Read more: The worst thing for Iain Duncan Smith's "have-nots" would be Brexit
"The Treasury is the worst thing in Britain" and "has to be broken up." So argued Iain Duncan Smith, former Work and Pensions Secretary, this week. Duncan Smith claimed that the government department is responsible for Britain's low-productivity and that it dictates "every single policy area across government" according to a "narrow design."
Duncan Smith's frustration with the Treasury is well documented—he frequently clashed with the department during his time in government, and when he resigned in March it was, he claimed, down to the Treasury's commitment to disability benefit cuts.
Is he onto something? Is the Chancellor too powerful? A panel of experts including Giles Wiles—co-author of "The end of the Treasury," offer their views.
There needs to be a Treasury. Mayhem would ensue were there no finance ministry challenging every penny of expenditure. Within Britain’s executive branch there is should be a balance of power. Where matters of money are concerned, at one end of the balance should lie the Treasury.
But this particular Treasury squats like a half-tonne weight on the scales. To start with, it sees fit to initiate far too much policy: wheezes that encroach across other departments, while bearing none of the responsibility for making them work. Forced academisation is but the most recent example; hundreds went before under both George Osborne and Gordon Brown. Worse, a finance-department lens provides a distorted view of the decisions needed in a modern economy. When everything is subordinate to the need for ready cash, real long term considerations are discounted to nothing.
Politics is short-termist enough without a powerful central department doubling down on the myopia. The accountants need to stick to counting their beans, not setting the government’s course.
The Treasury has been around for almost 1,000 years. An institution like that cannot be changed overnight. Its remit and scope has already changed significantly over recent decades. Interest rate decisions have been delegated to the Bank of England and economic forecasting to the independent Office of Budget for Responsibility. A full break-up is probably not the answer but there are strong arguments for further reform. The Treasury might stick more rigidly to its responsibility for setting tax policy and be made more accountable for this to Parliament. Decisions related to public spending and economic growth might then be delegated to other departments and the regions. The Treasury’s archaic Green Book appraisal process that inhibits good investments is certainly in need of reform. A lot of officials could also work in different parts of the country to correct the perceived investment bias in favour of London.
Duncan Smith is likely right that the controlling culture of the Treasury is almost unique in the west, but this does not warrant its break-up. As the single point of sign off, the Treasury has an overview and control that can drive cross-department priorities and manage spending.
The problem lies with the vision of the Treasury. Its mission statement focuses entirely on spending control and economic growth. However, national outcomes are not just about GDP. The Treasury is divorced from what matters to people at a human level. What’s worse, control has become the goal. Yet the answer is not removing control, but shifting the goal for which it is used.
The vision of New Zealand's Treasury is to achieve higher living standards, including natural, social, and human capital. This more human mission drives a necessarily more collaborative, long-term approach across government. Replicate this in Whitehall and perhaps Duncan Smith’s compassionate arguments would have been heard.
"The Treasury is the worst thing in Britain" and "has to be broken up." So argued Iain Duncan Smith, former Work and Pensions Secretary, this week. Duncan Smith claimed that the government department is responsible for Britain's low-productivity and that it dictates "every single policy area across government" according to a "narrow design."
Duncan Smith's frustration with the Treasury is well documented—he frequently clashed with the department during his time in government, and when he resigned in March it was, he claimed, down to the Treasury's commitment to disability benefit cuts.
Is he onto something? Is the Chancellor too powerful? A panel of experts including Giles Wiles—co-author of "The end of the Treasury," offer their views.
There needs to be a Treasury—but not this one
Giles Wilkes, journalist at the Financial Times and co-author of "The end of the Treasury"There needs to be a Treasury. Mayhem would ensue were there no finance ministry challenging every penny of expenditure. Within Britain’s executive branch there is should be a balance of power. Where matters of money are concerned, at one end of the balance should lie the Treasury.
But this particular Treasury squats like a half-tonne weight on the scales. To start with, it sees fit to initiate far too much policy: wheezes that encroach across other departments, while bearing none of the responsibility for making them work. Forced academisation is but the most recent example; hundreds went before under both George Osborne and Gordon Brown. Worse, a finance-department lens provides a distorted view of the decisions needed in a modern economy. When everything is subordinate to the need for ready cash, real long term considerations are discounted to nothing.
Politics is short-termist enough without a powerful central department doubling down on the myopia. The accountants need to stick to counting their beans, not setting the government’s course.
There are strong arguments for reform
Damian Hind, Economics Researcher at Policy ExchangeThe Treasury has been around for almost 1,000 years. An institution like that cannot be changed overnight. Its remit and scope has already changed significantly over recent decades. Interest rate decisions have been delegated to the Bank of England and economic forecasting to the independent Office of Budget for Responsibility. A full break-up is probably not the answer but there are strong arguments for further reform. The Treasury might stick more rigidly to its responsibility for setting tax policy and be made more accountable for this to Parliament. Decisions related to public spending and economic growth might then be delegated to other departments and the regions. The Treasury’s archaic Green Book appraisal process that inhibits good investments is certainly in need of reform. A lot of officials could also work in different parts of the country to correct the perceived investment bias in favour of London.
The problem is not the Treasury's power, but its vision
Harriet Maltby, Head of Policy Research at the Legatum InstituteDuncan Smith is likely right that the controlling culture of the Treasury is almost unique in the west, but this does not warrant its break-up. As the single point of sign off, the Treasury has an overview and control that can drive cross-department priorities and manage spending.
The problem lies with the vision of the Treasury. Its mission statement focuses entirely on spending control and economic growth. However, national outcomes are not just about GDP. The Treasury is divorced from what matters to people at a human level. What’s worse, control has become the goal. Yet the answer is not removing control, but shifting the goal for which it is used.
The vision of New Zealand's Treasury is to achieve higher living standards, including natural, social, and human capital. This more human mission drives a necessarily more collaborative, long-term approach across government. Replicate this in Whitehall and perhaps Duncan Smith’s compassionate arguments would have been heard.
