Rishi Sunak’s Treasury has made clear no new money will be spent on the relaunch of Boris Johnson’s “levelling up” agenda next month, The Telegraph understands.
Ministers and officials developing plans for the much-anticipated white paper are having to work with existing government projects and look at cost-neutral reforms.
The refusal to consider more cash for Mr Johnson’s flagship domestic reforms – which critics see as ill-defined – follows tensions between Number 10 and Number 11 over spending.
On Thursday, Downing Street publicly backed a senior aide to Mr Sunak who was blamed for an anonymous quotation that criticised the Prime Minister’s political operation. The claim has always been denied.
Mr Johnson and Mr Sunak appeared together at a business round-table event on Thursday as Downing Street said the two men’s teams “continue to work together very well at all levels”.
The white paper on levelling up – broadly defined as the push to reduce geographical inequality in the UK – has been pencilled in for publication the week before Christmas.
Key challenge for Michael Gove
Michael Gove, who was moved to head up the newly renamed Department for Levelling Up, Housing and Communities in the September reshuffle, is leading the reforms.
One key challenge is to counter criticism that levelling up, a term Mr Johnson first championed before the December 2019 election, is more a slogan than a coherent vision for reform.
Mr Gove was one of the last Cabinet ministers to conclude negotiations with the Treasury during the spending review, which set government department budgets for the next three years.
Last month, Mr Gove’s department received a real-term increase in budget, as did every department. However, the Levelling Up Fund was not expanded, remaining at £4.8 billion.
Multiple government sources aware of discussions about the white paper said the Treasury had made clear the assumption was that no new public money would be allocated.
“The cash has already been allocated,” said one Treasury source, referring to the spending review. “They have to flesh out what levelling up actually means.”
Cabinet ministers and government officials have privately admitted that in recent months there have been tensions between Downing Street and the Treasury over spending levels.
Rishi Sunak is a ‘fiscal conservative’
Last month’s Budget pushed public spending to its highest point in 50 years and the tax burden to its highest point in 70 years, with health spending especially increasing after Covid-19 pressures.
Mr Sunak and his team have often made clear he is a fiscal conservative at heart and his Budget speech included a warning about the limits of government intervention, despite the tax rises he had just announced.
On Thursday night, Mr Sunak won “politician of the year” at an awards ceremony run by the Spectator magazine just hours after a poll put Mr Johnson’s favorability ratings at an all-time low.
“The good news is it only cost £400 billion”, the Chancellor joked about his award in his acceptance speech – a reference to the vast public spending used to counter the Covid-19 pandemic.
For much of the last year, Mr Sunak has topped polls of which politicians Tory members want to see as their next party leader, though he has slipped down the list since raising taxes.
This week in-fighting broke out about who was the “senior Downing Street source” quoted by the BBC saying there was “concern” about leadership in Number 10.
Treasury sources denied the quotation had come from them.
On Thursday, the Prime Minister’s official spokesman played down reports of tensions between Mr Johnson and chancellor Mr Sunak.
“They continue to work together very well at all levels,” the spokesman said.