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Stop bidding, begging & bowing to Treasury – but how?

Stop bidding, begging & bowing to Treasury – but how?

🕔10.Oct 2018

One October long ago, shortly before England won the World Cup, my first final-year undergraduate essay was on something then rather exciting: the Department of Economic Affairs (DEA) – the completely new government department Prime Minister Harold Wilson had established following Labour’s 1964 election victory. Chris Game reflects on deliberations on the fringes of the recent party conferences about the role of the Treasury and local government funding. 

Cynics saw it as typical Wilsonian chicanery – creating an important-sounding but harmless long-term economic planning department that would sideline without overtly insulting his potentially troublesome Deputy Leader, George Brown (a sort of Labour Boris).

The cynics weren’t entirely wrong, but the DEA was conceptually very much more. Wilson, an economist and experienced Opposition politician, was acutely aware of the Treasury’s tentacular power over all domestic policy, and how frustrating it could prove, after 13 years of Conservatism, to a Labour Government.

His scheme would split the Treasury in two, reducing its role to short-term revenue-raising and financial management, while the DEA would produce the UK’s first National Economic Plan – published in September 1965, just in time for my essay.

Which might just conceivably have worked (the scheme, not my essay) – had the incoming Government felt politically able immediately to devalue the over-valued pound. It didn’t, and the Plan’s publication was about as good as it got.

Brown went on to the Foreign Office (where he cut rather a BoJo-like figure), his successors were less weighty, committed and effective, the DEA was wound up, and the Treasury clawed back its temporarily ceded power and steadily more besides, to reach the strangulating dominance it has today.

I’ve been reminded of these things several times recently, initially by Shadow Chancellor John McDonnell’s Labour conference speech and his commitment to:

reprogramme the Treasury, rewriting its rule books on how it makes decisions about what, when, and where to invest. We will end the Treasury bias against investing in the regions and nations, and make sure it assesses spending decisions against the need to tackle climate change, protect our environment, drive up productivity, and meet the investment challenges of the 4th industrial revolution.

(my emphasis)

It didn’t get remotely the coverage of Labour’s public ownership pledges, but even that section of McDonnell’s speech included setting up “a Public and Community Ownership Unit in the Treasury”.

We have no equivalent of the US federal law and funding for pre-election preparation for taking control of government. For a prospective Labour administration largely unfamiliar with Whitehall, therefore, any serious advance thinking is obviously good.

But McDonnell’s approach, perhaps unsurprisingly, seems almost the inverse of Wilson’s: less divide and rule than empower and refocus – with JM himself as an even more powerful and interventionist Chancellor than, say, Gordon Brown or George Osborne.

Undoubtedly, though, the reference to rewriting presumably the Green Book – the Treasury’s Bible on policy appraisal and project evaluation – will have given the mandarins and bean counters pause for thought.

I was reminded again of these things last Monday morning, while attending two Conservative Conference fringe meetings organized by Localis, the self-labelled ‘neo-localist’ think tank. One was about devolution to our core cities, the other on local government funding.

Both sessions – the timing, tepid coffee and biscuit rationing notwithstanding – were standing room only, lively, and interesting. But both were also pretty downbeat, verging at times on despair.  Remember, this was 48 hours before May’s literally out-of-the-blue (and, incidentally, seriously Treasury-kicking) scrapping of the council housing borrowing cap and her fantastic (in every sense) pronouncement of the ending of austerity.

Monday’s audiences were mostly people, both speakers and audience, taking a brief break from their day jobs of coping with their councils’ collective real-terms loss of over half their Government funding, next year’s prospective £3.9 billion funding black hole, and the apparent stalling of devolution.

However, it was a Conservative Conference, so not quite as easy as in most such discussions to blame party ideology, government policy, and/or ministerial ineptitude – although Liz Truss, Chief Secretary to the Treasury and apparently the planet Magrathea, did make a strong ineptitude bid on that evening’s Newsnight, claiming that the Government hadn’t, as we all imagined, been “making cuts to local authorities”, but actually “giving them more spending power”.

Back on Earth, other culprits were needed, and in Localis’ devolution session it was partly ‘the system’ – our unparalleled hyper-centralised and strangulating way of trying to do government, as if elected Governments themselves had no say in the matter – but, first and foremost, ‘Whitehall’ in general and the Treasury in particular.

George Freeman, Mid Norfolk MP (and founder of the Capital Ideas Foundation), kicked things off. He was official Government ‘ideas man’ until last November’s (frustration-induced?) resignation as Chair of the PM’s Policy Board, and in future possibly one of her more interesting leadership challengers.

If so, he more than hinted at the focus of his manifesto.

It would be frightening if taking back control from the EU were to make government in Whitehall even bigger.

– a sentiment echoed several times from the floor. Our “top-down model of government actually squeezes energy out of those – particularly those attempting to run city government – who should be driving growth.”

Not surprisingly, the one speaker actually currently attempting to run a city government – Bristol’s Labour Mayor, Marvin Rees – concurred, with the even more vivid metaphor of central government having its foot on the neck of cities.

He gave personal examples of the contempt and disregard with which the centre treats even major city leaders – including how the recent details of Network Rail’s electrification of the rail line to Bristol … he’d had to read in a newspaper.

The current model of local government-Whitehall relations, Rees reckoned, was one of ‘Bid and Beg’, and the whole devolution process, before it had seemingly ground to a halt, amounted to a “spectator sport”, wholly defined by the Treasury and run entirely to a Government-convenient timetable. Large councils, even major cities and potential combined authorities, were reduced to “infantile dependency”.

Asked if he thought there was anyone in the Treasury who really understood this, the Mayor’s answer, after several seconds’ consideration, was “No, I don’t think so”.

Back to George Freeman, one of whose plethora of ideas is infrastructure bonds – as potentially part of the answer to, well, almost everything: economic recovery and growth, regional development, affordable housing, transport, teenage depression, the broken planning system (sorry, I made one of those up!).

Hitherto solely in the hands of central government, they should in future be available to building societies, mutual infrastructure companies, and … elected mayors and big city leaders.

Which sounds great, except for the teeny problem that the address to which the mayors and leaders would have to apply for their costed infrastructure bonds is: 1, Horse Guards Road, Westminster – oh yes, the Treasury.

We’ve come full circle, but I referred above to these conference fringe sessions homing in on two main publicly mentionable culprits for local government’s current woes: first, Whitehall and the Treasury, but second, doctors and the NHS.

George Freeman, as first speaker, had been first to mention them: “all money going to doctors, little to social care”.  Not all depictions of the contrast were quite that raw, but the strength of feeling and the readiness to criticise the financially privileged position of the NHS were unmistakable – particularly in the finance session, with plenty of councillors in attendance.

The University of Birmingham’s Francis Davis, with the interesting title of Professor of Religion, Communities & Public Policy, made the basic but highly pertinent point that – in complete contrast, of course, to councils – NHS trusts both can and regularly do overspend their annual budgets, as documented recently by the King’s Fund.

Even in 2010/11, 5% of the 2,000+ NHS trusts and foundation trusts overspent. By 2015/16 it was two-thirds, following which they were partially bailed out with a £1.8 billion annual ‘Sustainability and Transformation Fund’.

Last year, though, there were still 44% overspenders, so the S & T Fund has now been replaced by a £2.45 billion ‘Provider Sustainability Fund’. Yet the King’s Fund (yes, all these Funds are rather confusing) reckons the sector’s still heading for a half-billion end-of-year deficit.

Meanwhile, those other public service providers verging on unsustainability – the elected councils in Northamptonshire, Somerset, Norfolk, Lancashire, Surrey, and Birmingham and the other one-in-ten the National Audit Office estimates could exhaust their reserves within the next three years – must be crossing their fingers and hoping their Provider Sustainability cash turns up pretty soon.

The really frustrating thing about this particular but huge segment of the central-local problem is that, if they’re honest, pretty well everyone seriously involved knows the answer. It’s not like which of council tax revaluation, the retention, reform or abolition of business rates, or, say, a land value tax is the best way of boosting council income.

As Cllr Paul Carter, finance panelist and Kent CC Leader, has, among many others, long and passionately advocated, it’s the proper integration of the health and social care systems.

In the shorter term, and no doubt bearing in mind the increasingly Labour territory that is London, what was needed was “a new needs-led methodology” of funding distribution, “away from London, with its ludicrously low rates, to county shires”.

He had to be really pressed before admitting to much confidence of even that happening, but it seemed to buck the punters’ spirits up more than most of what they’d heard.

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