View from City Road: Sir Terence must tread softly at the Treasury

When Josef Stalin was pressed by a French prime minister to stop suppressing Catholicism, he famously snorted: 'The Pope] How many divisions has he got?'. Given that the Catholic church looks set to last a good deal longer than the Communist party of the old Soviet Union, this put-down has not worn well. It nevertheless expresses a profound if cynical truth: secular power often depends on sheer force of numbers. Generals, industrialists - and civil servants - all measure themselves in part by the scope of their responsibilities.

That is one reason why yesterday's Treasury reorganisation is just a little worrying, for it concentrates still more divisions - of the bureaucratic rather than military kind - in the hands of the Treasury's powerful permanent secretary, Sir Terence Burns.

Instead of having seven senior mandarins reporting directly to him, Sir Terence will now have 10. The idea of the permanent secretary as primus inter pares among the three other Treasury permanent secretaries is gone. All the second permanent secretaries lose whole areas of responsibility directly to Sir Terence. He is truly the first Lord of the Treasury.

This is odd. Sir Terry, an affable Geordie, is one of the last people anyone would cast in the role of a power-hungry autocrat. The ostensible object of the exercise is the fashionable management notion of de-layering: cut out layers of managers, prune costs, clarify responsibilities and decentralise. But the proof will lie in the eating.

In effect, Sir Terry has conflated the two layers of management below him. The Treasury's three second permanent secretaries have each lost under-secretaries and divisions. Sir Nigel Wicks, the lugubrious international legman, loses five divisions including the key fiscal and monetary area, which becomes a free-standing fiefdom under Robert Culpin.

Andrew Turnbull, the permanent secretary in charge of public spending, loses 16 nitty-gritty divisions, which go into two more new groups, retaining responsibility only for overall strategy and for defence, which may be a signal of battles to come. The third permanent secretary and chief economic adviser, Alan Budd, has lost the two divisions dealing with public expenditure economics to Mr Turnbull.

At the same time, Sir Terry has created a new 'supply-side' empire under Steve Robson that will deal with industry, education and the City, reflecting the Chancellor's interest in improving the links between them.

Mr Robson now has a larger number of divisions than any of the second permanent secretaries, even though he is a grade lower as deputy secretary.

All this makes sense if Sir Terry can avoid meddling, and allow his new groups to act like go-getting divisions of a merchant bank rather than hierarchical units. But Sir Terry will have to be careful. The other area of concern is women: the departure of Rachel Lomax to the Cabinet office removes the only woman in the senior ranks of the Treasury. An import or five would do wonders.

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