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After Nick: what the Treasury (and the rest of us) needs in its next permanent secretary

Treasury Permanent Secretary Sir Nick Macpherson is standing down at the end of March – after ten years as the Treasury’s most senior official. News of his departure is being accompanied by plaudits from colleagues and those he served. We have yet to be told how his successor will be chosen. But, as Jill Rutter explains, it’s an important choice – both for the Treasury and the country.

The Treasury is always one of the most powerful departments in Whitehall – but at the moment it stands head and shoulders above the rest. That is in part due to the Chancellor – with a writ that runs over any areas of policy he is interested in (infrastructure, the supply side, decentralisation and leading the European renegotiation effort); in part due to the “benign” relationship between the Chancellor and the Prime Minister; in part due to the grip the Treasury diaspora has on other key jobs in Whitehall, but also to a significant degree to its own sense of identity and purpose under Nick Macpherson. While external ministerial critics might express frustration at its interference and say it has “massive problems”, the Treasury itself is pretty happy, topping the staff engagement charts (some might even say it's too pleased with itself).

The appointment may well follow a proven formula. Pick as permanent secretary an insider who has spent their career in the Treasury (Nick never left the Treasury in his 31 years there); who knows the Chancellor well and can ensure his writ runs in Whitehall (an essential prerequisite, for instance, of making sure departments honour the deals done as part of the 'Northern Powerhouse' initiative); and who will preside over more of the same.

But while there is no point in appointing a permanent secretary who cannot work with the Chancellor, the leading candidate should not just be the person who will give the Chancellor the quietest life. George Osborne has thanked his outgoing permanent secretary for “advice to me that has always been intelligent, candid and discreet”– but the country may be better served by someone who is more prepared to stand up to his boss in public. It is notable how quickly the Treasury moved to brush off any suggestion that the NAO could look at the cost of tax reliefs and how reluctant the Permanent Secretary has been to use his accounting officer responsibilities to challenge the value for money of policies like pensioner bonds, or 'help to buy' ISAs. Other permanent secretaries have been more willing to take a stand.

The Permanent Secretary has a stewardship role to ensure the integrity of the public finances. While the Office for Budget Responsibility (OBR) has taken over forecasting responsibilities, the Treasury should be ensuring that figures presented by the government are transparent and not misleading. As we have pointed out before, the Treasury almost seems to delight in producing figures that are impossible to interpret for months after the event. That may serve incumbent chancellors well, but it is a long-run disservice to the economy. So we need a Treasury permanent secretary who will enforce propriety and discipline in presentation.

We also need someone who will think more innovatively about Treasury processes. Process innovations in economic policy come from politicians not from officials – whether it is Bank independence, the Office of Budget Responsibility (OBR) or even the Office of Tax Simplification (OTS). The Treasury’s own reaction is instinctive conservatism. But increasingly the old secretive ways no longer fit public expectations and as a nation we are poorly served by the lack of public debate about, or scrutiny of, tax policy. Rather than revel in Treasury traditionalism, the next Treasury permanent secretary needs to be able to step back and think afresh about how the Treasury can lead on better policy making (and at the same time challenge the Treasury to stop being the backmarker on almost every measure of transparency).

There are other areas where the new Permanent Secretary needs to press on and keep up work already in train. Three areas stand out:

  • First, the Treasury needs to continue its belated leadership of the finance profession and to support departments to make the best use of financial and other management information.
  • Second, the Treasury needs to lend its substantial weight to Civil Service Chief Executive John Manzoni’s agenda of improving the wider capability of Whitehall.
  • Finally, having agreed the spending totals for the rest of the Parliament, the Treasury now needs to act as facilitator and enabler of the changes needed to deliver those numbers, rather than simply regarding meeting them as someone else’s problem. It also needs to be increasingly alert to the risks inherent in running services through fragmented organisations and complex outsourced contracts – to make sure these deliver for the taxpayer, and that there are clear accountability arrangements and failure regimes in place.

Finally, the biggest challenge for the new Permanent Secretary will be to navigate the European referendum. Many Treasury alumnae claim their greatest triumph was to keep the UK out of the euro but will want to avoid the instability of potential Brexit. One of Nick Macpherson’s most controversial steps was to make public his advice on the implications of Scottish independence; his successor will need to avoid the Treasury being played into the referendum debate.

The Cabinet Secretary is in charge of the process to find the right person. Unless he is prepared to go outside the UK or break dramatically with precedent in other ways, the field is very small. But he needs to make sure that the new appointment is acceptable to the Chancellor, good for the Treasury and the civil service – and good for the long-term economic future of the country.

Topic
Brexit

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