed that decisions made by Chancellor John Healey will grant London the structural leverage needed to begin long-delayed capital infrastructure schemes. Underwritten by local tax retention mechanisms and a new overnight visitor levy, the capital intends to fund the Bakerloo line extension, the West London Orbital rail route, and international rail link capacity from Stratford without continually relying on central government bailouts.

How will London raise and support the £10bn infrastructure borrowing capacity?

As reported by Jim Pickard of the Financial Times, the newly announced Budget establishes mechanisms allowing municipal leaders to retain portions of locally generated income tax and business rates. In addition, local authorities are being granted powers to implement an overnight visitor levy, commonly known as a “tourist tax”.

According to joint financial evaluations conducted by Treasury officials and City Hall accountants, these guaranteed local revenue streams provide sufficient fiscal coverage to back long-term municipal bond issuances and direct borrowing of at least £10bn.

As reported by the Financial Times, Mayor Sadiq Khan stated: “I can say confidently we can raise north of £10bn. We can start on some really big stuff. This is without doubt the most pro-London Budget since I became mayor”. Khan noted that since assuming office in 2016, he had repeatedly requested fiscal devolution powers from successive chancellors, only to be turned down until the current Treasury administration took action.

What major infrastructure and transport schemes are targeted for construction?

As reported by Financial Times journalist Jim Pickard, the multi-billion-pound borrowing allowance will directly fund several landmark transport and regeneration initiatives across Greater London:

• Bakerloo Line Extension: Extending the Underground line south-east from Elephant and Castle toward Lewisham to improve connectivity across underserved south London boroughs.
• West London Orbital Rail Line: Establishing a new suburban rail service running over existing orbital tracks, which Khan identified as capable of advancing rapidly.
• Stratford International Connections: Launching new international rail services from Stratford station in east London.
• Euston Knowledge Quarter: Developing a specialized life-sciences and commercial innovation hub surrounding the redeveloped Euston station site.

To execute these projects, forthcoming legislation will allow the London Mayor to establish a formal successor mechanism to the funding framework originally constructed for Crossrail (now operating as the Elizabeth Line). That model successfully blended public grants, local business contributions, and borrowing secured against future passenger revenue.

How has Mayor Sadiq Khan responded to the Treasury’s northern leadership?

As reported by the Financial Times, Khan acknowledged the political irony of receiving London’s most extensive devolution package from a government led by northern politicians. Concerns had previously been raised by select London Labour MPs that Prime Minister Andy Burnham and Chancellor John Healey—both representing northern constituencies—might prioritize regional northern initiatives over the capital’s economic requirements.

Dismissing those concerns, Khan praised the Treasury’s approach to municipal finance. As reported by Jim Pickard of the Financial Times, Sadiq Khan stated: “It’s ironic when some people say that Andy Burnham and John Healey don’t get London. They clearly do”. Khan added that “It’s a breath of fresh air to have a chancellor who understands and listens to us,” stressing that fiscal autonomy means City Hall will no longer need to approach the Treasury with “a begging bowl”.

Khan also expressed satisfaction that Chancellor Healey’s bank levy adjustments for the City of London remained limited in scope. The higher profits surcharge on banking institutions will run for 15 months, raising approximately £1bn next year—a measure Khan noted was far less onerous than financial sector executives had anticipated.

How have independent economic experts and Transport for London reacted?

As reported by financial media sources, Transport for London (TfL) issued a statement describing the promise of enhanced fiscal devolution as “extremely welcome”. The transport executive has faced severe budgetary strain in recent years due to capital backlog repairs and infrastructure deterioration across aging tube and bus networks.

Validating the mayor’s analysis, Tony Travers, Professor of Government at the London School of Economics (LSE), confirmed to the Financial Times that the retention of local taxes and visitor levies represents a genuine, high-value expansion of the capital’s financial capabilities. Travers noted that providing London with self-sustaining borrowing mechanisms aligns the UK capital more closely with international peer cities like New York and Paris regarding municipal infrastructure financing.

Background of London Fiscal Devolution and Infrastructure Funding

Since the creation of the Greater London Authority (GLA) and the Mayor of London office in 2000, London municipal leaders have consistently argued that the UK’s highly centralized tax system restricts long-term urban planning. Compared to international financial capitals where local governments retain substantial proportions of property, sales, and income taxes, London has historically relied on central government grant allocations and temporary emergency funding settlements negotiated directly with HM Treasury.

This central reliance became particularly acute during the construction of Crossrail (the Elizabeth Line), which required complex multi-party funding agreements combining Treasury grants, the Business Rate Supplement (BRS), and borrowing by TfL. The post-pandemic drop in public transport fare revenues further strained TfL’s operational balance sheet, triggering recurring fiscal disputes between City Hall and central government over capital funding allocations. The introduction of income tax retention, business rate flexibility, and the visitor levy represents the most significant shift toward structural fiscal devolution in the capital in over two decades.

Infrastructure Delivery, City Hall Finances, and Regional Policy

The Treasury’s decision to unlock a £10bn borrowing allowance for Greater London is predicted to generate far-reaching effects across the UK construction sector, municipal governance, and national political dynamics.

For London residents and transit commuters, the fiscal package guarantees that long-stalled capital projects—most notably the West London Orbital and the Bakerloo line extension—can move into formal engineering and procurement phases without remaining vulnerable to sudden shifts in central government spending reviews. The West London Orbital is expected to progress first due to its use of existing rail corridors, providing early economic stimulus and job creation across west London.

For municipal leaders across the UK, London’s fiscal devolution framework sets a precedent for regional metro mayors. Leaders in the West Midlands, Greater Manchester, and Yorkshire are predicted to leverage the London tax-retention model to demand similar long-term borrowing powers tied to local visitor levies and retained business growth. However, financial analysts caution that managing a £10bn debt load will require City Hall to maintain strict revenue oversight on passenger fare forecasts and tourism levy receipts to ensure long-term debt servicing costs do not impact core municipal services.