A “strategic vacuum” at the heart of government has allowed a dominant Treasury to take "ownership" of whole-of-government strategy, according to the IfG.
The think tank’s latest report, Treasury ‘orthodoxy’ :What is it? And is it a problem for government?, draws on interviews with dozens of current and former officials, advisers, Treasury ministers and other policy experts.
It states that the department "demonstrates a worrying imbalance of power in government that leads to bad outcomes in policy and spending" and that the prime minister "does not have the firepower, the intellectual support or the control of government processes required to match the might of the Treasury".
“The result is too often an abdication of the prime minister’s responsibility to set the strategy for his or her government," the report says. "The Treasury is left to fill that vacuum and own much of government strategy through its tightly gripped spending and budgetary processes."
However, Treasury staff are too inexperienced and unable to draw on adequate expertise to make the spending decisions asked of them, the report claims.
The think tank also highlights concerns that the department is too quick to micromanage spending when it could better delegate more power to departments to spend their budgets. “Greater autonomy, and less micromanagement, could strengthen the strategic capacity of departments,” it argues.
There is also a “lack of reciprocal scrutiny, particularly on tax; leading to a tax system that is overly complicated and inefficient, exacerbated by a culture of secretiveness”, the report says.
Dismissing accusations by some critics, notably former prime minister Liz Truss, that the department is anti-growth, the report argues that its orthodoxy "sees sustainable public finances and sound money as in a long-term, symbiotic relationship with promoting economic growth".
However, it warns that Treasury budgeting processes result in damaging short-termism and “a bias against ideas that are intended to achieve transformational change”.
It calls for reforms such as a new spending review process. “Changes to the fiscal framework should involve slowing down the pace of decision making to enable more strategic thinking – crucially, with a move to only one major fiscal event a year,” it says.
Another recommendation is “opening up the civil service, including the Treasury, to more specialist expertise” which would “help to improve the quality of spending decisions”.
In addition, No.10 and the Cabinet Office should be strengthened "to fill the strategic vacuum in central government that currently necessitates the dominance of the Treasury’s budgeting processes", according to the report.
Giles Wilkes, IfG senior fellow and report co-author, said politicians must recognise and address the imbalance.
“Public policymaking is about tough choices, and the Treasury is merely the conduit of difficult news. But no one in government can deny the extent of its power," he said. "Its views often outweigh all others, which risks seriously distorting our politics."
The Treasury had not responded to a request for comment at the time of publication.