The Treasury is one of Britain’s oldest, most powerful and secretive institutions. But all too frequently it has escaped public scrutiny when it comes to investigating the ups and downs of the UK economy. More often, it is depicted as a saviour, repeatedly rescuing the nation’s finances from the hands of posturing Prime Ministers, powerful special interests, and the combustions of world financial markets. It is a bedrock of government stability in times of crisis. However, there is another side to the story. The Exchequer, more than any other institution, has shaped modern Britain’s economic system. In between the highs there have been many lows, from botched privatizations to dubious private finance initiatives, from failing to spot the great financial crisis to contributing to ever-growing regional imbalances and economic inequalities. Davis’s book goes behind the scenes to offer an inside history of the Treasury, in the words of the chancellors, officials and civil servants themselves. It shows the failings as well as the successes, the personalities and the thinking which have shaped Britain’s economy since the 1970s. Based on interviews with over fifty key figures from the last five decades of Treasury life, it offers a fascinating, alternative insight on how and why the UK economy came to function as it does today, and why a paradigm shift and institutional rethink is long overdue.
Originally Brexit was going to be this book's punchline. It neatly marked the end of forty years of Treasury history, starting with one existential crisis for the institution and ending in another. It also seemed to mark forty years of the rise and fall of Britain's particular neoliberal experiment. The Exchequer had played a vital role in shaping that system, positioned as it had been at the centre of an intellectual and institutional nexus, connecting British elites from Whitehall to the City. But since the referendum, there have been
The story of today's Treasury starts back in 1976. That was the year when the department suffered the humiliation of a forced IMF bailout. An institutional identity crisis followed. Shock treatment was doled out and changes begun. The arrival of the Thatcher government in 1979 then traumatized the department again and a system overhaul was pursued at several levels. A radically reconfigured Exchequer then played a big part in implementing the new ideas of the 1980s.
As this chapter argues, behind the big personalities
For another flexian fixer who drove developments inside the Treasury, it was all about creating a professionalized operation within the Exchequer, one that could direct activities across government departments and public entities up and down Britain. Thus was born Partnerships UK, a new unit designed to upscale PFI initiatives. That former official recounts intentions at the time:
We created something called
The well-being of Europe’s citizens depends less on individual consumption and more on their social consumption of essential goods and services – from water and retail banking to schools and care homes – in what we call the foundational economy. Individual consumption depends on market income, while foundational consumption depends on social infrastructure and delivery systems of networks and branches, which are neither created nor renewed automatically, even as incomes increase. This historically created foundational economy has been wrecked in the last generation by privatisation, outsourcing, franchising and the widespread penetration of opportunistic and predatory business models. The distinctive, primary role of public policy should therefore be to secure the supply of basic services for all citizens (not a quantum of economic growth and jobs). Reconstructing the foundational has to start with a vision of citizenship that identifies foundational entitlements as the conditions for dignified human development, and likewise has to depend on treating the business enterprises central to the foundational economy as juridical persons with claims to entitlements but also with responsibilities and duties. If the aim is citizen well-being and flourishing for the many not the few, then European politics at regional, national and EU level needs to be refocused on foundational consumption and securing universal minimum access and quality. If/when government is unresponsive, the impetus for change has to come from engaging citizens locally and regionally in actions which break with the top down politics of ‘vote for us and we will do this for you’.
An institutional perspective on UK economic history
However, as argued throughout, ideas had to be turned into realizable policies and practices, and the Exchequer was the institution to facilitate this. Beneath the big political personalities and momentous confrontations operated the institutional knowhow of the Treasury. To effect change, it relied as much on itself, its orthodoxies and contacts, as on the vaguer ideologies of its transient political ministers.
As Chapter 2 explains, behind the 1980s political fireworks two fundamental organizational changes were taking place within the Treasury
Well, that's the story that successive chancellors and Treasury officials have been very successful at telling. The liars and fantasists bit apart, I beg to differ. In fact, the overarching thesis of this book is an attempt to even out the balance of this narrative.
It is true that the Exchequer is an impressive institution that is essential to the UK's political economy and stable government. For Martin Wolf, the Financial Times chief economics commentator and a Treasury observer over decades
monetarism. When leading the Department of Energy (1981–83), he did the groundwork for utilities privatization. As Chancellor of the Exchequer (1983–89) he then relentlessly cut taxes, privatized and deregulated.
I was frequently reminded of his prior standing when I interviewed him. When we met, in the House of Lords, he was holding court in a large red leather chair in the corner of one of the tea rooms. As we talked, various barons and baronesses couldn't help but sidle up to pay their respects. It's not often that you witness the ennobled doffing
again able to roam freely across the world, able to establish its own international operations and to restore its earlier ‘greatness’.
This vision stands in stark contrast to two alternative but overlapping internationalist views. One of these is deeply enshrined in the Exchequer. A strong part of the Treasury orthodoxy, going back to William Gladstone's time, is manifested in its support for free trade and anti-mercantilism. It is not that the Treasury is opposed to empire per
after the banking collapse, the Treasury was more than ready for a return to its basic raison d’être . For Cameron: ‘The weight of Treasury opinion, of Nick Macpherson, Tom Scholar, of those sorts of people were “this is the right thing to do.”’ In fact, the Treasury imposed the biggest single department cuts on itself (33%) and Macpherson made great efforts to reduce his own civil service headcount. In Danny Alexander's recollection, the Exchequer wanted to go even further:
In the Treasury there