Ministers Reflect: on the Treasury

Inside the Treasury

The minister with Treasury experience we interviewed, Mark Hoban, was impressed with the way the Treasury prepared for new ministers and thought his background helped him make that transition: “I was financially literate, which was important, I had run projects, some of those skills about managing people and managing teams I’d learnt at PwC were invaluable at the Treasury.” He said the learning curve was steeper at the Department for Work and Pensions (DWP). He also noted a difference between the departments in the importance of Parliament and the media – in the Treasury, more Parliament and less media – and was surprised to find the reverse at DWP.

In the Treasury, he was struck by the calibre of staff he encountered: “Lots of young, very bright, very motivated people who were very keen and ambitious and it was really quite a dynamic environment.” Again, he contrasted this with those who worked for him at DWP:

“The Treasury, because it was not a delivery department, was much more theoretical and intellectual, which was right for the purposes but actually…a real strength I saw in DWP was that variety of experience, that intellectual capacity to think about how a policy should be designed but then also that experience to say well this is how it can be delivered in practice, which is helpful.”

Outside the Treasury

Views from outside were more mixed – and not always quite so complimentary. Lord Marland thought that “The Treasury had some good people in it. I think some of the people thought they knew more than they did.” Chris Huhne reported one encounter with:

“…a fairly young woman from the Treasury who, very determinedly, was lecturing us all about how we couldn’t possibly give independent borrowing powers to the GIB [Green Investment Bank] because if this was to happen it would undermine the UK’s credit rating and that it was absolutely ridiculous, so, you know, this was simply the Treasury making it up as it went along to try and kill an idea that it never wanted.”

Treasury power – and interference

Some ministers were taken surprise by the extent of Treasury involvement in their department: even Mark Hoban remarks:

“I do not think you appreciate the power and influence of the Treasury until you are outside. Particularly on the spending side, it has a very clear sense of its own priorities and interests and views about the effectiveness of policy and spending priorities and things like which actually the detail of their engagement surprised me.”

For those who were completely new to government, like Nick Harvey, this came as an unwelcome shock:

“I was just astonished by the extent to which Number 10 and the Treasury and the Cabinet Office stuck their nose into departmental affairs. I mean, I had made speeches in opposition about Downing Street, under Gordon Brown’s Treasury, meddling. The reality was far worse than any of my rhetorical flourishes. I had just no idea the extent to which they micro-managed and nosed into departmental affairs. I was absolutely horrified by it to be honest.”

It was not just the Liberal Democrat ministers who had reservations about the Treasury. Caroline Spelman said the Treasury was “very hard to deal with; it has all the power because it has all the money, and this was at a time when there was no money.” But other ministers pointed out that Treasury challenge was important. Mark Hoban notes: “If the Treasury wasn’t there to exercise that challenge to departments about their spending, I do not know who else would provide that challenge.”

Secrecy

As we have noted before, Treasury engagement with departments is a one-way street. Their licence to meddle is not reciprocated when it comes to consultation with departments on fiscal events. This is especially true in departments like the MoD which were, according to Nick Harvey “on the naughty step” for prior financial mismanagement. Long-serving Pensions Minister Steve Webb explained his frustration at the Treasury’s “juvenile” behaviour on pension tax relief:

“You might imagine they’d have some engagement with the Pensions Minister, but they’d make a big change to pension tax relief and not tell me. Now, I did know what was happening in the 2014 budget when the pension reforms happened and that was a good thing. But in 2012 I think it was when tax relief changed for 2012, I heard it the same time everybody else did. And that’s ridiculous, you know, my vanity aside, that’s just a stupid way to run government. But it’s the Treasury, you know. It’s tax”.

Collaboration – or not

Failure to consult on tax changes was one aspect people noted of the Treasury not acting as a team player. Damian Green noted that the Chancellor made life much easier for the Home Office on immigration policy:

“George Osborne made it very clear at the start of the Government that he stood behind the idea of an immigration target, so all those Treasury officials who were treating it in purely economic terms, basically couldn’t. So the Treasury never argued against it in a way that one could imagine in other circumstances they would.”

As we pointed out in our Centre Forward report, George Osborne is not the first Chancellor to treat the cabinet committee system with a degree of lofty disdain. Vince Cable said that the Chancellor avoided formal decision-making structures: “Osborne didn’t really believe in cabinet committees. I was deputy chairman of various economic committees but they never ever met.

His deputy David Willetts (who later got himself put on Nick Clegg’s Home Affairs Committee) noted that he had misread the cabinet committee structure:

“It becomes clear very early on [that] the Economic Affairs Cabinet Committee is not meeting and is not a functioning committee. You can speculate about the reasons but it might have been that George [Osborne] didn’t want to have Vince [Cable] coming in regularly and speaking across the whole range of domestic and economic policy. I understand George’s reasons, but it actually became very frustrating.”

Ministers and their networks

The most effective operators had to make the relations with the Treasury work bilaterally – especially in areas where there were overlapping responsibilities. Steve Webb said that with pensions policy:

“Responsibility for it is split. So I was responsible for… if you’ve got a pension, a company pension fund, I was responsible for that. If you had a pension with an insurance company, the Treasury were responsible for that, sort of. I mean, you know, because its financial services rather company pensions. So lots of decisions had to be jointly made.”

In the Department for Business, Innovation and Skills (BIS), David Willetts noted an inbuilt tension, compounded by governing in coalition:

“…BIS had by and large a poor relationship with the Treasury. It is one of the great dysfunctional relationships in government. Who is the economics ministry? Is the Treasury the economics ministry or isBIS the economics ministry? How do you define it? Is [the Treasury] a finance ministry or economics ministry? Because you see the Treasury also see themselves in part as the economics ministry. That’s the start of it. And then we have this kind of Lib Dem and Conservative tension on top. We made it work, but there was a tension there.”

The way savvy politicians make it work is by using their relationships. For example, Steve Webb called on Liberal Democrat Chief Treasury Secretary Danny Alexander:

“Occasionally it would be apparent that to get something done in Pensions we needed the Treasury. So I would ring Danny [Alexander, then Chief Secretary], and there was a bit of a kind of, ‘Oh, you’ve got the phone number of the Chief Secretary of the Treasury’ kind of thing. Well ‘of course I have’.”

David Willetts would try to put make sure BIS’ demands aligned with the Treasury agenda and then go:

“…out on manoeuvres. I wouldn’t be completely secretive but they were always worried. I wouldn’t turn up to George [Osborne] and say what a terrible letter you’ve had from BIS and ignore it. I wouldn’t. What I said, a lot of them, would be items that were in the BIS ask list, but re-presented and re-prioritised in accordance with what I knew their [the Treasury’s] priorities were. So the Treasury relationship I think worked.”

He also offered George Osborne a political dividend:

“If George [Osborne] provided me with some money for some project I had put to him, I would then, not even formally but six months on [say], ‘You know that money you gave me for those incubator sites on the university campuses, I went the other day, you gave them the money six months ago and the building is already going up. It’s going to be finished by the end of the year, do you want to go to the opening?’ ”

As a result he thought the relationship between the departments was good. The other route was through George Osborne’s powerful former Chief of Staff, Rupert Harrison. Steve Webb used him on pensions – noting their shared Institute for Fiscal Studies (IFS) heritage; while Vince Cable found sorting things out through the adviser network effective:

“If I wanted to agree something with Osborne I’d go and talk to him or more usually operate through our special advisers. Rupert Harrison [Osborne’s then Chief of Staff] was a very powerful man, I don’t know if he realised that. I would send Giles [Wilkes] off to talk to him and we’d work through it.”

Conclusion        

Our Ministers Reflect archive offers some nuggets of insight into the role of the Treasury, the frustrations and possibilities of dealing with them. There are hardly any treasury ministers in our sample – so far.  The reason for that is simple: as long-serving Financial Secretary David Gauke said at a Treasury alumnae reunion, there is a Treasury Ministerial alumnae network as well – “called the Cabinet” – a point we have noted in our Whitehall Monitor report.

It is clear that the Treasury looms large in the lives of secretaries of state, or ministers of state like David Willetts and Steve Webb with their own big portfolios. Some, but not all, of their messages are positive. Most recognise the need to have clear strategies to get the Treasury onside rather than resorting to Chris Huhne’s position: “we don’t negotiate with terrorists.” Not surprisingly, it is former economics journalist Huhne who sees the greatest need for reform:

“The Treasury needs to be challenged far more often. It’s a department that has massive problems; its staff turnover is enormous. You know, any professional organisation that has a staff turnover like the Treasury’s should really be worried”.

View our Ministers Reflect archive.