Treasury to shake up public spending rules to boost regional economies

Posted On: 
27th December 2019

The Treasury is set to change how it allocates government cash to boost spending for the North and Midlands.

Boris Johnson plans to boost spending and party staff in former Red Wall seats
Credit: 
PA

New proposals set to appear in the spring budget will see government officials reassess how infrastructure and development spending is allocated.

There would be a shift in spending focus away from London and the home countries towards areas in the North and Midlands, The Times reported.

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The Prime Minister also plans to move civil servants outside London and increase regional party operations in areas previously represented by Labour.

Currently, investment decisions relating to areas such as infrastructure and scientific research are made based on projected economic return, known as gross value added (GVA).

But, research by academics at Cambridge and Manchester universities found that this policy had contributed to the “extreme” productivity divide between the UK’s regions.

REGIONAL BOOST

Under new rules these criteria could be changed, instead focusing more on closing the gap between London and other UK regions.

A senior Treasury source told The Times: “It is a very big thing. You have to think about the outcomes you want to achieve and work backwards.

“The traditional way to look at it is the simple GVA per head.

"There is a question of whether you change that to take into account wellbeing productivity discrepancies. It is an exciting debate and you’re going to hear a lot more about it in relation to the budget.”

They added, however, that the government still planned to be “fiscally prudent” following its election win.

The Conservatives are also boosting their regional party operations and moving civil servants outside London to bolster support in so-called Red Wall seats won from Labour.

More than 100 extra campaign staff were hired outside London in the run up to the December 12 election to help win over Labour seats.

A party source told the FT: “Central office really just needs to focus on media and research.

“We are looking at how we can boost our field operations and keep as many campaigners on the ground as possible — especially where we won for the first time.”

The paper also reported that the Prime Minister plans to shift civil servants out of London in 2020, as well as placing new government agencies in other UK cities.