Money set to be given to Northern towns as part of the Government’s levelling up fund will be scaled back because of high inflation, Simon Clarke has confirmed.

The Levelling Up Secretary yesterday told MPs that due to Putin’s war in Ukraine, pots of investment will have to be scaled back.

“It is not the case that central government or local government can expect to buck inflation or that we can accommodate the cost of inflation within our settlements,” he told the Commons.

He added that there was a “mechanism within the levelling up fund to allow bids to be resized for inflation”.

Chief Secretary to the Treasury Simon Clarke arrives in Downing Street, London for a Cabinet meeting. Picture date: Wednesday March 23, 2022.

“It’s very worrying for communities that have been promised much-needed investment to hear that soaring inflation and the economic crisis made in Downing Street might make proposals no longer affordable,” said Alex Norris, Labour’s shadow levelling up minister.

“Many councils are facing huge financial pressures, putting strain on vital local services, and they need urgent clarity about whether applications on which they have spent time and money are still viable.”

Yesterday the Government also revealed that it was continuing its freeze on “non-essential” aid spending until the Chancellor’s medium-term fiscal plan on Halloween.

Vicky Ford, a foreign office minister, wrote to Sarah Champion, the Rotherham MP and chair of the international development select committee, outlining that budget pressures from the Treasury had forced the move.

It comes after the Treasury also confirmed that it had indefinitely paused its intention to return aid spending to 0.7 per cent of GDP until the fiscal situation improves.

“My committee still isn’t clear what this means in practice,” said Ms Champion, adding that her committee will be questioning FCDO officials later today on cuts to international aid.

Levelling up funding to be cut because of inflation