By Suzannah.Brecknell

19 Aug 2010

As the spending review rolls on, cross-departmental working seems to be on the agenda at the Treasury. Suzannah Brecknell reports.

On the morning of chancellor George Osborne’s emergency Budget in June, when Treasury ministers stood sombrely outside Number 11 Downing Street, they had two key messages: this is not going to be a pain-free process; but it is one we will undertake together.

The creation of a Public Expenditure (PEX) cabinet committee, involving ministers from the Foreign and Cabinet Offices, to oversee the spending review was the first evidence that the Treasury is indeed keen to emphasise collective responsibility and joint decision-making in shaping the spending cuts. The committee will challenge departmental spending plans and advise on final settlements, and also act as an incentive for ministers to settle quickly – as they may be able to join the group once they have done so. Ultimately, the inclusion on PEX of ministers from across government will further strengthen the message that deciding on budget cuts is a collective endeavour.

Alongside this group is a committee of permanent secretaries which will – according to its co-chair, cabinet secretary Gus O’Donnell – look at cross-departmental issues and try to encourage collaboration through the spending review. Speaking at Civil Service Live in July, O’Donnell added that he would like to see “more in the way of pooled budgets – but that’s a debate I’m having with the Treasury and I’m not entirely sure I’m going to win that debate”. Pooled budgets may not be totally off the agenda, however; the spending review framework specifically encourages departments to create joint submissions on cross-cutting issues.

The Treasury has also taken a role in centralising and reducing spending through the Efficiency & Reform Group: although based in the Cabinet Office, it is co-chaired by Treasury chief secretary Danny Alexander. The shift towards collective working is genuine, suggests one seasoned Whitehall observer: “There’s a coherence about the centre that wasn’t present in the past, between Number 10, Cabinet Office and Treasury. That wasn’t true when Brown was chancellor fighting Blair, or when he was prime minister fighting Darling. They’re moving in tandem.”

Where tensions are arising, the observer continues, is “where some of the civil service are saying: ‘Hold on, we can’t do this as fast as you want to’. And sometimes the demands from the Cabinet Office and the Treasury can be different; that’s not intentional, but it’s because of the speed of the agenda.”

Although cuts to public spending form the majority of Osborne’s deficit-reduction plan, he has also announced measures to increase tax revenue through VAT, capital gains tax and a new bank levy. A number of other tax reforms were announced in his Budget but there has been – according to Carl Emmerson, deputy director of the Institute for Fiscal Studies – no clear steer on longer-term tax reform. He suggests that the Treasury needs to do “more thinking in that direction”.

The Treasury has published a number of discussion papers and consultations around the tax reforms announced in the June Budget, which Exchequer secretary David Gauke presented at the time as part of a “more considered and open approach to tax policymaking”. Emmerson suggests that another way to improve tax reform in the UK would be to have a clearer discussion within government about how tax reform can help to achieve wider government objectives. “The coalition government may actually force that upon the Treasury,” he says, “in the sense that it’s not just George Osborne and Danny Alexander who decide between themselves what’s going on: they have to get agreement from their cabinet colleagues around the table.”

The Treasury has also announced several new bodies, including the Office of Budgetary Responsibility to produce an independent assessment of public finances and the economy; the Office of Tax Simplification, which is carrying out reviews into tax credits and taxes affecting small businesses; and three new bodies to regulate the financial services sector. An independent commission on how to reduce risk in the banking sector is under way, chaired by Sir John Vickers.

The ministerial team

George Osborne is the youngest chancellor in more than a century, and he heads an equally fresh-faced ministerial team, most of whom are under 40. Osborne’s rise to the second-most powerful post in government has been a quick one. Elected in 2001, he got his first frontbench appointment in 2003 and became shadow chancellor in 2005.

Writing on the Tory website ConservativeHome in June, former MP Paul Goodman, who worked with Osborne in the shadow Treasury team – described the chancellor as a “supremely self-confident” risk-taker, “the best political tactician the party’s got” and a charming, but ruthless, economic and social liberal who recognises that “ideas matter” in politics but is only interested in an idea if it serves a political purpose.

“Out of the four shadow cabinet ministers I served under,” wrote Goodman, “he ran the most focused meetings. If the conversation drifted to process rather than politics, he’d close it down rapidly.” Goodman also observed that Osborne is an “operator”, keen to keep the support of both ministers and back benchers – and that he looks after his allies. This latter observation is supported by the fact that Osborne kept his shadow Treasury team largely intact and has brought former advisers into government as special advisers.

If Osborne’s rise to the Treasury was fast, Danny Alexander’s was supersonic. Elected in 2005, Alexander became chief of staff to Nick Clegg in 2007, was influential in writing the Lib Dem manifesto, and then played a key role in the negotiation talks. He was first appointed Scottish secretary, before being moved to the Treasury as chief secretary following David Laws’ resignation over expenses.

Alexander is from a strong Liberal family and was, until this year, a director of the Joseph Rowntree Reform Trust. He is – unlike his fellow Treasury ministers – a pro-European and spent several years working for the European Movement and the Britain in Europe Campaign, before moving to become head of communications at the newly-created Cairngorms National Park in 2003. Jane Hope, chief executive of the Cairngorms National Park Authority, tells CSW that Alexander was “very thoughtful. Whatever you asked him, it was very clear that he thought it through and he’d always give you a considered answer”.

She also highlights a skill that may have served Alexander well in coalition negotiations and ongoing PEX committee meetings. “He was always able,” she says, “without ever upsetting anybody, to ask the probing question – and that made him, in my view, a particularly good team player. He was always polite, never lost his rag and I never saw him rattled, but he could probe anybody’s arguments to make sure we were getting to the truth.”

Hope also remembers Alexander’s focus on openness and accountability – “he instilled in us right from the word go that you must never be frightened about being utterly open about everything you do”, she says – and his work developing the Cairngorms National Park brand, used by businesses and organisations within the park. The experience of building a brand around an overarching authority rather than the organisations within it, and gaining support from those organisations for the brand, may stand him in good stead as he tries to ensure the coalition’s brand and priorities remain uppermost in budget discussions. Finally, Hope reports that Alexander is remembered as being fond of biscuits: something which civil servants preparing for long negotiation meetings with the chief secretary may wish to bear in mind.

Financial secretary to the Treasury Mark Hoban joins the Treasury in the role he has been shadowing since 2005. A qualified accountant with an economics degree, he has been an MP since 2001 and is strongly Euro-sceptic.

David Gauke also steps into the role he shadowed: that of Exchequer secretary to the Treasury. Elected in 2005, Gauke is a member of the right-leaning think-tank the Centre for Policy Studies and was a co-signatory of the radical pamphlet Direct Democracy, which called for more powers to be devolved to local government and directly-elected officials.

Economic secretary Justine Greening is another former accountant, who has called for more trained accountants to become MPs. She was elected in 2005 for Putney – a seat which became a key embarrassment for the Tories in 1997, when David Mellor faced a challenge from founder and leader of the Referendum Party, Sir James Goldsmith. In the end the seat was taken by a Labour candidate, and Greening’s victory in 2005 was seen as a landmark in the Tories’ gradual electoral recovery.

Former UBS banker and civil servant Lord Sassoon was given a peerage in order to take a post in the Treasury. He was the author of Conservative pre-election plans to reform the financial services system, and will now have responsibility for driving through many of these reforms.

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