With Budget day looming, the spotlight is once again on the Treasury, one of the most powerful and secretive departments in Whitehall. Even with sincere efforts made during the Starmer government to recentre power in No.10 and the Cabinet Office, including with the creation of a new chief secretary to the prime minister, it will of course still be Rachel Reeves and the other occupants of 1 Horse Guards Road holding all the cards on Wednesday.
The Institute for Government’s new report Ministers Reflect on the Treasury combines insights from our Ministers’ Reflect archive, now in its tenth year and containing over 150 interviews with chancellors, treasury ministers and ministers in other departments, with the institute’s own analysis of the Treasury’s internal culture, the problems that beset cross-government working and what can be done to improve government effectiveness. In all, the paper offers more than just historical curiosity; come for amusing anecdotes from figures like Ken Clarke and Jack Straw, stay for the institute’s assessment of how dysfunction at the centre of government has become so widespread.
Indeed, the power of the Treasury has secured the ire and awe of countless generations of ministers. In particular, our report alights on the Treasury’s confused and far-ranging brief as a source of frustration for ministers on the outside. Former pensions minister Steve Webb spoke to us about finding out about an announcement on pensions in the news because the Treasury had shut him out. Likewise, Caroline Spelman, a former secretary of state in Defra, bemoaned the Treasury’s influence, stating “it has all the power because it has all the money.” Even former chancellor Philip Hammond has sympathy for spending ministers negotiating with the Treasury, acknowledging “all ministers in all spending departments will have marks on their furniture where they’ve kicked something because they got a message saying the Treasury doesn’t like this.” This opacity serves no one.
Ministers also praise Treasury officials for rigorous thinking, discipline and financial prudence, especially when money is tight. However, focusing solely on balancing the books or meeting fiscal rules can crowd out broader, mission-driven priorities. The Treasury’s comfort in managing the present can stifle its ability to deliver transformational change, especially when collaborating with other departments.
As our interviewees note, the Treasury plays a vital role in saying no to bad ideas, doing the analytical work to justify policy decisions on value for money grounds, and, alongside its tax and spend functions, stimulating growth, investment and living standards improvements in the wider economy.
“As a spending minister, by no means did I abandon my Treasury orthodoxy in terms of a belief that you have to pursue value for money determinedly, and that one should only be spending extra money if it’s clear what you’re seeking to achieve, what you’re seeking to avoid perhaps, and that money is being spent wisely.”
David Gauke, Conservative minister, 2010-19
Curtailing the Treasury’s role is not necessarily the right response. Rebalancing power at the centre, though, means empowering the Cabinet Office and No.10 to make strategic calls about the purpose and direction of government; otherwise, the Treasury too often fills a vacuum created by others, by default not design. Indeed, several former ministers urge a reset: a stronger prime ministerial department or a better-resourced Cabinet Office, to rebalance influence and drive joined-up, mission-led policymaking, echoing many of the recommendations made by the IfG’s own commission on the centre of government.
The testimony of ex-ministers reveals a central truth; the Treasury’s power is indisputable, but it is not immutable. Reform of Treasury processes, expansion of expertise and a cultural reset that allows those working inside the Treasury and outside it to engage with each other on good faith and with transparency, will be to the benefit to all working in government.
Shaina Sangha is a researcher on the Institute for Government’s policymaking team and an author of Ministers Reflect on the Treasury