Treasury tells Michael Gove not to expect lots of new cash for levelling up

Michael Gove’s new levelling up department is being warned not to expect a large injection of new cash in the spending review hours after Boris Johnson called levelling up “our fundamental project”, Sky News understands.

Mr Gove‘s department, which covers housing, the Union, local government and elections, will be expected to negotiate its three-year budget on the basis of the bid put together by Robert Jenrick, who was sacked on Wednesday.

Although there is some scope for changes, Sky News has learnt the Treasury is playing down the ability of incoming cabinet ministers to radically rewrite their departmental spending bids or ask for dramatically more.

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One Whitehall source told Sky News that Mr Gove should therefore not be expecting an above average settlement.

A leading Tory MP, Jack Berry, said that the Treasury needed a new approach to levelling up or the Tories risk losing voters in the North.

Sky News has learned that the Treasury asked cabinet ministers to submit bids for the spending review at the start of the week, hours before the reshuffle was due to begin.

Now they are telling all departments they are still expecting to negotiate in some cases on the basis of bids submitted by cabinet ministers who lost their jobs or changed roles – which include Dominic Raab from the Foreign Office, Robert Buckland who has gone from Justice and Mr Jenrick from the Ministry of Housing.

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This has caused surprise in parts of Whitehall, who point out there is a long way to go until the October 26 review and the arrival of a new Chief Secretary to the Treasury, Simon Clark, may change calculations.

Mr Gove may also benefit from machinery of government changes, such as the possible move of the Union unit to Mr Gove’s new ministry, which means Mr Jenrick’s budget submission cannot be adopted completely like for like.

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Having only been in place 48 hours, it is thought to be too early for Mr Gove to have decided what his budget needs and priorities will be.

This morning the prime minister used the first post-reshuffle cabinet meeting to emphasise the importance of levelling up.

He said: “By cutting crime, by making our streets safer across the country, by improving the quality of people’s lives, putting in fibre optic gigabit broadband sprouting through everybody’s homes, by tackling the skills deficit across our country, by giving people opportunity across the whole of the UK… combined with local leadership – we are going to fulfil our fundamental project of uniting and levelling up the entire country… because that is what our mission is.”

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Departments are already facing a squeeze.

Overall departmental spending will rise 4% a year in real terms (which is a 6% rise in cash terms before accounting for inflation) but a large share of this will be taken up by the Health and Social Care spending meaning other departments will get less.

Whitehall was braced for a tricky settlement as Rishi Sunak attempts to reclaim the mantle of fiscal discipline for the Conservative party after spending hundreds of billions on the pandemic.

Jake Berry, chairman of the Northern Research Group of Tory MPs who want greater commitment to levelling up, told Sky News: “I think what we’re learning is that the Treasury is yet to be convinced that levelling up is a government priority.

“Levelling up is about devolving power away from London, that tends not to be an agenda that the Treasury backs.”

Asked why there is resistance, he said: “They regard it as expensive.

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“Many of these projects in the North don’t stack up on traditional value for money spending.

“It’s just for that exact reason these communities need investment.

“The Treasury doesn’t need to so much tweak the Green Book.

“As they’ve done over the last few years – they need to rip it up, throw it in the shredder, and then chuck the waste away.

“They need a whole new approach.

“In all fairness to Mr Gove he has a track record of delivering… he has a track record of taking on what he’d call ‘the blob’ – and in this case the Treasury is the blob.”

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