Come back Treasury, your country needs you…

British government doesn’t work well when too much power is concentrated in HM Treasury.

Gordon Brown used the Treasury to run his own supply-side policies and act as first minister for domestic affairs. George Osborne combined being Chancellor with being chief executive (or at least strategy director) of the Cameron government. He again had a free hand on any policy area where the Prime Minister didn’t have his own agenda – on those few issues, the Treasury held back. One, for example, was on the net migration target, where, as former immigration minister Damian Green told us, the Chancellor never made the Treasury’s economic arguments.

That unbalanced the government. The UK Government’s adversarial style of decision making requires challenge to work. Too many bad policies get through if the Treasury acts as policy advocate rather than policy sceptic.

Both Brown and Osborne were also using the Treasury to prepare the ground for their ultimate move next door – from 11 to 10 Downing Street.

Over the same period, Treasury officials consolidated their grip on the centre. The last three Cabinet secretaries have been born and bred Treasury officials. The Treasury took over more and more responsibility on the European Union from the Foreign and Commonwealth Office – providing the head of the UK representation in Brussels and the Prime Minister’s chief adviser on European affairs. They established a grip on the top role at No.10. Ever since Sir Clive Whitmore – from the Ministry of Defence – stepped down as Mrs Thatcher’s Principal Private Secretary in the early 1980s, Treasury officials occupied the top official slot in No.10 until the appointment of securocrat Simon Case by David Cameron last year.

But the power in No.10 has shifted with the dominance of Theresa May’s Joints Chiefs of Staff – both of whose government experience is drawn exclusively from the Home Office. In an early indication of what that means, the review of Hinkley Point C appears to have focused solely on the security implications – with the opportunity to ask if the economics still made sense (or could be improved) passed up.

At last week’s party conference, the Chancellor struck a very different note from the dominant tone – warning of the potential economic risks that would have to be managed to deliver a successful Brexit, in contrast to the optimism of the Brexit Three (Liam Fox, Boris Johnson and David Davis) and the Prime Minister. He put a different gloss on what the referendum vote meant: ‘it is equally clear to me that the British people did not vote on June 23rd to become poorer, or less secure’.

The Prime Minister’s conference speech bore few hallmarks of any input from the Treasury. It is hard to believe that Treasury advisers would not have pointed out how her comments on the impact of monetary policy might be interpreted – or that sterling might not react positively to parts of the speech. Just when the UK needs to sound like a great place to do business, the Prime Minister opted to sound more anti-business than any Conservative Prime Minister since Edward Heath’s denunciation of the unacceptable face of capitalism. The Chancellor then used his trip to the United States for the International Monetary Fund (IMF)/World Bank annual meetings for damage limitation.

The Treasury was the Leave campaign’s bete noire during the referendum – its analysis used to make the case for a punishment Budget and to warn of a permanent loss of national wealth if we left. HMT was on the Gove list of distrusted acronyms as much as the IMF or the IFS (Institute for Fiscal Studies). It was a big institutional loser on 23 June.

But as the Government approaches the task of defining our negotiating strategy with the EU, it needs a powerful advocate for economic interests at the table.

For the last two decades, there has been a good case for cutting the Treasury down to size. The bigger threat over the next two years is that the Treasury is side-lined.