I need history to return to the Treasury,” said its permanent secretary, Sir Nicholas – now Lord – Macpherson, to me in 2012. He had concluded that the department’s institutional memory was found wanting during the 2007-09 financial crisis, having waned in the years since its historical section was abolished as part of the 1976 IMF cuts.
One of the ways we have worked to mitigate this has been through the King’s College London-partnered Chancellors and the Treasury: Managing the British Economy class, now in its 11th year. Recurrent themes have been the often-turbulent relationship between prime ministers and chancellors, between No.10 and the Treasury, and reforms to the machinery of government.
This historical context adds significance to the recent changes around economic policymaking at the centre of government, which attracted relatively little attention. Switching Darren Jones from his job as chief secretary to the Treasury to the newly created chief secretary to the PM role, and appointing an HMT official as principal private secretary to the prime minister for the first time since Chris Martin a decade before, are both interesting.
Yet other changes are arguably more significant, as they have caused real difficulty in the past. First, consider the appointment of Ben Nunn, reportedly one of prime minister Keir Starmer’s closest allies, as chief of staff to the chancellor, Rachel Reeves. Compare this to when Boris Johnson, egged on by his senior adviser Dominic Cummings, demanded in 2020 that No.10 would choose the chancellor’s advisers and Sajid Javid promptly resigned.
Next, the announcement of a new No.10-No.11 “budget board” committee to jointly draw up the budget was also eyebrow-raising, certainly for those who remember the New Labour years. This brought to mind one of the more humorous moments of the Blair-Brown conflicts – known widely as the TB-GBs – when, a month before the 1998 Budget, Tony Blair asked his chancellor: “What about the Budget?” only to receive the response: “I haven’t made my mind up yet.” The exasperated PM resorted to pleading: “Give us a hint, Gordon!” which occasioned the end of the meeting as, according to Blair’s economic adviser Derek Scott, “no one from No.10 could keep a straight face”.
The new budget board is co-chaired by Torsten Bell, parliamentary secretary to the Treasury, and Baroness Minouche Shafik, the newly appointed chief economic adviser to the prime minister. Shafik is clearly a significant appointment, having been permanent secretary at the late Department for International Development and deputy governor of the Bank of England – indeed, she had been rumoured to be in the running for governor.
Press speculation around Shafik’s appointment pointed to the possibility of friction with Reeves, which has not happened so far. But conflict was certainly the result when, in 1989, Margaret Thatcher became determined to reappoint Alan Walters, a high profile economics adviser. Relations had become strained between the prime minister and the chancellor, Nigel Lawson, thanks to rising inflation and interest rates, not to mention differences over the European Exchange Rate Mechanism and even independence for the Bank of England. But the flashpoint was Walters, whose “hostility to various aspects of government policy was well known”, according to Lawson. His – and Walters’s – subsequent resignation marked the beginning of the end for the longest serving prime minister of the 20th century.
Starmer, Reeves and the wider government have been at considerable pains to portray the reforms as a consensual effort to improve economic policymaking and avoid accusations of a prime ministerial takeover. But the intriguing question is: should relations between a prime minister and chancellor be smooth?
In his resignation speech, Javid spoke of the need for “constructive, creative tension” between the roles. Prof Ed Balls – former minister and adviser to Gordon Brown, and a lecturer on our chancellors and the Treasury course – often talks of the desirable constitutional conflict between Nos.10 and 11 that resulted in energy-sapping, robust, yet – as he argues – successful economic policymaking in the Blair and Brown years. Balls compares this with the close and respectful partnership forged between David Cameron and George Osborne which, some have said, resulted in the Brexit referendum after the latter decided not to obstruct the PM’s wishes.
One thing’s for sure: Starmer was certainly much more involved in this year’s budget than last year’s. Only time – and future historians – will tell if this has resulted in better policymaking or simply closer relations at the centre of government.
Professor Jon Davis is director of the Strand Group at King’s College London