A former New Labour cabinet minister has spoken of his negative experiences of dealing with the Treasury – and the problems its poorly researched interventions created for other departments.
John Denham, who held junior ministerial roles under Tony Blair and two cabinet posts under Gordon Brown, made his comments in a just-published interview for the Institute for Government’s Ministers Reflect series.
The former MP said he had witnessed clear examples of significant changes being forced on departments by the Treasury without warning or consultation – with negative consequences that could have been avoided.
Denham became an MP in 1992, when John Major secured a fourth consecutive term for the Conservatives. He was made a parliamentary under-secretary of state in the then-Department of Social Security after Labour’s landslide victory in the 1997 general election.
He told the IfG that as a minister, he had rapidly come to understand that the Treasury did not operate in the same way as other departments.
“I learnt very early on that the Treasury was a law unto itself and would do things that were damaging to other government departments without any consultation," he said.
Denham said then-chancellor Gordon Brown had a “number of priorities” for his first budget, including the abolition of advance corporation tax, which was part of the taxation model for occupational pension schemes.
“This was seen universally as a signal that the government was not interested in the future of occupational defined-benefit schemes,” Denham said. He added that the move “undoubtedly led to the more rapid closure of private sector pension schemes” than would otherwise have been the case.
The former cabinet minister said what had been particularly striking was that the DSS had no involvement in the decision.
“This was done without any consultation with our department at all," he said. “I think my officials had picked up something about it because they got me to sign a letter to the Treasury saying ‘don’t do anything with ACT’, but that was it. There wasn’t a write-round to respond to.”
Denham quit government in 2003 over the UK’s involvement in the Iraq War. However, he went on to serve as secretary of state at the short-lived Department for Innovation, Universities and Skills, created when Brown became PM in 2007. He later took the helm of the then-Department for Communities and Local Government.
Bungled ‘good news story’ turns into cuts
Denham said that in his first days at DIUS, he was called up by the head of the No.10 Policy Unit and told he would need to announce a big increase in the maintenance grant for students that was a “good news story” for which the department would receive funding.
“So I announced this thing,” Denham said. “If I’m honest, though it’s socially desirable, it wasn’t necessarily where we would have spent money if we’d had the choice, but it had been decided. It was part of Gordon’s package of measures he wanted to announce as prime minister, so we went off and did this.
“It was only after the event that you find out (I’m not saying this has got anything to do with inheritance tax and farmers at all) that the Treasury had done the calculations without using the economic modelling that existed within my department.
“So the financial implication of this announcement was several hundred million pounds more than the Treasury had given us money for, and I then ended up having to make cuts in the department to pay for the overspend on this. I just thought, ‘I know there’s secrecy, but you could actually have asked the people who know before you made this announcement’. But anyway, that happened.”
Building bridges with chief secretaries
Denham said that as he became more experienced as a minister – and particularly when he was a secretary of state – he came to recognise that developing relationships with Treasury chief secretaries could yield constructive results and devoted more time to doing that.
“I realised when I was at DIUS that officials would say, ‘well, you can’t do that, minister, because the Treasury won’t like it’,” Denham said. “That was where I realised that I had to say to people, ‘look, if you say the Treasury won’t like it, just tell the Treasury that I’ll have a meeting with the chief secretary to discuss it’.
“These objections from the Treasury were always about Treasury officials. They were never from Treasury ministers, right? It was the same with Downing Street. At DIUS I actually set up a procedure: you do not tell me the Treasury won’t like something unless the Treasury confirm that the chief secretary would like to meet me to discuss it. And you don’t tell me that Downing Street won’t like something unless you tell me that Tony Blair, or Gordon Brown as it would have been then, would like to meet me to discuss it. You had to cut out all of these people who are trying to influence policy who had no mandate to do so.”
The full transcript of Denham’s Ministers Reflect interview can be found here.