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Michael Gove and the levelling up agenda have been hamstrung

The Treasury will reportedly oversee all of the Levelling Up Department’s capital spending.

By Jonny Ball

Just when you thought that Downing Street had run out of nails to hammer into levelling up‘s coffin, it finds another one. On Wednesday 8 February the Financial Times reported that the Department for Levelling Up, Housing and Communities had been placed firmly in the naughty corner, with the Treasury imposing a capital spending ban due to apparent concerns that it isn’t delivering value for money.

John Glen, the Chief Secretary to the Treasury, will now have to sign off on all capital spend from the department, including billions of pounds earmarked for local authorities applying for levelling up grants. The government has tried to play down this development, claiming that controls like these are a normal aspect of government finance. A spokesperson maintained that the government’s “central mission is to level up every part of the United Kingdom”.

Except that by any measure, the government has made little or no progress on combating regional inequality after over a decade of Northern Powerhouses, enterprise zones, city deals and of course levelling up. If it was in any way normal for departments to have no powers over capital spending, Treasury ministers would do little but sign off on new bus stops and repaved job centre car parks.

Until very recently the department was forking out billions, with little Treasury oversight on anything under £30m, with varying degrees of success. Jack Shaw, a local government specialist and senior research fellow at the Institute for Public Policy Research (IPPR) North, revealed in November that only 5 per cent of the government’s £4.8bn levelling up fund had actually been spent. “When the government awards this funding,” he told Spotlight, “it doesn’t just end up in a local authority bank account the next day.”

If the capital spending decision was at all related to the fact that large chunks of levelling up funding have found themselves caught up in projects to beautify the shopping districts of leafy market towns that happen to be in Conservative constituencies, the Treasury may have a point. But the department for what was supposed to be a flagship government policy having to ask permission for spending on so much as a park bench seems a tad unusual. This is especially so when the department is led by a minister who has cultivated a reputation for implementing difficult reforms in the face of bureaucratic inertia. Michael Gove was appointed Levelling Up Secretary to see through a bold programme of public investment.

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“The Treasury always hated that,” says George Dibb, head of the Centre for Economic Justice at the IPPR. “Under Boris Johnson, creating the Department for Levelling Up was about empowering Gove with a big vision of how the economy should be changed, and how the state needs to act to grow the economy in particular places.” Levelling up was meant to narrow gaps in productivity, wealth and economic opportunity between hard-up regions and the dynamic economies of London and the south-east. “That was always going to get the Treasury’s backs up,” Dibb adds. “There’s an ideology there… a short-termism, a preference for tax cuts rather than investment, an understanding of economic development that tends to be based around an inactive role for the state.” For Shaw, meanwhile, “The Treasury has a relatively narrow cost-benefit analysis and it doesn’t understand or appreciate how money can deliver for communities.”

That might be an understatement. Under Johnson the Treasury’s so-called “green book” of spending rules was meant to be reformed to privilege investment in poorer areas outside the capital. But in Rishi Sunak we now have a Prime Minister who boasted to Conservative Party members in Tunbridge Wells that he had changed “the formulas… that shoved all the funding into deprived urban areas”. This latest news for the Department for Levelling Up confirms the Treasury’s reputation as the Place Where Ministers’ Dreams Go to Die – the perennial block on much-needed public investment.

Changing the name of the Ministry of Housing, Communities and Local Government to the Department for Levelling Up in 2021 was supposed to show the government’s apparent commitment to boosting economic growth in Britain’s deprived regions. There’s nothing like a departmental rebranding to signal “we are definitely not just moving the deckchairs around this time”. This was meant to be the cornerstone of a new Tory agenda that borrowed from Labour and consolidated constituencies in the red wall by supporting jobs and infrastructure. The capital spending ban will mean fewer of the promised projects get completed.

“Sunak was never a supporter of that kind of economic policy,” says Dibb. “As chancellor he crushed the industrial strategy. Now he’s Prime Minister his scepticism for that kind of thing is really manifesting.”

[See also: Where next for levelling up?]

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