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Labour plans to break up the Treasury and move it to the North

By Jonny Ball

In an interview with Manchester Evening News, Labour’s shadow chancellor, John McDonnell, revealed the party’s plans to move a “huge” part of the Treasury to the North by basing a national unit for investing in infrastructure in the region. McDonnell also promised an evolution of the North’s devolution settlement, promising to devolve much of the unit’s decision-making over £250bn worth of expenditure.

Speaking of the need to address the massive inequalities between the English regions, and close the North-South divide, McDonnell announced plans for a decades-long infrastructure investment pot. “The National Transformation Fund,” he told MEN, “will be done by a unit in Number 11… But we’re going to devolve Number 11. We’re going to locate this in the North.”

The shadow chancellor said he planned to meet northern mayors over the coming weeks to come up with a detailed plan of how this type of fiscal devolution would work in practice, highlighting the prospect of mayors, city regions and devolved authorities having input in any new Labour government’s budget and spending review decisions.

A report published in May by the former head of the civil service, Lord Bob Kerslake, warned that the socio-economic chasm between the North and the South was now comparable to that between East and West Germany at the end of the Cold War.

Following the publication of that report, more than 30 regional daily newspapers launched a co-ordinated campaign, Power up the North, synchronising their front pages and calling for politicians in Westminster to urgently try and tackle the North-South divide. The papers, including the Manchester Evening News and the Liverpool Echo, also jointly published an open letter calling for the Northern Powerhouse project to be given a higher priority, specifically calling for transport and infrastructure investment, as well for the Northern Powerhouse minister to be elevated to a cabinet post.

Criticising what he sees as the current government’s bias towards London and the South East, with a far higher proportion of public and private investment pouring into the capital, McDonnell called for a massive regeneration programme “over a couple of decades”, with the aim of “reversing the neglect of the North.”

Last year, figures released by IPPR North showed that London received £419 more per head in transport spending than the North of England. In June, the think tank also revealed analysis to coincide with the five-year anniversary of the launch of the stalled Northern Powerhouse concept, which found that 200,000 more northern children live in poverty than in 2014, that foreign investment has nosedived, and that the amount of late or cancelled trains has more than doubled. In addition, the IPPR report showed that public spending has been reduced by £3.6bn in the northern regions, compared with a £4bn rise in the South.

“No government can ever again bias its investment plans so heavily against the majority of the country,” McDonnell said, insisting that a Labour administration would press ahead with devolution. “When we go into government, we all go into government,” he told MEN. “There’s an increasing recognition now that we can’t go on like this. The grotesque levels of regional inequality are not acceptable.”

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