Budget to lift housing funding past £40bn as ministers hand English mayors more power and cash

More than £1bn for social and affordable housing in England will be announced in Wednesday's Budget, pushing the government's 10-year homes programme beyond £40bn. The housing money comes packaged with a broader shift of authority toward the regions, which the Treasury has been previewing ahead of the statement.

Mayors and regional leaders are expected to receive greater powers and funding. Councils will also be helped to borrow from central government at preferential interest rates to invest in housebuilding. The stated hope is that regional leaders gain more flexibility and authority over investment decisions.

The figures are specific. Next year, the government will allocate an initial £285m in transitional seed funding to support mayors and local leaders, which the Treasury says should reduce dependence on what it calls fragmented bidding pots in Whitehall. Areas that are not yet strategic authorities will be able to draw on a share of that money to unlock projects that contribute to local growth. From 2028, the government will work with mayors to design a new £1.5bn borrowing facility, giving them access to capital for local priorities. The Treasury says that could go toward new homes, reviving high streets or improving transport links.

Chancellor John Healey said English cities and regions would get the right to decide their own future. He said mayors and local leaders know what their communities need, and that the government is giving them more money, more power and more capacity to get projects moving and homes built. Prime Minister Andy Burnham said the plans were about shifting power to those who know their communities best, adding that he was calling time on local leaders going cap in hand to Westminster.

Reaction from mayors was positive. Claire Ward, chairwoman of the UK Mayors Network and Labour's East Midlands mayor, said the right powers and resources through increased devolution would help turn ambitious plans into reality. Lord Sadiq Khan, Labour's mayor of London, said greater ability to invest could help unlock major infrastructure, naming the West London Orbital route, extensions of the Bakerloo line and the Docklands Light Railway, and development of Stratford International station. The chancellor will also announce support for small breweries, with the Treasury saying he wants to turn the tide for pint producers.

Not everything going into the Budget has been smooth. Alex Depledge, the Treasury's entrepreneurship adviser, has announced she is resigning, effective Thursday, the day after the Budget. She told the Sunday Times that start-ups were being treated as a sideshow and should not be pushed to the margins of economic policy. Keeping scale-ups on the fringes, she said, underestimates the contribution of the country's greatest companies, which need support to grow on British shores at all costs.

Defence is the other pressure point. The Sunday Times reports that Healey is expected to unveil billions of pounds of new defence spending, with specific details left to next year's spending review. Healey himself resigned as defence secretary in the previous government in June over the defence investment plan, which he said fell well short of what the armed forces needed. He had called for spending to reach 3% of GDP by 2030, on the path to a Nato target of 3.5% in 2035.

Shadow chancellor Andrew Griffith has said Healey should resign if he fails to set out how the UK will reach 3% by 2030. He accused the chancellor of dithering over finding money for the country's insurance premium, adding that there cannot be a strong economy without strong defence. Defence Secretary Wes Streeting replied that the Conservatives were to blame for failing to invest in the military while in office, and said the prime minister's government was determined to give the armed forces the investment needed to keep the country safe. Wednesday will show whether the defence commitment arrives with a date and a figure attached.