Is it time the Treasury gave departments more say in setting budgets?

From the editor: Iain Duncan Smith's resignation highlights the sheer power of the Treasury under George Osborne

By Jess Bowie

08 Apr 2016

"When I was a minister I always looked forward to the cabinet meeting immensely because it was, apart from the summer holidays, the only period of real rest I got in what was a very heavy job."

So wrote former chancellor Nigel Lawson in 1994. It’s hardly a ringing endorsement of the system of cabinet government. But, in light of Iain Duncan Smith’s dramatic resignation over benefits cuts to the disabled that were “not defensible...within a budget that benefits higher earning taxpayers”, perhaps a more collective approach to budgetary decision-making is the order of the day. It’s something advocated by the Institute for Government’s Jill Rutter, for whom the case is particularly strong, given that budgets are blowing up in chancellors’ faces with increasing regularity.

The work and pensions secretary's electrifying resignation letter takes a direct swipe at the chancellor, complaining of “a lack of awareness from the Treasury, in particular, that the government's vision of a new welfare-to-work system could not be repeatedly salami-sliced.” These words reinforce a keen sense among ministers and Whitehall watchers of the sheer power of the Treasury under George Osborne.

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In the IfG’s excellent series, Ministers Reflect, ex-defence minister Sir Nick Harvey recalls his “horror” at the way the Treasury “micro-managed” departments’ affairs. For others, it feels as if there is an implicit deal between HMT and Number 10: if David Cameron cares passionately about something, Osborne won’t interfere. But those limited issues aside, the chancellor can do what he likes without much challenge.

For the RSA’s chief executive Matthew Taylor, who was chief strategy adviser to Tony Blair in the mid-2000s, the sense of an all-pervading Treasury is the cumulative effect of years of coalition, Cameron’s announcement that he won’t serve a third term, and the impending EU referendum – all of which have left Downing Street weak, he tells me.

Taylor believes the government works best through a classic tripartite decision-making process in which the three parties are Number 10, the Treasury and the service department. “The service department obviously has the subject expertise and knows the interest groups in its particular area of responsibility. The Treasury are there to be the critical scrutineers, particularly with regards to numbers. The role of Number 10 is to think most about the overall political and policy strategy,” he says.

Under this model, secretaries of state would have two courts of appeal: if they don’t get what they want from the Treasury they can try their luck with Number 10 – and vice versa. Taylor is clear, however, that Number 10 must be the primus inter pares – the place where the authority lies if HMT and the department disagree.

Writing a budget around a cabinet table of 30 people may not be feasible, as Lord Lawson would doubtless agree. But a scenario where, under a strong Downing Street, each department feels able to make its case to both Number 10 and the Treasury seems – in the absence of full collective decision-making – a logical solution. 

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