Former Treasury permanent secretary Tom Scholar’s departure was “not normal”, his replacement has said.
Scholar was sacked on 8 September by then-chancellor Kwasi Kwarteng, who was at that point less than 48 hours into the job. Senior Treasury officials Beth Russell and Cat Little stood in as interim perm secs for the following month.
James Bowler, who was perm sec at the Department for International Trade, was then appointed on 10 October 10 to replace Scholar. He confirmed to MPs on Thursday he started that very day.
Asked by the Treasury Committee if this type of transfer of position was normal, with no handover between Scholar and himself, Bowler said; “No. I think Tom’s departure wasn’t normal.
“I think the then-chancellor of the exchequer said he didn’t want Tom to continue as the permanent secretary, so Tom stood aside and the process was undertaken to appoint someone in his stead, which was done by the civil service commission at relative speed.”
Russell told the MPs that she and Little had not anticipated Scholar’s sacking and both “found out about [it] on the day Tom left”. And she said the decision for them to step up in his place was made on the day.
38 days of Kwarteng: 'We gave all the advice we should have done'
Kwarteng only lasted 38 days as chancellor, after his disastrous "mini-budget" on 23 September caused two weeks of economic chaos. He was sacked on 14 October by Liz Truss, who had devised much of the "growth plan" and resigned less than a week later amid growing pressure to stand down as prime minister.
Russell and Little, who are now second permanent secretaries at the Treasury, said they set out all the right advice to Kwarteng and other ministers ahead of the mini-budget.
“Cat and I are confident that we gave all the advice that we should have done to ministers on the economic and fiscal backdrop, the impacts and the market position, particularly around the financing requirement," Russell said.
“We gave advice on the cost of measures in the normal way.”
She confirmed that Treasury officials “raised alarm bells” over the plans, which included a series of tax cuts, such as bringing forward the planned cut in the basic rate of income tax from 20% to 19% and the abolition of the 45% higher rate of income tax, both of which were eventually scrapped.
“I think it’s fair to say that we knew there were risks and it is something we heightened our monitoring around,” she added.
However, she said the advice they could give was limited by Kwarteng’s decision to prevent the Office for Budget Responsibility from carrying out a forecast ahead of the mini-budget.
“In a normal [fiscal] event, where there is an OBR forecast, the OBR would certify the costings of all measures. That bit didn’t happen but we gave advice on the cost of all measures in the way we would normally do.”
Bowler, who wasn’t in place until after the mini-budget was launched, said one of the major lessons the Treasury has learnt from the growth plan is "to avoid splitting a major fiscal event from a forecast".
“That wasn’t sensible,” Bowler said. "I think you would want to, in the future, in normal times, always combine any large fiscal event with a forecast.”
He said it was also a mistake to announce “giveaways" without "consolidation measures" aimed at reducing government debt, which Kwarteng had planned to announced later in a medium-term fiscal plan.
Bowler said many of the decisions had already been taken in the Conservative Party leadership contest this summer, which Truss had won. Bowler added: “I am absolutely satisfied that Treasury officials set out the right advice to the then-chancellor.”
Hunt budget 'important locus to move forward' after 'crisis upon crisis'
Kwarteng was replaced immediately by Jeremy Hunt as chancellor, and he has been kept on by new PM Rishi Sunak.
The chancellor delivered an Autumn Statement on 17 November, which replaced the mini-budget and set out set out plans for £55bn of savings over the next five years, largely through tax increases and spending restraint.
Bowler said the fiscal plan "has been a very important locus to move forward" after a year of crises and "a tough year for Treasury civil servants".
"There has been a lot of crisis upon crisis," he added.
"Covid, Ukraine, energy, the mini budget came on top of that. Political change, four chancellors since the summer, and in some quarters, some negative comments on Treasury civil servants. None of that has been helpful."