North is 'on course for levelling down' claim as Rishi Sunak is urged to stand up for the region in Spending Review

Chancellor Mr Sunak is due to address the Commons on Wednesday to set out where money will be spent and cut back as the UK deals with the economic shock of Covid-19.

But following reports that a 5.6 per cent increase to the national living wage – which was due to increase to £9.21 an hour in April – will be cut back to £8.90 an hour, a rise of 2 per cent, on advice of the Low Pay Commission, the Government has been accused of “levelling down” the country instead of levelling up..

Sheffield City Region Mayor Dan Jarvis said the Government had an opportunity to show its commitment to the North, which provided Boris Johnson with his majority in December.

He said: “The unprecedented economic crisis caused by the pandemic has disproportionately hit the North and the brutal reality is that we are now on course for levelling down, not levelling up.”

Mr Jarvis said one of the ways in which the Government could deliver would be by directing the Shared Prosperity Fund, which will replace EU funds after Brexit, to the areas of the country which need it most.

It was a view shared by director of the Northern Powerhouse think tank Henri Murison, who told a Commons committee today: “Whatever people thought of EU funding, it was needs based, and the Shared Prosperity Fund has to take a similar lens.”

He said: “My biggest fear is that central Government departments will try and top slice some of the Shared Prosperity Fund and pocket it in Whitehall for their own programs, and I think that is the wrong approach.

“I think that Shared Prosperity Funding should be spent in the regions by the regions, not by central Government.”

While former head of the Civil Service Lord Bob Kerslake added that the 2070 Commission - an independent inquiry into city and regional inequalities in the UK of which he is chairman - recommended tripling the size of the fund to £15bn.

He said: “But I don't think we want to see that money given out simply, through short-term - bluntly - beauty parades between different places, all the evidence tells us that just doesn't work. So what we do need to do really is to have a long-term plan from Government.”

Mr Sunak is expected to set out more details on the fund on Wednesday, but he said last week: “We are absolutely committed to levelling-up opportunities so those living in all corners of the UK get their fair share of our future prosperity.”

And on Tuesday evening he said his “number one priority” is to protect jobs and livelihoods in the wake of the economic havoc wreaked by the coronavirus pandemic, ahead of a multibillion-pound package to be unveiled later today.

However Mr Jarvis said: “We need an extension or successor to the Local Growth Fund, and we need a Shared Prosperity Fund that replaces EU funds and directs them to the most deprived parts of the country.

“But replacing those two funding sources is only enough to leave us standing still. To deliver the levelling up change this government has promised, we need long-term investment on a much greater scale.

“The Spending Review must give metro Mayors the certainty and clarity we need to deliver our plans for people, places and businesses. This is not a time for tinkering: we need a true transformation to level up the North.”

A number of spending commitments have already been announced including £3bn more to support the NHS, including £1bn to address treatment backlogs built up while attention was focused on Covid-19 patients.

The criminal justice system will get £275m to help courts cope with the cases that have built up due to coronavirus capacity constraints and tens of millions will be spent on a new counter-terrorism HQ.

While £1.6bn has been announced for local roads, and the Treasury’s green book – which sets the rules for government spending – will be altered to make it easier to spend money outside London and the South East.

However, the coronavirus lockdown brought economic activity to a halt, with tax revenues drying up, while the Treasury has paid out more than £200bn on furlough and other schemes to try to nurse the economy through the crisis.

The latest official figures for October show public sector debt passed the £2tr mark for the first time in history.

A freeze on public sector pay and suspending the UK’s commitment to spend 0.7 per cent of national income on overseas aid, with a cut to 0.5 per cent, are thought to be area’s the Chancellor hopes to claw back some money.

But Mr Sunak said it was not the time to impose tax hikes “in the fog of enormous economic uncertainty”.

He insisted he had concerns about the need to tackle the soaring scale of borrowing, but said “there’s an appropriate time” to address it.

“Right now the right economic response is to focus on tackling the virus,” he said.