In defence of Treasury brain

Treasury officials are often criticised for making budgets add up in the short term at the expense of long-term goals. That’s true, but imagine the money that would be wasted if they didn’t! Writes Joe Hill

Budgets are divisive, everyone has their own gripe. Too much spending, or too little. Not enough growth, or too much of the wrong kind of growth. Taxing “working people”, or everyone else. The one thing everyone agrees is that it’s the Treasury’s fault. 

Whatever the politics of the current Chancellor, the Treasury has long been dogged by accusations that its own culture and instincts damage decision making. Winston Churchill dubbed it “Treasury orthodoxy” at the Budget in 1929; you might have heard it referred to as “Treasury brain”. Whatever the name, it’s seen as a ‘bad thing’.

I disagree. Treasury brain is real, but we’d be far worse off without it.

At this point I should make a confession: I worked at the Treasury for three years. During that time I met many critics. Most held a grudge because their pet project didn’t get funded or their preferred tax cut wasn’t made. Those decisions can be seen as arbitrary and unfair – and often they are. Plenty are undeserved, but you would be amazed at how many ideas for wasting public money never see the light of day because the Treasury blocks them.

Its instincts are right: that things will always cost more than planned, that they will usually deliver less than promised and that lots of the ‘investments’ it is asked to make are anything but. 

These are instincts hardened by experience – during my tenure we were regularly told with a straight face that departments would need to spend 20 per cent more a year, every year, just to keep the lights on. Projects would always come in late, over-budget and under-delivered. And any attempt to reform public sector workforces was met by hostility, usually from within government itself. 

Want proof? Take a look at any big government project or glance at public sector productivity rates.

True, the Treasury has plenty of failings. A bias towards short-termism, controlling budgets at the expense of end goals and ‘vandalising’ key projects to make the numbers add up. 

Who else would champion the interests of the taxpayer?

But its flaws are also more noticeable than those of other departments because of the power the Treasury has – and imagine if that wasn’t the case. Who else would champion the interests of the taxpayer? The rest of government has no incentive to save money – let them loose, and the Chancellor’s Budget envelope today wouldn’t be worth the paper it’s written on. 

The teams in Horse Guards Road are the only part of government which institutionally knows what all adults do: that politics is about trade-offs in life. Other civil servants may find it annoying that a 20-something ‘bright young thing’ from HMT asked them to do a cost-benefit analysis for their widget transformation fund, but would they do it if nobody told them to?

Of course it could be better. Indeed, many of the Treasury’s problems are because it has just enough power to block bad ideas, but not nearly enough power to make good ideas happen. And when all you have is a hammer, everything looks like a nail. 

On my first day at the Treasury I was told that we would always be criticised for “knowing the price of everything and the value of nothing”. That turned out to be the case. But looking back on it, I don’t think most critics really wanted us to think more about public value – they just wanted us to stop counting the cost. I don’t think many taxpayers would agree.

Joe Hill is policy director at the Reform think tank