Ban on Gove’s ‘piggy bank’ risks stalling regional regeneration plans

Good morning. With Stephen away for some well-earned R&R, today’s Inside Politics is coming to you from 200 miles north in Manchester.

Appropriate, perhaps, since Manchester had an inadvertent role in triggering one of the more remarkable shifts in Whitehall machinery of recent times.

Sir Humphreys harrumphing 

As Rishi Sunak gave mandarins new desks, ministers new titles and Whitehall departments new brass plaques in last week’s reshuffle, the Treasury had already been quietly doing some reorganising of its own. Levelling up secretary Michael Gove had just had, in the subsequent words of one joyous Labour adviser, his “piggy bank stolen”; Number 11 had banned him from any new capital expenditure without its approval. Previously the Department of Levelling Up, Housing and Communities was able to sign off its own spending on capital projects of up to £30mn.

The ostensible trigger for that clampdown seems to have been a speech here last month. Gove had originally hoped to announce four new pots of cash to local authorities and mayors. But the Treasury apparently felt bounced and the bean counters stepped in.

Their move to regain control of his department’s finances was inevitably downplayed: “processes change”, the levelling up minister Lee Rowley told MPs in response to an urgent question on the matter on Thursday, while Gove himself dismissed it as “Sir Humphreys harrumphing”.

But this is no minor tinkering. It is an extreme measure only taken when there are real concerns about a department’s spending. The decision to rein in Gove’s spending will gum up machinery both in the beleaguered ministry and in Number 11, as each tiny project, however minor, has to go through for approval.

So is such a draconian intervention solely the result of one overzealously drafted speech? Not everyone thinks so.

Gove’s department had been lumbered with billions of pounds worth of post-election local regeneration funds, hundreds of bids from councils, an army of red wall Tories wanting something for their election leaflets. It faced delivery constraints on the ground and increasing external scrutiny of where the money goes.

So it wasn’t long before the department was hit with warnings from the National Audit Office, the Public Accounts select committee (twice) and the Government Internal Audit Agency about fund governance, capacity and poor impact evaluation.

Addressing her urgent question last week, Labour’s Lisa Nandy alluded to “rumours” that “the affordable housing budget has not been spent and that there are levelling-up funds that have not been spent either, which will now be clawed back by the Treasury”. When I asked Gove’s department about underspends on its Affordable Homes fund, it said simply that government remains “committed” to its full £11.5bn programme.

And yet: the ban on DLUHC’s capital spending also extends to Homes England, the arm’s-length housebuilding body that Gove hoped would spearhead his wider regional regeneration aims (see this government release trailing the levelling up white paper from January 2022).

When the Treasury told me last week that the spending ban’s impact on Homes England would be “minimal”, one very well-placed housing industry professional retorted: “No way. Try telling that to the majority of the organisation, who do land, brownfield, investment and so on”. 

There was a risk of “potential paralysis” in Homes England, they said, adding: “Also, what does that say about it being Gove’s regeneration body — and about Gove’s agenda?”

It is the right question.

Gove’s white paper — and indeed a speech to the Liverpool Convention of the North a few weeks before last February’s launch — made clear he had embraced state intervention as a means to make impactful change in places outside the South East. But a year later, as Rishi Sunak’s reshuffle erases “industrial strategy” from Whitehall nomenclature (with the scrapping of the Business, Energy and Industrial Strategy department) and the Treasury takes hold of Gove’s purse strings, is that plan getting harrumphed out of existence?

PS. Some Gove-watchers think his main goal, with time in this parliament running out, is to secure his legacy under a Labour government — keep his ideas sufficiently alive that the next lot are unable to ditch them.

Now try this

Foodie friends are raving about the White Swan at Fence, near Burnley. They report a warm welcome despite appearing late and sweaty from a long walk, followed by a rather reasonably priced locally sourced Michelin-starred menu. Speaking of which, I am excited to finally be going to The Spärrows in Manchester later this month, now also in the Michelin Guide. Previously the restaurant was in such a tiny space I had never managed to sample its magnificent selection of spätzle and dumplings, but now it has relocated to Red Bank near Victoria Station.

Need more? Manchester Museum reopens next weekend after a £15mn overhaul, complete with a new dinosaur, golden mummies, a South Asia Gallery — in partnership with the British Museum — and a Chinese culture gallery.

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