Levelling up: Sunak flounders in giving substance to Johnson’s slogan

Good morning. Nadhim Zahawi survives, for now. But I don’t have much more to say about that other than to urge you to read our brilliant profile of him. Today’s note is on one of Rishi Sunak’s difficult inheritances from Boris Johnson: the levelling up agenda.

Flagship has sailed

Rishi Sunak is the first teetotaller in history to come into work with a hangover every day: the hangover, of course, is the combined legacy of his Conservative predecessors, Boris Johnson in particular.

The swirling questions about Richard Sharp’s appointment as BBC chair: a Johnson hangover. The bitter divides within the Tory party over tax-and-spend: a Johnson hangover. And, of course, Brexit and all its consequences are a Johnson hangover. (Albeit, in that case, a hangover caused by a punchbowl that Sunak was all too willing to drink from.)

One of his other Johnsonite inheritances is “levelling up”. As Katy Balls wrote in her Times column last week, it didn’t emerge from a focus group: it was Johnson freestyling. From there it made it into the manifesto and essentially every part of Westminster, despite the fact it has never polled well and most voters don’t really believe it.

It’s a classic Johnsonian phrase. The genius of it is that it means almost anything you want it to: it can stretch to “boosting the productivity of the UK’s cities” all the way to “fixing some hanging baskets in a marginal constituency with ease”. But the problem is that something that could mean anything often in practice means nothing at all.

In practice, “levelling up” has meant a bit more than nothing: it has resulted in some real devolution deals to councils and metro-mayors in the UK. But one area that central government has been reluctant to devolve very much of is money.

That has all sorts of negative knock-on effects. First, as our northern England correspondent Jen Williams explains in an excellent long read, local governments spend huge amounts of money and time not on running local services or helping to boost their economies, but on bidding for contracts from central government. Another, as the FT editorial board has noted, is that it creates local government units that have no interest in thinking about how revenue is generated, merely in how it is spent.

It has negative political consequences, too. Having lots of little funds controlled by central government is great politics when you are a government presiding over a growing economy and a united party. That means you can go around the country handing out baubles and generally making yourself popular.

This is not the case for Sunak, who is saddled with a bad economic backdrop and a poor overall economic record. So instead, he doesn’t have many baubles to give out, and must reckon with a party so divided that everyone takes it as an opportunity to have a shot at him.

When the government of the day is weak, they are incentivised to remove themselves from spending decisions. That’s why the Barnett formula — which determines the change to the amount of money given to Scotland, Wales and Northern Ireland every year — was devised back in 1978, during James Callaghan’s term in Number 10. Joel Barnett, the then Labour chief secretary to the Treasury, wanted to find ways to avoid painful negotiations with the secretaries of state for Scotland, Northern Ireland and Wales (who, in those pre-devolution days, ran their respective countries “as viceroys”, as John Morris, Wales secretary from 1974 to 1979, once put it to me).

So Barnett devised a formula whereby the terms he negotiated with the secretary of state for education would automatically apply to education funding in Scotland, Northern Ireland and Wales, and what he negotiated with the health secretary would automatically apply, and so on and so forth.

That’s the political background to our scoop that Jeremy Hunt is contemplating moving away from individual grants to departmental-style spending settlements with at least two of the metro mayors, Andy Street and Andy Burnham, the Conservative mayor of the West Midlands Combined Authority and the Labour mayor of Greater Manchester respectively.

If he did, it would both be a better approach for those metro mayors, and go some way to helping ease one of Sunak’s hangovers.

Now try this

One of my favourite recent discoveries is the novelist Joshua Cohen, whose book The Netanyahus is a brilliantly funny and clever bit of work. I am very much enjoying making my way through his back catalogue. (I am halfway through Book of Numbers at the moment.)

Top stories today

• Zahawi to loom large at PMQs | Rishi Sunak will face renewed calls today to sack Conservative party chair Nadhim Zahawi, as Labour challenges the UK prime minister on why he did not find out sooner the details of his minister’s £5mn tax dispute.

• US and Germany to send tanks to Ukraine | People familiar with the matter said that the US was preparing to announce that it would deliver M1 Abrams tanks to Ukraine, while Germany would send Leopard 2 tanks, though they would not confirm the number. It marks a significant shift in western efforts to bolster Kyiv’s fight against the Russian army.

• Logistics strike breakthrough | Amazon workers at a warehouse in Coventry will strike today in protest over pay, marking the first time UK employees of the ecommerce giant have taken industrial action.

• ‘UK Silicon Valley’ | The government has backed a new regional partnership board to help drive investment into the UK equivalent of Silicon Valley, centred around the two world-class universities of Oxford and Cambridge. Michael Gove, levelling-up minister, said in a letter to the interim chair of the new board that the government would commit £2.5mn to the project.

• Portsmouth to Normandy cable | The High Court in London has overturned a government decision to block a £1.4bn undersea electricity interconnector to France planned by an energy group backed by two tycoons born in Russia and Ukraine.