Northern Tories Think Rishi Sunak Has Thrown Them A Post-Covid Economic Lifeline
Rishi Sunak’s spending review will be remembered as the one where he cut the aid budget and broke a Conservative manifesto commitment against the most dire economic outlook for 300 years. Though for those MPs begging the government to reconnect with Tory voters in the north and Midlands, it may yet turn out to be a triumph. Kate Proctor looks at whether the new £4bn Levelling Up Fund and commitments to infrastructure will help the government turn a corner and set a pathway to a future beyond coronavirus.
Standing at the despatch box just nine months into the job of Chancellor, Rishi Sunak is telling the nation that the economy is forecast to shrink by 11.3 percent, the largest decline in 300 years. Coronavirus is the cause and to that end, he announces public sector pay will be frozen for 1.3 million workers, the international aid budget slashed and to keep the country going, borrowing will reach an eye-watering £394 billion. It is an “economic emergency” according to Sunak and there has not been much to hope for.
Except for the Northern Tory MPs, who are cock-a-hoop that they have managed to finally get the cut through to central government they think their constituencies deserve. To them this was a spending review full of domestic policies that put the country, and crucially the north and Midlands, first. Just weeks ago the Northern Research Group (NRG) of Tories – a powerful lobby of around 50 MPs – were furious, dashing off an angry open letter to Boris Johnson where they demanded investment to remedy the north-south divide and a roadmap out of restrictions, which in some parts of the north west had been in place since the summer. It looked like a looming rebellion, and it was obvious the Prime Minister was going to have to change tack swiftly.
While the Chancellor has been more frequent and systematic in his contact with the backbench, there was no denying Johnson had become remote with some MPs in “blue wall” seats, having never met with them after getting elected. Johnson had some urgent work to do and crammed in face to face discussions, Zoom meetings and plenty of tea and coffee to hear what MPs wanted. In his fervour to meet backbenchers, he ended up having to isolate for 14 days after the MP for Ashfield, Lee Anderson, tested positive for coronavirus.
A few weeks on however and the flagship £4bn Levelling Up Fund is announced, which will see awards of up to £20 million for local communities to be used to build among other things, bypasses, train stations, bus lanes, fix eyesores and do-up town centres. They will be locally led and intended to get the support of mayors, regional mayors and MPs. The northern Tories knew a specialist fund was on its way but they didn’t know its exact form until Sunak made the announcement.
“I think the statement by the Chancellor really was the watershed of ‘there is more to life than Covid’ and put levelling up right back at the heart of the government’s agenda,” said Jake Berry MP, who leads the NRG, and is a former northern powerhouse minister and MP for Rossendale and Darwen in Lancashire.
“We also asked for infrastructure to be fast-forwarded and clearly the national infrastructure strategy, and the location of the infrastructure bank in the north of England, is a huge element of our campaign.”
Laughing, he said: “We have been accused on occasion of being critical of what the government’s doing but when they give us most of what we ask for, then we will heap them with praise!”
On the £4 billion fund he said it’ll be about getting cash out the door, and shovels in the ground.
“It’s about those smaller local schemes that wouldn’t register on the government’s infrastructure register, so for example it would be sorting out the roundabout at the centre of Rawtenstall which causes huge delays to people’s commute. Looking at a local express bus service from my constituency into Greater Manchester. Those smaller schemes often struggle for government spending. This fund looks at things in a much more micro-level,” he said.
Towns are finally having their moment, he explains, which was something Theresa May kick-started with the Towns Fund but which slid from the agenda because of Brexit.
“The electoral battleground for our country is towns – and [it has] been the battleground since the early 2000s so it’s bizarre isn’t it that it’s taken until now for government to really focus in on how it can support communities and towns,” Berry said.
It hasn’t gone unnoticed from the Spending Review that there is a neat parceling up of a £4bn cut to the aid budget, and the £4bn fund for projects to “level up”. Amid the international outcry over the move, Berry thinks people will understand tough decisions had to be made.
Others have speculated the aid cut will go down very well on the doorsteps come the election.
The National Infrastructure Bank due to be rolled out next spring is intended to replace the European Investment Bank after Brexit. This is seen as a significant way of leveraging green jobs and will have its office in the north of England.
The UK Shared Prosperity Fund (UKSPF) is set to replace European Structural Funding – a hugely significant stream of investment in the north in the past two decades. Sunak said the Treasury will at least match EU receipts, on average reaching around £1.5 billion a year.
Pilot programmes for the (UKSPF) begin next year also.
Underpinning the entire review is a reform of the Green Book – the Treasury’s rulebook on how to make decisions on public investment – which will now have a cost-benefit formula that is more amenable to northern projects.
Tories lined up to praise the raft of new schemes designated for their area through other funding pots. Stockton South MP, Matt Vickers handed Sunak the friendliest of questions after his statement, on whether a £3bn hydrogen transport hub in his patch was an example of the kind of local investment that should be expected from the government. Sunak said: “That’s an example of the kind of local priority we can fund having made these tough decisions.”
There has been no shortage of critics lining up to lambast levelling up as nothing more than a political slogan however. Andy Burnham, Labour mayor of Greater Manchester, was dismissive saying the fund made little sense while also allowing councils to increase council tax by up to 4.5 percent. He told the Manchester Evening News: “Again that is not an act of levelling up. That is asking local communities to pay themselves for the challenges they’ve faced this year.”
Shadow Chancellor Anneliese Dodds described it as a “rabbit out of the hat” moment and it will still see communities having to go begging to ministers for support for their areas.
TUC General Secretary Frances O’Grady said the spending review was a levelling down because of the pay freeze for public sector workers.
The government has said it will give those who earn under £24k a year a £250 pay rise yet more than a million people are still expecting to receive exactly the same wage.
She said: “After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis.”
Henri Murison, director of the Northern Powerhouse Partnership, said: “It feels like a hollow victory to create a £4bn levelling up fund when Whitehall will still get to decide how it is spent.
“It is disappointing we’re yet to see targeted investment at the biggest barriers to driving up productivity which can only be done by trusting directly elected metro mayors and their combined authorities - this is the only way we will close the north-south divide.”
The Local Government Association welcomed it but said they were worried about the competitive bidding process.
But for the northern Tory MPs the spending review has been a significant victory and exercise in political pressure.
They shouted loudly, and when that failed to bring about change they formed a group, and that critical mass of angry MPs finally got the attention of the most important men at the top of government.