Treasury haters might raise a glass later because it looks like it’s finally happening: the PM has confirmed that the Leviathan of Horse Guards Parade is being broken up. Or has he? In an interview with the Times, Andy Burnham laid out the view that the Treasury’s dual responsibility for promoting growth and managing the public finances doesn’t work. His answer is to shift the oversight of economic growth to No. 10 North.
I’m sceptical about how much of a transformational change this is. First, let’s examine the charge. Does the Treasury’s ‘bean-counting’ obsession stifle the government’s ability to drive economic growth? Set aside consideration over whether Whitehall really has any easy growth levers to pull (or whether it just enables the conditions for private-sector growth, per Andy Haldane’s argument in the FT this morning). The fact is that the Treasury as an institution has pushed hard for growth-enhancing measures over the years, particularly on the supply side, whether that’s through liberalisation of the planning system or opening up more sources of energy supply. It’s the politicians who tend to say no.
Second, Andy Burnham and the soft-left’s historic grievances with HMT – many of which have merit – are arguably much more to do with the institution’s approach to public spending, and less to do with growth. They say the Treasury has been hostile to regional investment due to obsessions with benefit-cost ratios and hostile to devolution due to fears about tax distortions. They argue that public spending conditions stipulated by HMT stop departments from getting money out the door. They think that the Treasury (and the OBR) underplays the potential returns of capital investment. (From an intellectual perspective, many around the PM would be comfortable with the argument of borrowing more for capital investment. They don’t think the three-year time horizon for the government’s fiscal rules is optimal either.)
Burnham has zeal for further devolution. It’d be wrong to see No. 10 North purely as a gimmick. It is true that officials previously working on growth in the Treasury in London will be given desks in Manchester, and that there are many special advisers with Treasury experience in No. 10. But I can’t help but see Burnham’s words as part of the usual cyclical pattern in British politics. The strong prime minister, backed by more economic heft in No. 10, seeks to exert more control over the Treasury. In other words, see this as more about power – across to No. 10, but also out of Whitehall – than about structures.
As to whether this drive will permanently weaken the chancellor and the Treasury: now is not the time to judge. Ahead of the Budget, for all the focus on the market backdrop and the fact that this will leave Healey and Burnham with limited room for manoeuvre, the pair face political risks. Will a streamlined Budget that sets out a devolution roadmap, increases taxes to deal with the pencilled-in cuts for unprotected departments and cost-of-living support, explores flexibilities in the debt rule for more capital investment, be radical enough for Labour MPs? The PLP’s appetite for difficult choices on welfare reform will need testing.
Still, don’t read too much into an apparent demotion for the chancellor
It’s also worth paying particular attention to the formulation of the PM’s ‘Ten Year Plan’. It’s hard to see that plan being seen as bold or radical enough without it pre-committing some longer-term capital budgets, and in a familiar dynamic, this will be the ask from No. 10, whether in Downing Street or Manchester. But the Treasury won’t like it. Watch the dynamic between No. 10 and No. 11 ahead of the multi-year Spending Review as we move into 2027.
Still, don’t read too much into an apparent demotion for the chancellor. Burnham will set the ambition, Lou Haigh will press for the fiscal framework to change, and No. 10 North will challenge the Treasury’s instincts. A counterweight to the Treasury has merits – many former PMs have realised this and tried to create one before. But ultimate responsibility for the difficult tax and fiscal trade-offs cannot be devolved.
