Dictation stopped working (M1 MacBook Pro / Ventura 13.2.1)

Recently Dictation on my M1 MacBook Pro running Ventura 13.2.1 stopped working. The bell sounds when I double click the Ctrl key twice, the microphone overlay pops up, there is movement inside the microphone in response to my voice, but no words are generated.

This feature has been working fine for the last couple of years without any issue.

1. Dictation is turned on.
2. My language - English (United Kingdom) is selected.
3. Im using the correct command (double click the Ctrl key twice).
4. I'm connected to valid internet connection (as I'm currently on the Apple website filling a community support form).

When I try a random Siri question, it works fine and I get a correct response to the question I asked. So it's clear my microphone is working and my machine connected correctly.

I also remembered seeing somewhere that the Apple Silicone machines could run basic dictation offline without the use of a internet connection, so this would mean that even if there was a connection issue that it wouldn't be a problem.

Any ideas?