Michael Gove ‘plotted to waste £1.5bn’ in unspent taxpayer cash

Michael Gove has been accused of hatching an “outrageous” plan when he was Levelling Up Secretary to “waste” £1.5 billion of unspent cash that could be used to tackle the cost of living crisis.

Under Mr Gove’s leadership, the Department for Levelling Up, Housing and Communities (DLUHC) developed a plan known as “Project Zero” to “get rid” of a £1.5 billion projected underspend, The Telegraph has been told.

Mr Gove, who served as Levelling Up secretary until he was sacked by Boris Johnson in July, is said to have sent a memo outlining the project at the start of the summer.

A Whitehall official told The Telegraph: “Every year or so departments will end up with a certain amount of underspend which is very embarrassing with the Treasury, because they ask for as much money as they possibly can.”

The source said that Mr Gove felt DLUHC needed to clear the underspend so the department could “ask for more money in the future”. Pointing to the cost of living crisis, the source said: “It seems just outrageous on the timing.”

DLUHC is said to be considering a “couple of projects” for the money, but the source said there was “nothing particularly good to use it on”. “Basically there’s very little that has a good benefit-to-cost ratio, hence it’s still sitting there.”

Another Whitehall source described the process for dealing with underspends as “ridiculous”. “If they haven’t spent all of their money, they frantically look for ways to spend it so they don’t get less money next year,” the source said. “In other words, look for ways to waste taxpayers’ money on things that don’t need to be done.”

David Jones, a Tory backbencher and former Cabinet minister, said: “One wonders what had gone wrong with the budget – it’s fairly clear that if it’s a surplus to the extent of £1.5 billion, the budget was severely awry.

“It underlines not only the fact that those compiling the departmental budgets are clearly way off beam, but also the Treasury needs to give very careful scrutiny to these budgets when they are put forward, and for that purpose we need ministers at the Treasury who will impose that degree of rigour.”

Mr Jones said that given the cost of living crisis, the underspend should be returned to the Treasury. “They shouldn’t be scratching around to find projects to spend the money on,” he said. “If they don’t need it, the money should go where it can be better spent.

“The Treasury, God knows, has enough calls upon the public purse at the moment - I’m sure that at this particular time there are other departments that could spend it far more effectively.”

‘Treasury incompetence’ to blame for underspends

However, an ally of Mr Gove pushed back against the criticism, describing it as “ludicrous”.

They said that underspends were often the result of Treasury checks that held up departmental spending decisions.

“Underspends normally occur because of Treasury incompetence,” the ally said. “Gove was looking at using the money to help house Ukrainian refugees, turbocharge Right to Buy and unlock thousands of new genuinely affordable homes.

“The idea it might have been been a waste of taxpayers’ money is ludicrous.”

DLUHC confirmed that a decision on how to deploy the departmental underspend had yet to be taken. A spokesman said: “Departmental underspend is a normal feature of government finance, and any savings are fed back into the wider budget planning process. All spending goes through a rigorous process to ensure it goes where it is most needed and taxpayers get value for money.

“We are totally focused on driving forward the Government’s central mission to level up the country while also supporting people as they grapple with the rising cost living, including through our successful £150 council tax rebate scheme.”

There have been cases of departments returning underspends to the Treasury.

When he was Welsh Secretary in John Major’s government, John Redwood said that efficiency drives had enabled him to return £100 million of Wales’s block grant to the Treasury, in contrast with predecessors who focused on obtaining more funding.

Liz Truss, the favourite to take over from Boris Johnson as prime minister, promised during the Tory leadership race to “wage a war on Whitehall waste”, which she claimed would save £11 billion.