National Treasure

With a change of government comes an opportunity to consider whether the Treasury, often considered a bastion of the British state, is in fact fit for purpose. This short piece of research is designed to do that. Our aim is to make recommendations that will make it more likely that Britain’s economic policy will be better designed, scrutinised and implemented, which is ultimately in the interests of the public. 

The power of the Treasury in recent years, both inside and outside Whitehall, has not been conducive to a debate about how best to achieve reform. The apparent success of Labour’s macroeconomic policy meant that there was little incentive to question the Treasury as an institution.

Since 2007 two things have changed. First, the financial crisis has raised questions that were previously absent. Could the department have done more to insulate people in the UK from this global financial shock? Why did its economic forecasts in 2007-08 turn out to be so over-optimistic? Is it cut out for its extraordinary task of eliminating the structural deficit?

Second, a change of government, coupled with the department’s own need to cut costs, has led to an outflow of people who were previously working at the heart of the institution. This gives an opportunity to canvass views from those who had previously not been available for interview on how things might work better.

Our research will address four main areas of interest:

• First, internal issues around organisation, scope and mission. What is the Treasury like as an institution to work in? Does it organise itself in the most effective way? Does it understand what its job is, and is it concerned with the right things?

• Second, external issues around accountability, in particular to parliament and through that to the public. Are there effective checks and balances between legislative and executive? Can there be more effective scrutiny to improve the policy making process and aid public understanding, both of the detail – such as individual measures in the finance bill - and big picture issues, such as the overall economic effect of a Budget?

• Having dealt with institutional issues, we will then look at the two main functions of the Treasury: taxation and spending. On taxation, we seek to explore the relationship between the Treasury and HM Revenue and Customs, asking whether it is conducive to effective policy making.

• Finally, on spending we will look into the effectiveness of the department to keep hold of the purse-strings across Whitehall and in particular whether there are changes to the accounting systems that are used in Whitehall that could aid the decision process on spending.

The authors of this project will bring considerable personal experience to the table. Kitty Ussher, now Director of Demos, was a Treasury minister twice in the period 2007-09, a member of the Public Accounts Committee from 2005-06, the Finance Bill committee in 2007, 2008 and 2009 and had previously from 2001-04 worked closely with the Treasury in her role as a special adviser in the then Department of Trade and Industry. Paul Johnson was formerly head of microeconomics at the Treasury from 2004 to 2007. In January 2011 he became the Director of the Institute of Fiscal Studies. Imogen Walford is a junior economist at Demos.

For more information contact: imogen.walford@demos.co.uk