Daily catch-up: Top Treasury civil servant and Ed Balls combine to teach economic history

New course at King's College, London, aims to strengthen the Treasury's institutional memory

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The Independent Online

It was one of those accidental moments that will live in the memory. I went to King’s College, London, last Friday to sit in on the first seminar of Jon Davis’s new Masters course there, “The Treasury and Economic History since 1945.” Dr Davis’s co-lecturer for the course is Sir Nicholas Macpherson, the serving permanent secretary of the Treasury, which makes the course pretty special to start with. 

Sir Nicholas, who is a visiting professor at King’s, is serious about encouraging the Treasury’s understanding of its own history. He recognises that with its high staff turnover, it is hard for it to retain institutional memory, and he said that it has always been one of the departments most prone to “reinventing the wheel”. This is one of the reasons for the course, which includes several Treasury officials among its students. 

He is a good teacher, which we knew, because he has come to talk to our students before about New Labour in government. On Friday, he started by describing the origin of the Treasury as the earliest branch of the modern state, concerned with raising and spending money. It is differently structured from other departments, notionally governed by a board of Treasury lords, of whom the Prime Minister is the first – the others being mostly Government whips. “Which still matters when the Treasury has to do something such as nationalising a bank over a weekend,” he said: a junior official had to get a courier to get the Lords of the Treasury to sign the papers. 

His brisk review of Treasury history took in the Barber Boom – when an otherwise little-known Chancellor held office during the year, 1973, in which the British economy grew faster, by more than 6 per cent, than any other year before or since – and came, via Howe, Lawson, Major, Lamont and Clarke, to Gordon Brown. He said chancellors could use Budgets as a platform for asserting their dominance over domestic policy. He was just explaining how Brown had invented something called the Pre-Budget Report, which was “originally quite a good idea” but which was “basically an opportunity to have a second Budget”, when Ed Balls, Brown’s adviser and recent shadow chancellor, walked in. 

Sir Nicholas paused to acknowledge the arrival of the co-architect of the Pre-Budget Report, and carried on with his presentation, noting how David Cameron and George Osborne had learned from the tensions of the relationship between Brown and Tony Blair. 

Then he invited Balls, as special guest, to comment. Balls took to the academic water as if it were his natural home. “Here’s five connected points which occur to me,” he began, starting by accusing Sir Nicholas of being “too modest” about the Treasury’s capabilities. He did think, though, that the Treasury had something of an “identity crisis” because it thinks it ought to be a narrow finance ministry, but when an economics ministry was set up to compete with it in the 1960s it worked to limit and to destroy it. And now, with Osborne’s trip to China, it is becoming the Foreign Office too. 

He also said that the Bank of England now has more “engine-room capacity” than the Treasury, more “firepower” on economics. 

The exchange of views between Balls and Macpherson was an education in itself, as they debated the change from Cabinet discussions about, and even votes on, economic policy under Wilson and Callaghan to the twin-power model of Prime Minister and Chancellor under Thatcher and Blair. 

The last example of an economic question being taken to Cabinet, said Macpherson, concerned the euro. Kenneth Clarke insisted on his opposition to John Major’s wish to promise a referendum on the subject going to Cabinet in mid-1990s, where Major prevailed. (The 2003 decision on whether to seek to join was resolved in a series of meetings of small groups of Cabinet ministers.) 

William Keegan, another visiting professor at King’s, was also on hand at the seminar to warn against “fashion and the pursuit of panaceas”, and to recount his experience of having worked at the Bank of England in the 1970s, when he admitted that, in consultations with the Treasury, “we didn’t necessarily make the changes to documents we were asked to make”. 

Balls answered questions from students. Asked which Chancellor he most admired he said he thought highly of Denis Healey, and “not so highly” of Roy Jenkins: “Great chancellors who lose elections are not so great.”

One student asked what he thought of his successor as shadow chancellor, to which he replied diplomatically: “John McDonnell will find it challenging to reconcile a number of historical positions with those of his colleagues.” 

It was a sparkling start to a new chapter in the Davis school of ultra-contemporary history, descended from the great Professor the Lord Hennessy and now based at the Policy Institute at King’s, in partnership with the Institute of Contemporary British History, whose head, Professor Richard Roberts, was also present. 

Next year, Jon Davis and I teach our Masters course, “The Blair Government”, which we started at Queen Mary, University of London, and which has now moved to King’s. I cannot promise that Tony Blair will drop in whenever his name is mentioned, but we hope to bring to it that same chance to hear the “I was there”, “This is how it happened,” from those who were there at the highest level.