Treasury Ministers Research Articles

Life in the Whitehall Village

This article is abridged from Lord Bruce-Gardyne's account of his experience as a Treasury Minister published in 1986 under the title Ministers and Mandarins. It is valuable as another Ministerial account of life ‘on the inside’. It is also valuable as a contribution which is based on the experience of the Conservative Government. But above all it is valuable because Lord Bruce-Gardyne started off with a well informed academic view of the Treasury (See J. Bruce-Gardyne and M. Lawson, The Power Game, 1976).

Half a Loaf from the System?

David Stockman was ‘innocent’ to expect the Reagon govermment to cut its expenditure, claims Lord Bruce‐Gordyne, formerly a conservative Treasury Minister: right‐of‐centre democracies are ‘almost as greedy’ for govermment to spend as their left‐wing counterparts. Both are susceptible to lobbies that can pledge the votes of their supporters and demand that their priviliges are paid for by the taxpayer.

Competition in Political Markets

The political ‘convergence theorem’ argues that, in countries where there are two main parties or coalitions, their policies tend to converge. In Economic Affairs, January‐March 1985, Professor Josef Molsberger traced the rise and fall of the social market in Germany. With the ascent in Britain of the Social Democratic Party and the demise of Labour, Lord Bruce‐Gardyne and Dick Taverne reflect on the prospects for convergence between SDP and Conservatives, on policies to liberalise the British economy. Both are Treasury Ministers.

Decoding the Queen's Speech

The in-phrase politics at the moment is to say that something has been delivered in code. It has replaced such favourites of former times as pragmatic, consensus, or getting the balance of payments right, although Disraeli's famous nation has still to be overtaken the longevity stakes. If ever there was an example of something written code it was the Queen's Speech at the opening of the new session of Parliament. The speech always is code, and the art of working out just how many legislative promises are concealed by the time-honoured jargon which it is written is not easily mastered. Indeed, I am always taken aback at the end of the day by just how many Bills are found to have been lurking among the verbiage. This year it is said to be 15, though I could trace only 13 plus two that were certainly not mentioned. That it is the Queen's Speech is, of course, a fiction. All she does is deliver it. The text is a party political affair through and through. So far as health is concerned there were no surprises, though two disappointments for doctors. The two Bills everyone has been forecasting were there?the one to reform the sickness benefit system and the one to update the mental health law. Not everything one has been led to expect, however, is the sickness benefit Bill, which places a duty on employers to provide sick pay for their employees during the first eight weeks of sickness. It is an early runner this year's programme, but it is, after all, really only a revamped version of the one abandoned February, so that is to be expected. In the event it does not, as I suggested it might, tackle the question of sick pay for doctors suspended on health grounds. That is one disappointment for an expectant profession. The idea was considered by ministers, since the reform is desirable, but they came to the conclusion that it would be stretching the long title of the Bill?the defi? nition of its contents?too far to try to include these proposals. The Bill is also highly contentious, with Labour firmly pledged to oppose it, and there seemed good reasons for not giving any more ammunition to the enemy than was strictly necessary. The Bill proposes that as compensation for taking on the new liability employers will be able to deduct their payments of sickness benefit from their National Insurance contributions, which are handed over to the Treasury. But the question about what happens over self-certification, the proposal designed to divest doctors of the task of issuing short-term sickness notes, has not been resolved and is not mentioned the Bill, which will greatly disappoint GPs. They want self-certification to operate from next spring, and the principle has been pretty well considered by the DHSS. Treasury ministers, however, are unconvinced. The objection stems from the fear that employers, now that they can pass on the cost of sickness benefit directly to the Government, will be anything but rigorous checking up on the first week of sickness. That could lead to an increase the claims for short-term benefit, especially as the present safeguard of having to obtain the statutory sick note from a general practitioner would have gone. Claims for sickness benefit have been falling recently, after years of having risen steadily?a change explained by the fact that people may be more concerned than before about protecting their jobs this time of mass unemployment. The Bill is going ahead, but clearly ministers will want the issue settled by the time it comes up for its second reading the Commons. One way out is a plan for DHSS officials to make checks on claims for the first week, but the objection to that is their lack of medical knowledge, coupled with the bureaucratic effort involved. The staff savings from the scheme proposed the Bill are put at around 3000, and Mr Norman Fowler, the Social Services Secretary, would object to any scheme that prevented that goal being achieved. The whole problem is currently before a Cabinet committee, and further talks with the Confederation of British Industry and the medical profession are to take place.

DECISION-MAKING IN BRITISH MONETARY POLICY, WITH IMPLICATIONS FOR THE UNITED STATES*

THE COORDINATION of fiscal and monetary policy in Great Britain is formally accomplished by unifying responsibility for such decisions under one Government Minister, the Chancellor of the Exchequer. This dissertation begins by examining the relations between the Executive branch of the Government (as represented by the Chancellor) and the central bank, the Bank of England, in the light of the nationalization of the Bank. The nationalization statute, the Bank of England Act (1946), removed the Bank from the private sector of the economy and placed it firmly in the public sector. The Crown, which in fact meant the Chancellor, was given the power to appoint Bank officials. The Treasury Minister was also given the right to issue directions to the Bank authorities. Directions were to be obeyed; no appeal to higher officials was possible. Thus, the Bank of England was to be subordinated to the Government. The Parliamentary Debates on the Bank of England Bill serve to confirm this view; control of the Bank was thought to be essential if the Labour Party was to carry out its economic program. Monetary policy was to be decided by the fiscal authorities. Were the aims of the Act carried out in practice? Was the Bank placed under the thumb of the Treasury? Treasury-Bank of England relations during 1945-51 were examined in some detail as was some evidence available for the Fifties in an attempt to answer these questions. It was concluded that the spirit of :the Act survived during the administrations of Labour Chancellors Dalton and Cripps (1946-50). But during the Gaitskell year in the Treasury (1950-51) and the Governments of the Tories (1951)-59), the second Governor of the postwar Bank, Mr. Cameron Cobbold, began a quiet but successful war of independence. The Governor reinterpreted the Bank of England Act to conform with his preconceptions of the proper relationship between a central bank and a Government. According to Cobbold, a subservient central bank was heresy; the Bank of England could be no less than an equal partner of the Treasury in the formulation of economic policy. Cobbold's views on central bank independence are rejected on two grounds. First, monetary authorities, as any public officials in a democracy, must be responsible to the electorate. An independent central bank is a paradox in a democracy. Second, successful economic policy requires that the tools available to mold the national economy be used in conjunction with each other; monetary and fiscal policy cannot be allowed to work at cross-purposes. Placing the responsibility and the weapons of stabilization policy under one head as was the intent of the Bank of England Act must be accomplished. Accordingly, a number of proposals are examined, and two are favored. The first, suggested by ex-Chancellor Gaitskell would make the Bank into a Treasury Department. There are some thoughtful objections to this plan, however, and a substitute one is put forth. The Bank's Governor would be made a political appointee, a Parliamentary Secretary, responsible to the Chancellor, so as to assure political responsibility. The Deputy-Governor would be made a Permanent Secretary so as to ensure continuity and technical competence. No longer will the