Britain is an unusual country. Prolonged sunshine (three successive days) makes front pages. Travel five or 10 miles and you’ll hear different accents, even dialects. But perhaps the biggest oddity is the outsized influence of our Treasury.
HMT is an international outlier in that it is home to both the UK’s finance and economic departments. These are two quite different jobs. The former often refers to a bean-counting operation, responsible for sound money and the smooth running of fiscal events. The latter involves a greater focus on fostering economic growth. There is, you may have noticed, sometimes a tension between the two.
That is why many have tried to break them up. Harold Wilson created the Department for Economic Affairs, which endured for five unhappy years from 1964-1969. More recently, as shadow chancellor, John McDonnell commissioned a report by Lord Kerslake, former head of the civil service, on a possible divorce. And Liz Truss virtually ran for Conservative Party leader on a ticket of outlawing treasury orthodoxy.
It has, in other words, long been fashionable to blame the Treasury for Britain’s economic woes. I will declare an interest at this point: I am a former HMT official. And it is true that the Treasury is temperamentally sceptical of ‘grand projets’, industrial strategy and the state backing winners. I’ve written more about that here.
But see it from their perspective. The Treasury essentially stands alone as the sole government department with any interest in not blowing all our money. It is charged with maintaining market confidence and ensuring liquidity. So it asks questions such as “is that a good use of public funds?” We have been reminded in the last few days why this is important.
The British political system is not one of myriad checks and balances. The executive, and the prime minister in particular – when she or he enjoys a large parliamentary majority – possesses immense power. Therefore the Treasury can, and historically has, acted as a vital counterweight.
This largely accounts for why relations between the occupants of numbers 10 and 11 Downing Street, even if they start out amicably, often descend into bitter recrimination. Prime ministers, including Tory ones, usually want to spend big to keep backbenchers, party members and the public on side. Chancellors, meanwhile, are ever cautious of the bottom line.
This is not to say that the TB-GBs were especially helpful. It is probably not a good thing that by the end of his premiership, Tony Blair did not know what would be in the budget. But prime ministers and their chancellors can be too closely aligned.
I think we saw this with last week’s mini-budget. Liz Truss and Kwasi Kwarteng are ideological soulmates. They were co-authors of the now-famous Britannia Unchained pamphlet. Both were prepared to overrule Treasury orthodoxy to unleash unfunded tax cuts on an already jittery market. It did not go well, and has precipitated a falling currency, rising interest rates and emergency intervention from the Bank of England.
Every child knows from a young age that if you ask mom for something and she says ‘no’, you go ask dad. Britain is witnessing the consequences of having two parents who like to say ‘yes’.
In the comment pages, Ben Judah says the Americans are now worried that Vladimir Putin may well hit the nuclear button. Which may well render Tony Yates’ excellent piece on how there was a way to try ‘Singapore-on-Thames’ (but not like this), moot.
And finally, in what I imagine will be in no way controversial, we list the best coffee shops in London. I got pre-emptively annoyed that my favourite place wouldn’t be there but I checked and phew, it is.
