Few finance ministries yield as much influence over national affairs as Britain’s. Many advanced economies split responsibilities for tax, spending, and economic growth across departments, but His Majesty’s Treasury has all of these in its domain. This power has made it an easy scapegoat. In recent years its bean counters have been accused of imposing austerity after the financial crisis, and then spending wastefully during the pandemic.
Much of the blame is misguided. Politicians ultimately set the fiscal rules and policy agenda, not Treasury civil servants. In fact, a strong finance ministry is a feature, not a bug, of a well-functioning state. It needs to impose discipline on government spending to counter politicians’ predilection to overspend. Co-ordination is also needed as individual departments struggle to weigh their needs against broader government objectives. Still, some criticism of the Treasury is fair and calls for reform are justified. With significant, and often contrasting, economic objectives it struggles to get the balance right.
First, the Treasury’s growth mandate can often be usurped by its drive to make the books balance and ensure taxpayers receive value for money. This has been called “Treasury brain”: an overemphasis on near-term costs and benefits, and a hesitancy towards ambitious proposals that only pay off in the future. Insiders say the Treasury initially opposed an extension of the London Underground to Canary Wharf in the early 1990s — a project that ultimately ended up supporting the growth of London’s financial district.