Majesty's Treasury Research Articles

Interview with Professor Adrian FM Smith

SummaryAdrian Smith joined The Alan Turing Institute as Institute Director and Chief Executive in September 2018. In May 2020, he was confirmed as President Elect of the Royal Society. He is also a member of the government's AI Council, which helps boost AI growth in the UK and promote its adoption and ethical use in businesses and organisations across the country. Professor Smith's previous role was Vice‐Chancellor of the University of London where he was in post from 2012. He is a past President of the Royal Statistical Society and was elected a Fellow of the Royal Society in 2001 in recognition of his contribution to statistics. In 2003‐04 Professor Smith undertook an inquiry into Post‐14 Mathematics Education for the UK Secretary of State for Education and Skills and in 2017, on behalf of Her Majesty's Treasury and the Department for Education, published a 16‐18 Maths Review. In 2006 he completed a report for the UK Home Secretary on the issue of public trust in Crime Statistics. He received a knighthood in the 2011 New Year Honours list. The following conversation took place at the Alan Turing Institute in London, on July 19 2019.

Brexit and its possible implications for the UK economy and its regions: A post‐Keynesian perspective

AbstractThis paper discusses the implications of Brexit for both the UK and its regions, as the latter depends on the former. We concentrate on the forecasts by Her Majesty's Treasury (HMT), the Cambridge Centre for Business Research and the Economists for Brexit. It is argued that the estimates of HMT of the loss of GDP are likely to be overstated, but, nevertheless, there will probably be a fall in output. Given this, the effect on the UK regions is analysed using the regional balance‐of‐payments constrained growth model. This suggests that Brexit will cause regional disparities to widen.

Overview: Administrative Law

The Supreme Court decided 16 cases involving aspects of administrative law in the 2012–13 legal year. In B (Algeria) v Secretary of State for the Home Department,1 the Court held that, where an appellate court has concluded that the basis on which the decision of the lower court to sentence someone for contempt is flawed, it does not follow that the sentence chosen by the lower court is inevitably wrong. In this case, the four-month sentence of the Special Immigration Appeals Commission was affirmed, albeit for different reasons from those articulated by the Commission. It was felt unnecessary to remit the case to the Commission on this issue. Composed of a panel of nine judges, the Court issued two decisions regarding an Order for restrictive measures imposed by the Treasury under the CounterTerrorism Act 2008 Schedule 7. In Bank Mellat v Her Majesty's Treasury (No. 1),2 the Court determined by a majority of six to three that it had the power to adopt a closed material procedure on appeals against decisions of the courts of England and Wales on applications brought under s 63(2) of the 2008 Act, and by a majority of five to four that it would be appropriate in this particular case to do so. In Bank Mellat v Her Majesty's Treasury (No. 2),3 the Court quashed the Treasury's Order on both substantive and procedural grounds. A majority of five Justices to four held that the Treasury's direction to restrict the access of an Iranian bank and its UK subsidiaries to the UK financial markets on the ground that it posed a significant risk to national security by providing banking services to those involved in the development or production of nuclear weapons in Iran was both irrational and disproportionate. A majority of six Justices to three further found that the restrictions were unlawful because of a failure to give prior notice or any opportunity to make advance representations.

Do consultants treat humans or make widgets?

Productivity was once a word at the centre of disputes between factory workers and owners. Owners wanted more widgets for lower cost. Factory workers preferred the status quo in widget production. Little has changed in the world of business. But each dip of economic recession intensifies workplace discussions about redundancies and salary sacrifices. The owners or managers of any commercial organisation want even more for much less. Reduce costs, improve productivity. The status quo, though, is dead. Change or you are toast. Once doctors watched from a lofty height; a secure job for life, a stable profession with guaranteed earnings and few questions asked. A career in medicine, for many doctors, still offers a smooth trajectory of promotion and income. But when Her Majesty's Treasury raids the National Health Service for £3 billion, the game has changed.1 Productivity, a word that inflames any dispute, has become a common measure of health systems and the people who work in them. Salary rises awarded to both hospital doctors and GPs in the last decade, at a time when the productivity of the NHS continued to fall year on year, has sharpened focus on the level and quality of service being delivered. The new consultant contract, introduced in 2003, offered more money—salaries increased by 27% between 2003 and 2006—in exchange for the potential to manage consultants’ activity. Productivity wasn't explicitly linked to better pay explain Karen Bloor and colleagues, but the government's business case for the new contract carried an expectation of year-on-year consultant productivity gains of 1.5%.2 Their analysis covering 1999 to 2009 reveals that although several quality measures have improved, consultant productivity hasn't—and in half the specialties studied, productivity decreased. In our uncertain times of recession, days of working harder to stand still, these productivity data will be difficult for hospital consultants to accept. Indeed, the ‘input’ side of the analysis isn't solely dependent on salary. For example, staffing levels in the NHS have increased. Many consultants will also argue that the contract restored salary to an appropriate level. But the message of this new study is a broader one than mere consultant bashing. Improvements in healthcare productivity sound attractive in discussions and projections. The difficulty with productivity targets, just like efficiency gains, is delivering them. In a rapidly evolving environment like any national health service, they become harder to achieve, potentially impossible, as the complexities of healthcare continue to multiply year-on-year. Perhaps, in an age that is as much of decadence as it is of recession, slowing decline in healthcare productivity is as good as it gets? Perhaps healthcare productivity is immune to the engineering process improvements promoted by management consultants that can succeed in a widget factory? Perhaps we need to ask a more fundamental question, to misquote American Indie rock band The Killers, are we human or are we widget?

Hedge Funds, Human Rights, and Her Majesty's Treasury: Challenging the Margin of Appreciation Under the European Convention on Human Rights

In the European Court of Human Rights, a feature of international law called the margin of appreciation often precludes full substantive analysis of legitimate claims arising under the European Convention on Human Rights. The margin of appreciation is a deference that the international court provides to a challenged government for public policy legislation. The level of deference varies depending on the challenged law, but it is at its greatest when the court affords a wide margin of appreciation. When applying a wide margin of appreciation, the court focuses on the public policy underlying the legislation, rather than the merits of the claim. The standard applied by courts when examining legislation under a wide margin of appreciation lacks rigor, consequently, the decision to apply a wide margin of appreciation typically leads to upholding the legislation’s legality. In SRM Global Master Fund LP v. Treasury Commissioner, shareholders invoked the Convention in the British Court of Appeal to challenge the compensation scheme for shares expropriated by the British government when it nationalized a bank. The Human Rights Act, passed by the British Parliament in 1998, provides jurisdiction in British courts for claims arising under the Convention. Under the Act, the source of law for British courts is the European Court of Human Rights. When shareholders invoked the Convention to challenge the compensation scheme for the nationalization, the British Court of Appeal applied a wide margin of appreciation and upheld the scheme. The court determined that the subsidization, and subsequent nationalization, amounted to public policy and, consequently, merited a wide margin of appreciation application. This Note asserts that claimants should preclude a wide margin of appreciation to achieve substantive review of expropriation compensation challenges under the European Convention of Human Rights. The claimants in SRM Global Master Fund LP v. Treasury Commissioner unsuccessfully attempted this; however, the case’s facts and decision reveal a promising strategy. Using the facts, arguments, and analysis in SRM, as well as precedent under the Convention, this Note targets the consideration that triggers a wide margin of appreciation: public policy. By asserting that the challenged expropriation is a distinct expropriation, an expropriation lacking a public policy basis, claimants may preclude a wide margin of appreciation and gain substantive review of their claims.

Public–private partnership and regional productivity in the UK

In this paper, the authors are particularly interested in revealing the relationship between public–private partnership (PPP) investments and regional productivity. The main data sources are the database provided by the UK Her Majesty's Treasury on private finance initiative projects and the regional economic performance indicators published by the Department for Business Enterprise & Regulatory Reform. Regarding the regional distribution of projects, we are interested in determining whether this distribution is stable regardless of the authority promoting the projects. In addition, we utilise an econometric panel data model to evaluate the statistical association between PPP investment and regional productivity.

Her Majesty's Treasury v. Mohammed Jabar Ahmed and Others; Her Majesty's Treasury v. Mohammed al-Ghabra; R (on the application of Hani El Sayed Sabaei Youssef) v. Her Majesty's Treasury

Her Majesty's Treasury v. Mohammed Jabar Ahmed and Others; Her Majesty's Treasury v. Mohammed al-Ghabra; R (on the application of Hani El Sayed Sabaei Youssef) v. Her Majesty's Treasury

MY DAY

Robin Bew joined the Economist Intelligence Unit in 1995. Previously, he was an economist at Her Majesty's Treasury. He became the Economist Intelligence Unit's Chief Economist in 1997 and Editorial Director in 2006.

Funds, Rights and Terror: Her Majesty's Treasury v Mohammed Jabar Ahmed and Others

The case of Her Majesty's Treasury v Mohammed Jabar Ahmed and others is discussed to arrive at a better understanding of the legislation pertaining to global money laundering and terrorist finance. The legal framework and the decision in the case as well as its implications are highlighted.

Judicial Review by EU and Domestic Courts of the Al Qaeda and Taliban Sanctions Regime: Counterterrorism, Due Process, and the Search for the Golden Mean

SUMMARY This paper explores the extent to which sanctions, including asset-freezing and travel bans, imposed by the UN Security Council in its fight against terrorism on persons and entities allegedly associated with Al Qaeda, Osama bin Laden, and the Taliban, have been amenable to judicial review by EU and domestic courts, and the impact of such litigation on the implementation and development of the existing Al-Qaida and Taliban sanctions regime. I analyze the practice of EU and domestic courts, with special focus on the English courts, in reviewing the sanctions imposed by states and the European Union against Al Qaeda and the Taliban pursuant to Security Council resolutions. I also examine the response of the executive bodies responsible for implementing sanctions, such as the European Commission and Her Majesty's Treasury, to legal challenges brought by the affected individuals. Courts have generally been inclined to uphold domestic or EU acts implementing Security Council resolutions, on the basis that they draw their legitimacy from these resolutions. However, EU and English courts have recently acknowledged the inadequacies of the sanctions regime as implemented by the European Union and domestically, particularly the lack of adequate procedures whereby a person may challenge the freezing of their assets. In practice, if a domestic or EU court finds that the implementing act infringes fundamental rights, the court may quash it and order the relevant authorities to modify the implementation of the sanctions regime to remedy the infringements. These modifications could, in principle, clash with the conditions set forth by the Security Council. The rulings of EU and domestic courts may therefore compel states to violate their international obligations under Security Council resolutions and the UN Charter. However, rather than allowing noncompliance with the relevant resolutions, the Security Council should consider introducing needed improvements to bring the sanctions regime into compliance with fundamental rights, thereby avoiding an undermining of its authority and the effectiveness of the sanctions regime. In sum, this paper shows that legal actions before EU and domestic courts have triggered re-evaluation and encouraged the introduction of some important improvements to the sanctions regime and/or its implementation. INTRODUCTION In the wake of the terrorist bombings of U.S. embassies in Nairobi and Dar el Salaam in 1998, the Security Council adopted Resolution 1267 (1999), imposing financial sanctions and an air embargo against the Taliban. A sanctions committee, comprising all fifteen members of the Security Council, was established to oversee the implementation of these measures. In subsequent resolutions, which defined terrorism in all its forms and manifestations as constituting one of the most serious threats to international peace and security, the Security Council modified and strengthened the sanctions regime. The sanctions, adopted under Chapter VII of the UN Charter as preventive measures in the fight against terrorism, now apply to designated individuals and entities associated with Al Qaeda, Osama bin Laden, and/or the Taliban wherever located. States are required to implement three sanctions measures with regard to Al Qaeda, Osama bin Laden, and the Taliban, namely to freeze their funds and other financial assets; prevent their entry into or transit through states' territories; and prevent the direct or indirect supply, sale, and transfer of arms and military equipment to any individuals and entities associated with them. The sanctions committee maintains a regularly updated consolidated list of individuals and entities identified or associated with Al Qaeda, Osama bin Laden, or the Taliban. States may ask the sanctions committee to add names to the consolidated list. Designated individuals and entities are entitled to submit a request for delisting through the state of their residence or citizenship or through a focal point, which is now replaced by an ombudsperson. …

Borrowing Agreement with the Government of the United Kingdom

In light of the multilateral effort to ensure the adequacy of the financial resources available to the International Monetary Fund, and with a view to supporting the Fund’s ability to provide timely and effective balance of payments assistance to its members, the Government of the United Kingdom, acting through Her Majesty's Treasury, agrees to lend to the Fund up to the equivalent of SDR 9.92 billion.

Public Expenditure in the UK: How Measures Matter

SummaryStudying spending over time requires reliable data. It is not clear that such data exist in the UK, however. The two published sources of functional spending numbers—the Office for National Statistics's ‘blue book’ and Her Majesty's Treasury's Public Expenditure Statistical Analyses (PESA)—rely on estimates of past spending, using a link year method, rather than recalculating actual spending figures when functional definitions change. We assess the various measures of spending in the UK. Specifically, we do two things. First, we present a new, third, set of spending numbers applying temporally consistent functional definitions to PESA microdata. Second, we compare the three measures. Our analyses indicate that the Office for National Statistics and PESA data differ quite markedly, especially for certain functions, i.e. in some cases the two measures imply completely different histories. The differences between the original PESA data and our new measures are less pronounced on average, though significant differences are evident, especially year by year.

SRES, IPCC and the Treatment of Economic Issues: What Has Emerged?

This article reviews and extends the continuing debate on the treatment of economic issues by the Intergovernmental Panel on Climate Change (IPCC). Following an introduction, it has four main parts. Section 2, with its accompanying Annex 1, deals with one of the leading technical issues in the debate. It argues that, contrary to IPCC-related sources and some other analysts, exchange rates should not enter into measures or projections of output (real GDP). Section 3, in conjunction with Annexes 2 and 3, reviews again the projections of GDP and emissions that emerge from the IPCC's Special Report on Emissions Scenarios (SRES). It brings out in particular some confusions that have entered into the IPCC process and the arguments deployed in its defence. Section 4 lists the main weaknesses of the SRES, which are not a matter of the specific projections that it makes. These weaknesses cast doubt on the Panel's decision to use the SRES as a point of departure for its Fourth Assessment Report which is now in course of preparation. Section 5 considers the IPCC process as a whole. Attention is drawn again to the mishandling of economic evidence in IPCC documents and by the United Nations Environment Programme which is one of the IPCC's two parent agencies. New evidence of the professionally unrepresentative status of the IPCC milieu is cited from two sources: The Expert Meeting on Emissions Scenarios convened by the IPCC in January 2005; and the proceedings of the House of Lords Select Committee on Economic Affairs which has just reviewed ‘economic aspects of climate change’. The IPCC's dismissive response to independent critics, as illustrated in Annex 3, means that its handling of economic issues can be improved only if its member governments take action. Effective action will require in particular the involvement of the central economic departments of state: these will have to show greater awareness of what is at stake than Her Majesty's Treasury in its evidence to the Select Committee. More broadly, and going beyond economic aspects, it is high time to put in question the IPCC's status as a monopoly provider of information to governments on issues relating to climate change.

The UK and EMU: Lessons from Europe

Her Majesty's Treasury is due to report in June 2003 on the economic case for the UK adopting the Euro. One criterion concerns the extent of economic convergence between the UK and the European Union countries. Differences in financial, credit and housing institutions between countries present one important subset of constraints to sustained convergence (Maclennan et al, 1998) ‐ largely neglected in the economic literature on common currency areas. These types of differences create tension within the Eurozone. Empirical evidence supporting these concerns has emerged in signs of overheating in the Netherlands, UK and some of the fringe economies, and in the relative stagnation of Germany and Italy. The UK's buoyancy, however, is accompanied by serious economic imbalances, with consequent risks of instability. These would be exacerbated should the UK be prematurely locked into an exchange rate and interest rate regime unresponsive to domestic conditions. There is much to learn from European experience: from Germany and Italy, on the consequences of illiberal economic structures; from The Netherlands, on some of the risks of liberal credit markets; and from Denmark, with a liberal credit market but rational property taxation. In this paper, John Muellbauer argues that convergence does not have to be fully achieved, if there is a counterbalancing policy instrument to mitigate some of the effects of these slow‐to‐dissipate differences. Specifically in the UK, a reformed system of property taxation would contribute greatly to long‐term stability and the preservation of economic balance.

Teaching the scientists of tomorrow

There is growing concern among the scientific community regarding the decline in the numbers of young people entering science-related degrees and careers. A recent review carried out by Sir Gareth Roberts for Her Majesty's Treasury made a number of recommendations for improving science education in schools and universities. One of the concerns that arose from the review was school pupils' negative image of careers that result from the study of science and engineering, and the inadequate information about these. Furthermore, university students perceived that there is an insufficient number of attractive career opportunities in research for highly qualified research scientists and engineers. Besides the negative image of a career in science, students also found that starting salaries and salary progression were increasingly uncompetitive compared with the salaries of their counterparts in other sectors.

Creating communication: blending two traditions of information at the UK Home Office

I recently had occasion to look back into the archives of Her Majesty's Treasury. A memorandum there notes that:

Urwick on the business academy

L yndall Urwick was born in England in 1891. He attended Repton and New College, Oxford, and was awarded a B.A. degree in 1913 and an M.A. degree in 1919. He began his career in his family's glove manufacturing business, Fownes Brothers and Company. Following service in the First World War, he became organizing secretary for Rowntree and Company, a confectioner. He subsequently moved to the position of administrator of the Management Research Groups and then became Director of the International Management Institute in Geneva in 1929. When the Great Depression cut short the life of the Institute, Urwick returned to England and established the management consultancy Urwick, Orr and Partners. During World War II he was an advisor in organization to His Majesty's Treasury, and in 1942 he moved to the Petroleum Warfare Departmerit. From 1945 until 1965 Urwick continued his work as a management consultant and served as a visiting faculty member at such universities as Toronto, New South Wales, California, and Minnesota. He retired to Australia, where he died in 1983 at the age of 92. Urwick's books include: Factory Organization (1928), coauthored with C. Northcott, O. Sheldon, and J. Wardopper; The Meaning of Rationalization (1929); and with H. Metcalf, Dynamic Administration: The Collected Papers of Mark Parker Follett (1941). He also wrote a number of shorter works published by such groups as the British Institute of Management, the Institute of Labor Management, the Institute of Personnel Management, the American Management Association, and the Academy of Management. In the late 1920s, Urwick became a vigorous advocate for a staff college for industry. He felt that such an institution was urgently needed and should be structured along the lines of the existing staff colleges of the various branches of the military. In 1942 he was joined in his efforts by others who provided planning support and came up with sufficient money and students to give the project a reasonable chance for success. In 1948, the Administrative Staff College was opened by Clement Attlee, Prime Minister of England. It served as a model for many other similar undertakings that followed, both in Great Britain and throughout the world. During his lifetime, Urwick's membership in professional associations included The British Institute of Management (fellow), the International Academy of Management (charter fellow), the Academy of Management (fellow), and the American Management Association (life member). Among the awards he received were the Order of the British Empire and Military Cross (British Army), Gantt Medal (American Management Society and the American Society of Mechanical Engineers), and Knight, First Class, Order of Saint Olaf (Norway). Additional biographical details about Urwick can be found in the London Times (1983), the work of Trosky (1984), and the writing of Bedian (1984), from which the information presented here was extracted. Many early management texts, such as Mooney and Reiley (1939), Dennison (1931), and Sheldon (1923), can provide supporting background particulars as well.

Properties of the Fundamental Equilibrium Exchange Rate in Models of the UK Economy

The Fundamental Equilibrium Exchange Rate (FEER) is that value of the real exchange rate that is consistent with macroeconomic equilibrium. This article uses the long-run trade equation elasticities from the models of Tier Majesty's Treasury, the National Institute of Economic and Social Research and the Bank of England to examine the FEER calculation. The sensitivity of the results to changes in the key elasticities and to the possibility of a recent improvement in UK trading performance is considered. Historical comparisons are made between the FEER and the actual real exchange rate. All the results suggest that the real exchange rate was above the FEER at the time ofERM entry. The fixing of the nominal exchange rate removes a possible mechanism by which the economy might reach equilibrium and therefore convergence requires a period where UK inflation is lower than that of its trading partners.

The Role of Civil Servants in National Budgeting: An International Comparison

Beginning in October 1988, a budgeteer‐exchange program has existed between Her Majesty's Treasury in the United Kingdom and the Office of Management and Budget in the United States. Cultural and constitutional differences make the jobs of the budgeteers in each country analogous but not equal. Differences that exist include organizational structure, work content, and information presentation to legislative bodies.

Models of the UK Economy and the Real Wage-Employment Debate

This article is an example of the type of exercise that is made possible by the existence of the set of UK models at Warwick. Using three quarterly models, those of the London Business School (LBS), the National Institute of Economic and Social Research (NIESR) and Her Majesty's Treasury (HMT), and two annual models, those of the City University Business School (CUBS) and the Liverpool University Research Group in Macroeconomics (LPL), it considers the use, and possible abuse, of such models of the UK economy to illustrate the real wage—employment debate.In UK models real wages and employment are determined jointly and the article shows that the sign of the association between these two variables depends ore the nature of the shock which causes real wages to change. A common method of analysis is to perturb the endogenous real wage directly and although the results are quantitatively similar to those where the change to real wages results from a supply-side shock to the labour market, it is argued that such exercises are typically without foundation since no mechanism for achieving a direct reduction in real wages is put forward. Any implicit model which underpins the assumption of an exogenous shift in an endogenous variable needs to be stated clearly in order for the plausibility of the ‘intervention’ and resulting policy analysis to be assessed.