James Ashton: Can the Treasury’s meddling pay off at last?

SIR John Kingman signed off from civil service life the other week with a little-noticed speech in which he urged his former Treasury colleagues to carry on meddling.

In his time, Sir John had a hand in saving Northern Rock and recapitalising Royal Bank of Scotland, acting as permanent secretary for a few months before leaving Horse Guards Road in June. How much has already changed since then.

For meddling, read supply-side policies: that part of the Treasury’s role designed to stimulate productivity by cutting taxes and boosting competition. To be successful, the department roamed across government reining in not just inappropriate spending but inappropriate policies, too. This remit, beyond the Treasury’s core management of the public finances, was frowned on by George Osborne — at least until he took office.

Speaking to the Strand Group — part of the Policy Institute at King’s College London — Sir John remembered the future Chancellor’s promise that “the micromanagement and empire-building would stop”.

It looks as though it finally has done. In Theresa May, we have a Prime Minister who neither served time in Treasury — as John Major, Gordon Brown and David Cameron did — or appears to hold it in particularly high regard, as Tony Blair obviously did by devolving so much power to Brown.

The upshot is that Philip Hammond is unlikely to have anything like the scope to pull strings across government as recent chancellors have had. Concerned business leaders have already seen him slapped down over immigration policy and failure to contain the dithering over Mark Carney’s future. More will be gleaned at the Autumn Statement on November 23.

Sir John’s portrait of the Treasury as the UK’s would-be growth driver does not gloss over its failings. Despite the huge concentration of power it has enjoyed, the assembled Whitehall boffins are a long way from curing the UK’s housing and infrastructure ills, for example. Tight budgetary oversight led to departments warring over spending and daft fiscal rules that could not be met.

Better to let the Department for Business, Energy and Industrial Strategy (BEIS) champion some of this stuff? Sir John believes there is an inherent conflict because BEIS must advocate the status quo that big business enjoys. But the Treasury can only be so radical in cutting taxes — as Osborne did with corporation tax — because it doesn’t want revenues to collapse.

It must be better for the economy if a big ministerial beast pushes the productivity agenda. Very infrequently is anyone of sufficient stature running the Business Department, with the recent exceptions of Lords Heseltine and Mandelson. As Business Secretary, Greg Clark confessed in the wake of the Nissan accord that he hasn’t even got a chequebook. Hammond at least has that. Would that he has the freedom to use it to prove that meddling can work.