Listen with an open mind and be ready to advise on trade offs: Ex-Treasury perm sec on how to prepare for a new PM

Speaking at a think-tank event, Lord Macpherson also offered thoughts on the economy to incoming prime minister, while Treasury Select Committee chair said a full leadership contest is needed “so the maddest ideas perhaps don’t make it to asking for official civil service advice”. 

By Richard Johnstone

12 Jun 2019

Former Treasury permanent secretary Lord Macpherson has said the civil service needs to be ready to present the new prime minister and chancellor with information on the trade offs of new policy ideas “very quickly” when they take office.

Speaking at a event hosted by the think-tank Policy Exchange yesterday evening titled ‘The Economy: What do we want from the next prime minister?’, Macpherson, who was the Treasury top official from 2005 to 2016, said “this is what the civil service is there for”.

In his comments, he set out the need for supply side reform to boost the economy but called for a “sensible tax system”. He highlighted that the pledge by leadership frontrunner Boris Johnson to raise the 40% tax rate threshold from £60,000 to £80,000 was not the best way to boost the economy.


“I can tell you for free that if you want to promote growth, chucking £8bn at people earning between £60,000 and £100,000 is probably not a terribly well targeted way of doing that, but other people have different views.”

Asked by CSW how civil servants should prepare for the arrival of the prime minister during the Conservative leadership election, Macpherson said that “very simply, the civil service need to be prepared”.

He added: “It needs to listen some of the options that are currently being considered, approach them with a totally open mind and be ready to advise whomsoever is the chancellor in the coming period.”

There were “a whole set of processes that are either underway or due to come to a head in the autumn” that the new prime minister and chancellor will inherit, Macpherson said. “There will be a whole lot of issues about how you sequence those from the appointment of the next government of the Bank of England through to the next Spending Review.

“But this is what the civil service is there for. When it comes to things like tax options, these things have been under consideration for years and years. The critical thing is to be able to present to the new government very quickly what the trade-offs are and what the baseline is – there will be another OBR fiscal sustainability report [and] this is the decade when the demographic pressures really start hitting us. For the civil service this is quite frankly business as usual.”

Fellow panellists agreed civil servants were well placed to deal with changing policies. The chair of the Treasury Select Committee Nicky Morgan highlighted that the final two candidates who will be voted on my Conservative party members would be known by next Thursday, “so I’m not sure I’d rush to look at everything”.

She highlighted that, unlike the appointment of Theresa May as prime minister when her challenger Andrea Leadsom pulled out of the final round of voting in 2016, there was a need for a full contest.

“The reasons that we need to have a contest that goes all the way to 22 July [when the result of the vote of party members will be announced] is to make sure that scrutiny has happened and so the maddest ideas perhaps don’t make it to asking for official civil service advice.”

'Hanker after a cross party consensus on skills'

Elsewhere in the session, Macpherson set out what should be the next government’s priories for economic reform.

Setting aside the issue of Brexit – he said “this Europe business is going to go on for years, there will be a whole lot of posturing about it but in the end we will reach a new equilibrium” – he set out key areas for economic reform.

“If you actually want to address Britain’s economic problems, you’ve got to look at the supply side, and that is all about micro economic policy,” he said.

“What you need is you need proper competition and you need serious infrastructure investment. That is not about chucking £50bn at High Speed 2, that is about having a really good analytic base that will enable you to see which projects will deliver the highest economic return on investment.”

He said that “fortunately the Treasury has that capacity now” to compare and contrast different schemes, and highlighted that the most economically beneficial projects were often the “really prosaic things”.

“They’re about building really good bypasses, or an extra lane on a motorway, and most important of all building some extra houses.”

As well as infrastructure, he said innovation and skills were important, and called for a cross-party consensus on the latter to allow a system to be planned for the long term.

“The most important thing of all, seeing we’re leaving the European Union, is skills. Every single government says it is making a radical reform of the skills system, and we spend an awful lot of money on skills.

“I speak as a bureaucrat and you just hanker after a cross party consensus. If only we could have a skills system which the parties can align around and then don’t rearrange the deckchairs but actually see it through over a 20-year period, this country might yet have some hope.”

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