Shadow Chancellor John McDonnell has written to the Treasury’s most senior civil servant, Sir Tom Scholar, to put the Treasury on notice of the radical changes he is planning for how it operates if he ever becomes Chancellor. Guido has obtained his own copy of the three-page letter setting out McDonnell’s 10-point plan to reshape the Treasury as the all-powerful instrument of his own economic ideology. Guido gives you a taste of the future that lies in store under our glorious Corbynite overlords:
The revolution will be swift, McDonnell wants an emergency budget passed “within no more than 10 weeks”. The Treasury is instructed to “plan for the necessary preliminary actions to be taken to ensure that spending in advance of Royal Assent is permissible” – he wants the civil service to enact his “urgent spending priorities as well as tax proposals” including a “National Investment Bank” before he has even secured full approval from Parliament. The centrist counter-revolutionaries will never see it coming…
A full civil service re-education programme will be implemented: “The Treasury will widen the range of economic theories and approaches in which its officials and those in the rest of the government are trained”. Those emergency spending powers will help them get their own copies of Mao’s Little Red Book in good time…
McDonnell plans to centralise more power under himself by introducing new versions of Brown’s Public Service Agreements scrapped by Osborne, which give the Treasury the power to impose “monitoring arrangements” and exercise much tighter control over individual Government Departments. He also wants the current 3-year Spending Reviews to be replaced by good old 5-year plans. They worked so well in Soviet Russia and Maoist China after all…
The Treasury will also be required to throw open “all its policy making processes, including Budgets and Spending Reviews” to “wide” and “meaningful” consultations with the public, “businesses, trade unions, civic organisations and relevant stakeholders.” Will Momentum be getting a seat at the table?
The obvious reason why this is not done is because the contents of the Budget are highly market-sensitive, it would cause absolute chaos with price moving leaks. Of course in McDonnell’s true Marxist utopia, all businesses would be owned by and all prices set by the state, so maybe this wouldn’t be an issue after all…
The letter makes clear the scale of Corbyn and McDonnell’s ambitions to fundamentally reshape the institutions of the state along their own ideological lines. Any moderate Labour MPs who are happily going along with it on the basis that it’s just a slightly stronger form of Milibandism are going to be in for a nasty shock…
The Treasury is under renewed pressure to reveal the models behind its latest round of Project Fear forecasts, with a group of 26 economists including Remain and Leave supporters writing to Treasury Select Committee Chair Nicky Morgan, calling on her to demand that the Treasury makes its models available to “qualified independent economists”. Signatories to the letter include former external members of the Bank of England’s Monetary Policy Committee, former economic advisers to government and the CBI and former Treasury officials. Not just the usual Brexiteer economist crowd…
The letter notes the “widespread unease about the very negative post-Brexit outcomes predicted by the Treasury’s economic model” and complains that the Treasury’s attempts to explain its approach have been impenetrable even to “experienced macroeconomists”. The Treasury’s black box figures are playing a huge role in the Government’s approach to Brexit, they should be subject to full independent scrutiny…
Read the full letter below:
The Treasury’s modelling is notoriously dodgy. So dodgy in fact that in 2010 George Osborne set up the independent Office for Budget Responsibility to provide less political analysis than the hyper-political plaything of the chancellor of the day.
Economist Andrew Lilico has pointed out that in its analysis, the Treasury makes three remarkable assumptions.
These are clearly ludicrous assumptions as no credible economist assumes there are zero economic gains to be made from liberating companies from EU red tape. This further exposes the Treasury as a political tool not a serious economic body.
Guido remembers the Treasury’s bogus analysis during the referendum….
“Britain’s economy would be tipped into a year-long recession, with at least 500,000 jobs lost and GDP around 3.6% lower, following a vote to leave the EU, new Treasury analysis launched today by the Prime Minister and Chancellor shows.”
In February of this year, Cambridge academics concluded that most of the economic impact assessments before the referendum were “flawed”, and that the Treasury’s analysis was particularly bad.
“The short-term forecasts of the Treasury and OECD, which have turned out to be wrong, have further damaged the already weak public confidence in economists’ contributions to public debate.”
Wrong then, wrong now…
1/5 The recording of Charles Grant’s Prospect lunch raises more questions about the Treasury’s behaviour #TreasuryGate
— Jacob Rees-Mogg (@Jacob_Rees_Mogg) February 2, 2018
2/5 When Mr. Grant says ‘The Treasury is determined to keep us in the Customs Union’ does he mean the Chancellor or officials? If the Chancellor, it is a breach of collective responsibility, if officials, against their duty to implement Government policy #TreasuryGate
— Jacob Rees-Mogg (@Jacob_Rees_Mogg) February 2, 2018
3/5 When Mr. Grant refers to ‘unpublished papers’ on the Customs Union, who commissioned these and authorised him to be told? Again, if officials, improper for them to tell a partisan think-tank leader before most of the Government or Parliament #TreasuryGate
— Jacob Rees-Mogg (@Jacob_Rees_Mogg) February 2, 2018
4/5 Mr. Grant refers to private conversations with Treasury officials. Have these been authorised by Ministers or are officials freelancing? #TreasuryGate
— Jacob Rees-Mogg (@Jacob_Rees_Mogg) February 2, 2018
5/5 The conclusion must be either the Chancellor or his officials are deliberately trying to frustrate Brexit. Ultimately, Ministers must take responsibility #TreasuryGate
— Jacob Rees-Mogg (@Jacob_Rees_Mogg) February 2, 2018
The Mogg has a point here. As Guido pointed out yesterday, Charles Grant of the Centre for European Reform did say that the Treasury is trying to bounce the government into a softer Brexit. That is either a breach of Hammond’s collective responsibility or the civil service’s duty to implement government policy. Isn’t that the more important story?
Jacob Rees-Mogg asks if it is true that “officials in the Treasury have deliberately developed a model to show that all options other than saying in the Customs Union were bad and that officials intended to use this to influence policy” pic.twitter.com/qUTKvAJFi0
— BrexitCentral (@BrexitCentral) February 1, 2018
The big row today is over whether the Centre for European Reform’s Charles Grant did or didn’t tell Steve Baker that the Treasury was deliberately trying to change Brexit policy and keep us in the customs union. Baker says he did. Grant says in a statement:
“I did not say or imply that the Treasury had deliberately developed a model to show that all non-customs union options were bad, with the intention to influence policy.”
Fair enough. But it turns out Grant did say the Treasury was trying to influence policy by forcing the government into a softer Brexit. Publicly, in July:
This piece by @RobertsDan on how the Treasury is pushing UK govt towards a softer Brexit is well-informed: https://t.co/JwSLiWZtRK @CER_EU
— Charles Grant (@CER_Grant) July 2, 2017
Charles Grant, director of the Centre for European Reform… revealed the existence of an unpublished Treasury analysis showing that the costs of leaving without a customs union deal far outweigh any benefits from future overseas trade deals.
“The coalition of forces pushing for a softer Brexit is considerable,” Grant said. “The Treasury, long an advocate of retaining close economic ties to the EU, is newly emboldened.”
Does anyone really think the Treasury doesn’t want a softer Brexit?
Wishful thinking from the Treasury’s ultra-Remain former Perm Sec? Or is he onto something?
1/2 A reason for cautious optimism. What HMG has said and what it has done on EU negotiations are very different.
— Nick Macpherson (@nickmacpherson2) January 23, 2018
2/2 We will end up more integrated with EU than Brexiteers hope and Remainers fear. #freetrade
— Nick Macpherson (@nickmacpherson2) January 23, 2018
We have seen briefings before from the Treasury that May is going to end up closer to Hammond’s vision of the end state than Boris’ and Gove’s, so it’s worth taking this with a pinch of salt. But the Remainers’ optimism explains the increasing concerns of Cabinet Brexiters that we are not going to pursue a Brexit that makes the most of leaving…