The HM Treasury headquarters in London, rather than the Prime Minister's Downing Street office, is described as the true center of power in modern Britain. Historically, prime ministers have attempted to diminish the Treasury's dominance, with limited success.
Andy Burnham is reportedly planning to shift some executive authority from London to Manchester, establishing a 'national growth unit' dubbed 'No 10 North.' This initiative, alongside plans to devolve power to elected mayors and local authorities, is intended to challenge the Treasury's influence. However, wresting authority from the Treasury's bureaucracy has proven difficult for numerous political leaders.
The Treasury employs over 1,600 civil servants and special advisers, significantly outnumbering the approximately 300 at No. 10. This administrative weight allows the Treasury to scrutinize and influence nearly all government decisions requiring public funds, from policy reviews to changes in pension and welfare systems. Former Chancellor Gordon Brown reportedly took precautions to avoid Treasury oversight, even retreating to a small room to discuss policy without fear of leaks from civil servants.
A 2022 Institute for Government study indicated a significant power imbalance within the government, with the Treasury often filling a strategic void left by the Prime Minister due to a lack of administrative firepower or control over policy levers. This imbalance, the study suggested, can lead to detrimental spending outcomes.
The current Chancellor, Rachel Reeves, has faced challenges in countering the influence of her civil servants. Her decision in July 2024 to cancel winter fuel payments for ten million elderly individuals, aimed at addressing a perceived £20 billion fiscal black hole, was reversed after significant public backlash. This event was followed by what are described as damaging business taxes that have impacted investment, employment, and consumer confidence.
The market for British government bonds has shown volatility, and any perceived loss of Treasury control over funding for initiatives like Burnham's proposed 'No 10 North' could be destabilizing. Britain, along with other G7 nations, is still managing the financial repercussions of the 2008 financial crisis, the COVID-19 pandemic, and the conflict in Ukraine, making the allocation of funds a contentious issue.
Concerns have also been raised regarding a potential decline in the Treasury's intellectual capacity. Historically known for recruiting top talent from elite universities, there are increasing complaints about a decline in recruitment standards. A Freedom of Information request by The Spectator magazine revealed that the Treasury had discontinued numerical reasoning tests, citing adverse impacts on candidate diversity, as too many ethnic minority candidates were reportedly failing them. Verbal reasoning tests have also been removed. Critics argue that lowering standards in numeracy and reasoning diminishes the quality of financial analysis and places the Treasury at an intellectual disadvantage when negotiating with private sector financial institutions that often require advanced mathematical skills.
Past attempts to curb the Treasury's power, such as Harold Wilson's creation of the Ministry of Economic Affairs and the Ministry of Technology in 1964, ultimately failed, with both departments abolished within six years. This historical precedent suggests that Burnham's efforts to undermine Treasury hegemony may face significant obstacles.