Austerity and Brexit demand a shake-up of Treasury, advisors tell McDonnell

The Treasury is seen as “arrogant” and needs to be shaken-up in light of austerity and Britain’s vote to leave the European Union, according to an independent report commissioned for John McDonnell.

A series of sweeping reforms are demanded by Bob Kerslake, the former head of the civil service, in a review to be published tomorrow.

Lord Kerslake, a crossbencher, was commissioned by the shadow chancellor last year to examine how the most powerful government department could be changed to help deliver a “fairer, more dynamic economy”.

He found that many contributors claimed the Treasury was “arrogant, overbearing and negative towards other departments” and made a series of recommendations – although he stopped shorted of advocating it be broken up.

Tomorrow Kerslake will launch Rethinking the Treasury, which was compiled with experts including TUC general secretary Frances O’Grady, Stephen Hughes, the former chief executive of Birmingham city council and Oxford academic Simon Wren-Lewis. The findings of the report include the following proposed changes:

• A “re-focusing” of the department’s work on its core roles of overseeing the economy and managing the government’s finances, with a “clear operating mandate”.

• Promoting fiscal devolution to the English regions and the home nations.

• A review of staffing to ensure the department has sufficient numbers and experienced staff to meet the demands of Brexit, as well as the new mandate.
• Actions to “restore public confidence” in its economic forecasting and introduce greater openness, transparency and consultation when dealing with the rest of Whitehall.

“The Treasury is our most important economic policy making institution, but one that has been criticised by some for its approach and attitudes,” McDonnell said.

“This review will help shape Labour’s economic policy, as well as being an important first step in setting a new direction for the Treasury in the 21st century. The views of the former head of the civil service are ones that should be taken on board right across the economic and political spectrum in our country.

“As Sir Bob has made clear, we need the Treasury in the 21st century to be not only able to meet the big challenges of the day such as Brexit, but also one that focusses on all corners of our country, so that no one and no community is left behind. Therefore, I am deeply concerned that the review has raised this as areas which need reform.

“Given the severe challenges that our economy and our country face in the coming years, it is vital that we have a Treasury that is up-to-speed and is able to match them. The next Labour government will need to deal with many of these challenges, with what by then could potentially have been 10 years of Tory economic failure, and it will fall to us to ensure that the Treasury is ready and properly equipped for the 21st century.”

Kerslake said: “The Treasury is a small but very powerful department. To make the most of its very capable staff, it needs to fundamentally change both what it does and how it does it. It should  focus on its core economic and financial roles and work in a much more open and collaborative way. The impact of Brexit reinforces this need for change”.