Treasury bans capital spending by Michael Gove’s Whitehall department

Michael Gove’s Whitehall department has been banned from making spending decisions on new capital projects without specific permission from the Treasury, after concerns were raised about the ministry’s ability to deliver value for money.

The government’s move to regain control of the finances of the Department of Levelling Up, Housing and Communities comes after widespread concerns over delivery of the flagship policy to reduce regional economic divides.

That agenda, a central theme of the Conservative party’s 2019 election campaign, includes distributing multiple grants, worth more than £8bn, through a system that has been criticised by local authorities for its complex bidding processes and delays in allocation.

John Glen, the chief secretary to the Treasury, has now stepped in to prevent DLUHC from signing off spending on any new capital projects, because of concerns about whether the department is delivering value for money.

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Such interventions are typically reserved for departments about which the Treasury has particular financial concerns.

One government insider said the move was triggered by a speech Gove made in Manchester, on January 25, in which he announced £30mn to fund improvements to substandard housing. This came in the wake of an incident in Rochdale, when a two-year-old boy died after being exposed to extensive mould in his family’s flat.

“Michael sees that as an extremely important issue, but the Treasury insists on having control on how money is spent,” said one.

The Treasury denied the speech has prompted the spending ban. Officials had already blocked Gove from announcing a different, larger pot of local grants in the same speech, however, according to one Whitehall insider. The Treasury did not deny the claim.

The government said its “central mission is to level up every part of the UK by spreading opportunity, empowering local leaders and improving public services”.

“DLUHC will continue to deliver its existing programme of capital projects as planned.”

The decision to rein in Gove’s expenditure, taken last week, means that any new capital spending decision “however small, must now be referred to HMT before approval and the department is not allowed to make any decisions itself”, said one Whitehall insider.

Previously the department had been allowed to sign off new capital spending up to £30mn. 

Another said the move had had a “massive impact on day-to-day spending” in the department because of the scale of expenditure, with the end of the accounting year approaching, that now required sign-off.

The government’s levelling up funds have come under increasing scrutiny since the general election because of the effect of high inflation, delivery constraints, delays, burdensome bidding processes and underspends.

In November, a freedom of information request by Jack Shaw, a local government expert, revealed that just £243mn, or 5 per cent, of the £4.8bn levelling up fund — for projects such as transport hubs and cultural centres — had been spent. One government official reported “loads of problems getting money out the door”.

Allocations from the fund’s second round were repeatedly delayed in 2022, materialising last month to accusations of unfairness after large sums were spent on places with low levels of deprivation.

Concerns have also been raised within the government previously about the department’s ability to effectively spend levelling up funds. Last February, the National Audit Office spending watchdog warned DLUHC to “urgently” increase capacity in order to assess and manage multiple levelling up funds and highlighted concerns raised a year earlier over weaknesses in overall governance, control and risk management.


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