Treasury tells Michael Gove not to expect lots of new cash for levelling up
Michael Gove’s new levelling up department is being warned not to expect a large injection of new cash in the spending review hours after Boris Johnson called levelling up “our fundamental project”, Sky News understands.
Mr Gove‘s department, which covers housing, the Union, local government and elections, will be expected to negotiate its three-year budget on the basis of the bid put together by Robert Jenrick, who was sacked on Wednesday.
Although there is some scope for changes, Sky News has learnt the Treasury is playing down the ability of incoming cabinet ministers to radically rewrite their departmental spending bids or ask for dramatically more.
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What will the new cabinet achieve?
One Whitehall source told Sky News that Mr Gove should therefore not be expecting an above average settlement.
A leading Tory MP, Jack Berry, said that the Treasury needed a new approach to levelling up or the Tories risk losing voters in the North.
Sky News has learned that the Treasury asked cabinet ministers to submit bids for the spending review at the start of the week, hours before the reshuffle was due to begin.
Now they are telling all departments they are still expecting to negotiate in some cases on the basis of bids submitted by cabinet ministers who lost their jobs or changed roles – which include Dominic Raab from the Foreign Office, Robert Buckland who has gone from Justice and Mr Jenrick from the Ministry of Housing.
This has caused surprise in parts of Whitehall, who point out there is a long way to go until the October 26 review and the arrival of a new Chief Secretary to the Treasury, Simon Clark, may change calculations.
Mr Gove may also benefit from machinery of government changes, such as the possible move of the Union unit to Mr Gove’s new ministry, which means Mr Jenrick’s budget submission cannot be adopted completely like for like.
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The Prime Minister assembles a new top team
Having only been in place 48 hours, it is thought to be too early for Mr Gove to have decided what his budget needs and priorities will be.
This morning the prime minister used the first post-reshuffle cabinet meeting to emphasise the importance of levelling up.
He said: “By cutting crime, by making our streets safer across the country, by improving the quality of people’s lives, putting in fibre optic gigabit broadband sprouting through everybody’s homes, by tackling the skills deficit across our country, by giving people opportunity across the whole of the UK… combined with local leadership – we are going to fulfil our fundamental project of uniting and levelling up the entire country… because that is what our mission is.”
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How will cabinet reshuffle impact climate goals?
Departments are already facing a squeeze.
Overall departmental spending will rise 4% a year in real terms (which is a 6% rise in cash terms before accounting for inflation) but a large share of this will be taken up by the Health and Social Care spending meaning other departments will get less.
Whitehall was braced for a tricky settlement as Rishi Sunak attempts to reclaim the mantle of fiscal discipline for the Conservative party after spending hundreds of billions on the pandemic.
Jake Berry, chairman of the Northern Research Group of Tory MPs who want greater commitment to levelling up, told Sky News: “I think what we’re learning is that the Treasury is yet to be convinced that levelling up is a government priority.
“Levelling up is about devolving power away from London, that tends not to be an agenda that the Treasury backs.”
Asked why there is resistance, he said: “They regard it as expensive.
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“Many of these projects in the North don’t stack up on traditional value for money spending.
“It’s just for that exact reason these communities need investment.
“The Treasury doesn’t need to so much tweak the Green Book.
“As they’ve done over the last few years – they need to rip it up, throw it in the shredder, and then chuck the waste away.
“They need a whole new approach.
“In all fairness to Mr Gove he has a track record of delivering… he has a track record of taking on what he’d call ‘the blob’ – and in this case the Treasury is the blob.”
Chancellor Rachel Reeves has suffered another budget blow with a rebellion by rural Labour MPs over inheritance tax on farmers.
Speaking during the final day of the Commons debate on the budget, Labour backbenchers demanded a U-turn on the controversial proposals.
Plans to introduce a 20% tax on farm estates worth more than £1m from April have drawn protesters to London in their tens of thousands, with many fearing huge tax bills that would force small farms to sell up for good.
Farmers have staged numerous protests against the tax in Westminster. Pic: PA
MPs voted on the so-called “family farms tax” just after 8pm on Tuesday, with dozens of Labour MPs appearing to have abstained, and one backbencher – borders MP Markus Campbell-Savours – voting against, alongside Conservative members.
In the vote, the fifth out of seven at the end of the budget debate, Labour’s vote slumped from 371 in the first vote on tax changes, down by 44 votes to 327.
‘Time to stand up for farmers’
The mini-mutiny followed a plea to Labour MPs from the National Farmers Union to abstain.
“To Labour MPs: We ask you to abstain on Budget Resolution 50,” the NFU urged.
“With your help, we can show the government there is still time to get it right on the family farm tax. A policy with such cruel human costs demands change. Now is the time to stand up for the farmers you represent.”
After the vote, NFU president Tom Bradshaw said: “The MPs who have shown their support are the rural representatives of the Labour Party. They represent the working people of the countryside and have spoken up on behalf of their constituents.
“It is vital that the chancellor and prime minister listen to the clear message they have delivered this evening. The next step in the fight against the family farm tax is removing the impact of this unjust and unfair policy on the most vulnerable members of our community.”
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Farmers defy police ban in budget day protest in Westminster.
The government comfortably won the vote by 327-182, a majority of 145. But the mini-mutiny served notice to the chancellor and Sir Keir Starmer that newly elected Labour MPs from the shires are prepared to rebel.
Speaking in the debate earlier, Mr Campbell-Savours said: “There remain deep concerns about the proposed changes to agricultural property relief (APR).
“Changes which leave many, not least elderly farmers, yet to make arrangements to transfer assets, devastated at the impact on their family farms.”
Samantha Niblett, Labour MP for South Derbyshire abstained after telling MPs: “I do plead with the government to look again at APR inheritance tax.
“Most farmers are not wealthy land barons, they live hand to mouth on tiny, sometimes non-existent profit margins. Many were explicitly advised not to hand over their farm to children, (but) now face enormous, unexpected tax bills.
“We must acknowledge a difficult truth: we have lost the trust of our farmers, and they deserve our utmost respect, our honesty and our unwavering support.”
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UK ‘criminally’ unprepared to feed itself in crisis, says farmers’ union.
Labour MPs from rural constituencies who did not vote included Tonia Antoniazzi (Gower), Julia Buckley (Shrewsbury), Jonathan Davies (Mid Derbyshire), Maya Ellis (Ribble Valley), and Anna Gelderd (South East Cornwall), Ben Goldsborough (South Norfolk), Alison Hume (Scarborough and Whitby), Terry Jermy (South West Norfolk), Jayne Kirkham (Truro and Falmouth), Noah Law (St Austell and Newquay), Perran Moon, (Camborne and Redruth), Samantha Niblett (South Derbyshire), Jenny Riddell-Carpenter (Suffolk Coastal), Henry Tufnell (Mid and South Pembrokeshire), John Whitby (Derbyshire Dales) and Steve Witherden (Montgomeryshire and Glyndwr).
The UK has passed a bill into law that treats digital assets, such as cryptocurrencies and stablecoins, as property, which advocates say will better protect crypto users.
Lord Speaker John McFall announced in the House of Lords on Tuesday that the Property (Digital Assets etc) Bill was given royal assent, meaning King Charles agreed to make the bill into an Act of Parliament and passed it into law.
Freddie New, policy chief at advocacy group Bitcoin Policy UK, said on X that the bill “becoming law is a massive step forward for Bitcoin in the United Kingdom and for everyone who holds and uses it here.”
Common law in the UK, based on judges’ decisions, has established that digital assets are property, but the bill sought to codify a recommendation made by the Law Commission of England and Wales in 2024 that crypto be categorized as a new form of personal property for clarity.
“UK courts have already treated digital assets as property, but that was all through case-by-case judgments,” said the advocacy group CryptoUK. “Parliament has now written this principle into law.”
“This gives digital assets a much clearer legal footing — especially for things like proving ownership, recovering stolen assets, and handling them in insolvency or estate cases,” it added.
Digital “things” now considered personal property
CryptoUK said that the bill confirms “that digital or electronic ‘things’ can be objects of personal property rights.”
UK law categorizes personal property in two ways: a “thing in possession,” which is tangible property such as a car, and and a “thing in action,” intangible property, like the right to enforce a contract.
The bill clarifies that “a thing that is digital or electronic in nature” isn’t outside the realm of personal property rights just because it is neither a “thing in possession” nor a “thing in action.”
The Law Commission argued in its report in 2024 that digital assets can possess both qualities, and said that their unclear fit into property rights laws could hamstring dispute resolutions in court.
Related: Group of EU banks pushes for a euro-pegged stablecoin by 2027
Change gives “greater clarity” to crypto users
CryptoUK said on X that the law gives “greater clarity and protection for consumers and investors” and gives crypto holders “the same confidence and certainty they expect with other forms of property.”
“Digital assets can be clearly owned, recovered in cases of theft or fraud, and included within insolvency and estate processes,” it added.
The group added that the UK now has a “clear legal basis for ownership and transfer” of crypto and the country would now be “better positioned to support the growth of new financial products, tokenised real-world assets, and more secure digital markets.”
The country’s finance authority reported late last year that roughly 12% of UK adults own cryptocurrency, up from 10% in its previous findings.
The UK also revealed plans for a crypto regulatory regime in April that would bring crypto businesses under similar rules to other finance companies, aiming to make the country a global hub for crypto while promoting consumer protections.
Magazine: 2026 is the year of pragmatic privacy in crypto — Canton, Zcash and more
The UK is “really unprepared” to fight a war and has been living on a “mirage” of military strength that was shocking to discover, interviews with almost every defence secretary since the end of the Cold War have revealed.
With Sir Keir Starmer under pressure to accelerate plans to reverse the decline, two new episodes of Sky News and Tortoise’s podcast series The Wargame uncover what happened behind the scenes as Britain switched funding away from warfare and into peacetime priorities such as health and welfare after the Soviet Union collapsed.
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This decades-long saga, spanning multiple Labour, Conservative and coalition governments, includes heated rows between the Ministry of Defence (MoD) and the Treasury, threats to resign, and dire warnings of weakness.
It also exposes a failure by the military and civil service to spend Britain’s still-significant defence budget effectively, further compounding the erosion of fighting power.
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The Wargame: Behind the scenes
‘Russia knew’ about UK’s weaknesses
Now, with the threat from Russia returning, there is a concern the UK has been left to bluff about its ability to respond, rather than pivot decisively back to a war footing.
“We’ve been living on a sort of mirage for so long,” says Sir Ben Wallace, a Conservative defence secretary from 2019 until 2023.
“As long as Trooping the Colour was happening, and the Red Arrows flew, and prime ministers could pose at NATO, everything was fine.
“But it wasn’t fine. And the people who knew it wasn’t fine were actually the Americans, but also the Russians.”
Not enough troops, medics, or ammo
Lord George Robertson, a Labour defence secretary from 1997 to 1999 and the lead author of a major defence review this year, says when he most recently “lifted the bonnet” to look at the state of the Army, Royal Navy and Royal Air Force, he found “we were really unprepared”.
“We don’t have enough ammunition, we don’t have enough logistics, we don’t have enough trained soldiers, the training is not right, and we don’t have enough medics to take the casualties that would be involved in a full-scale war.”
Asked if the situation was worse than he had imagined, Lord Robertson says: “Much worse.”
Robertson meets the PM after last year’s election. Pic: Reuters
‘I was shocked,’ says ex-defence secretary
Sir Gavin Williamson, a former Conservative defence secretary, says he too had been “quite shocked as to how thin things were” when he was in charge at the MoD between 2017 and 2019.
“There was this sort of sense of: ‘Oh, the MoD is always good for a billion [pounds] from Treasury – you can always take a billion out of the MoD and nothing will really change.’
“And maybe that had been the case in the past, but the cupboards were really bare.
“You were just taking the cupboards.”
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Ben Wallace on role as PM in ‘The Wargame’
But Lord Philip Hammond, a Conservative defence secretary from 2011 to 2014 and chancellor from 2016 until 2019, appears less sympathetic to the cries for increased cash.
“Gavin Williamson came in [to the Ministry of Defence], the military polished up their bleeding stumps as best they could and convinced him that the UK’s defence capability was about to collapse,” he says.
“He came scuttling across the road to Downing Street to say, I need billions of pounds more money… To be honest, I didn’t think that he had sufficiently interrogated the military begging bowls that had been presented to him.”
Hammond at a 2014 NATO meeting. Pic: Reuters
What to expect from The Wargame’s return
Episodes one to five of The Wargame simulate a Russian attack on the UK and imagine what might happen, with former politicians and military chiefs back in the hot seat.
The drama reveals how vulnerable the country has really become to an attack on the home front.
The two new episodes seek to find out why.
The story of the UK’s hollowed-out defences starts in a different era when an Iron Curtain divided Europe, Ronald Reagan was president of the US, and an Iron Lady was in power in Britain.
Sir Malcolm Rifkind, who went on to serve as defence secretary between 1992 and 1995 under John Major, recalls his time as minister for state at the Foreign Office in 1984.
In December of that year, then prime minister Margaret Thatcher agreed to host a relatively unknown member of the Soviet Communist Party Politburo called Mikhail Gorbachev, who subsequently became the last leader of the Soviet Union.
Sir Malcolm remembers how Mrs Thatcher emerged from the meeting to say: “I think Mr Gorbachev is a man with whom we can do business.”
Gorbachev was hosted at Chequers in 1984. Pic: Reuters
It was an opinion she shared with her close ally, the US president.
Sir Malcolm says: “Reagan would have said, ‘I’m not going to speak to some unknown communist in the Politburo’. But if the Iron Lady, who Reagan thought very highly of, says he’s worth talking to, he must be worth it. We’d better get in touch with this guy. Which they did.
“And I’m oversimplifying it, but that led to the Cold War ending without a shot being fired.”
Read more from Sky News:
Courts in ‘calamitous’ state
Reeves faces rural Labour rebellion
In the years that followed, the UK and much of the rest of Europe reaped a so-called peace dividend, cutting defence budgets, shrinking militaries and reducing wider readiness for war.
Into this different era stepped Tony Blair as Labour’s first post-Cold War prime minister, with Lord Robertson as his defence secretary.
Robertson and Blair in 1998. Pic: Reuters
Lord Robertson reveals the threat he and his ministerial team secretly made to protect their budget from then chancellor Gordon Brown amid a sweeping review of defence, which was meant to be shaped by foreign policy, not financial envelopes.
“I don’t think I’ve ever said this in public before, but John Reid, who was the minister for the Armed Forces, and John Speller, who was one of the junior ministers in the department, the three of us went to see Tony Blair late at night – he was wearing a tracksuit, we always remember – and we said that if the money was taken out of our budget, the budget that was based on the foreign policy baseline, then we would have to resign,” Lord Robertson says.
“We obviously didn’t resign – but we kept the money.”
The podcast hears from three other Labour defence secretaries: Geoff Hoon, Lord John Hutton and the current incumbent, John Healey.
John Healey, the current defence secretary. Pic: PA
For the Conservatives, as well as Rifkind, Hammond, Williamson and Wallace, there are interviews with Liam Fox, Sir Michael Fallon, Dame Penny Mordaunt and Sir Grant Shapps.
In addition, military commanders have their say, with recollections from Field Marshal Lord David Richards, who was chief of the defence staff from 2010 until 2013, General Sir Nick Carter, who led the armed forces from 2018 until 2021, and Vice Admiral Sir Nick Hine, who was second in charge of the navy from 2019 until 2022.
‘We cut too far’
At one point, Sir Grant, who held a variety of cabinet roles, including defence secretary, is asked whether he regrets the decisions the Conservative government took when in power.
He says: “Yes, I think it did cut defence too far. I mean, I’ll just be completely black and white about it.”
Lord Robertson says Labour too shares some responsibility: “Everyone took the peace dividend right through.”
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