Sunak to choose northern base for new Treasury HQ

Newcastle and Leeds are among the main northern conurbations to make the final shortlist to become the site of the Treasury’s new economic campus — seen by chancellor Rishi Sunak as a big part of the government’s levelling up agenda.

Treasury North is set to be the crowning piece of the government’s plans to move 22,000 civil servants out of London by the end of the decade. The campus will initially house 750 officials from several ministries, including the departments for business and transport.

According to individuals with knowledge of the discussions, Sunak’s shortlist for the campus has narrowed to the well-connected cities of Newcastle and Leeds, versus Bradford in West Yorkshire, or the Teesside town of Darlington.

The Treasury is also finalising £180m of funding for new “carbon capture and storage” (CCS) schemes in far-flung sites which will capture CO2 emissions to tackle climate change with a project on Teeside likely to be chosen.

Prime minister Boris Johnson owes his emphatic parliamentary majority to voters in former Labour voting areas in the “red wall” constituencies in the Midlands and north that switched sides over Brexit at the 2019 general election.

Johnson has pledged to breathe new life into these areas’ economies by rebalancing growth across the UK while reforming Whitehall to give greater priority to left-behind regions.

Rishi understands that we need to start delivering in areas like mine and what better way to show real levelling up by bringing this to Darlington

As well as Treasury North, Sunak will next week announce locations for the first wave of freeports, which will give at least seven English locations tax breaks and relaxed planning controls.

The bidders in England include Teesside, Tyneside, Humberside, Bristol and London Gateway — as well as some inland sites such as East Midlands airport.

The chancellor will also use his March 3 Budget to announce the location of Britain’s new infrastructure investment bank, a post-Brexit successor scheme for the European Investment Bank, which will be in northern England.

But Treasury insiders said the choice of the government’s new northern economic campus will be highly sensitive and could trigger rivalries between urban centres. Ben Houchen, the Tory mayor of Tees Valley, believes that Sunak is being pressed by civil servants to “swap one metropolitan city for another”.

Houchen warned that the government “might as well not bother” opening the campus if Treasury North ultimately goes to a big city such as Newcastle or Leeds.

“Rishi understands that we need to start delivering in areas like mine and what better way to show real levelling up by bringing this to Darlington,” he said.

Officials say they have conducted a thorough analysis of recruitment, retention and sustainability for each location and concluded all four are viable.

Facing a “complex matrix of choices”, insiders said the chancellor will decide the location in the coming days, ahead of the Budget on March 3. A Treasury spokesperson declined to comment.

Conservatives representing the so-called red wall of former Labour heartland constituencies have argued that locating the campus in Newcastle or Leeds would not chime with the government’s agenda to deliver opportunities to England’s smaller cities and towns.

Another red wall Conservative said, “I think there’s an understanding that moving this to a major city would do little to further the levelling up agenda.”

The carbon capture storage funding is set to be shared between half a dozen projects, according to industry and Whitehall sources, although it is not clear whether it will be part of the Budget.

The likely winners include a Teeside project led by a group called OGCI Climate Investments, which is made up of investors including. BP, Shell, Total and Saudi Aramco.

A large investment will also go to a Humberside-based group called Zero Carbon Humber, which is backed by National Grid Ventures, Equinor and Drax as well as Centrica Storage and Associated British Ports.

Meanwhile, the government’s decision to cut Transport for the North’s core budget by 40 per cent from April has led northern leaders to question its commitment to levelling up.

Andy Burnham, Labour mayor of Greater Manchester, said “there is a sense that ambitions are being lowered” on northern transport schemes.

TfN has had to delay its final plan for Northern Powerhouse Rail, the £37bn scheme for a new Manchester-Leeds line and improvements across the region to link northern cities with faster, more regular services.