The defeat of the Treasury must not be final

For most advisers toiling within government, the standard daily routine is simple: “wake up/go to work/try to do things/get told you can’t by the Treasury/grumble a lot/go home”.

OK, I exaggerate: there is the whole maddening business of government by collective agreement to wade through. This means that any other department, from the mighty Home Office down to the, er, plucky Welsh Office might throw a spanner in your works.

But mostly it’s the Treasury telling you No, and then twice a year itself getting to announce whatever it damned well wants under some convention called “we control the purse strings, what you want to do about it?”  Usually it’s the likes of a beer duty cut, to show that They Get People (the omnishambles Budget casts a looong shadow). If you can detect notes of resentment in my preamble, well duh; I even wrote a pamphlet (with Stian) calling for HMT to be broken up.

So I ought to be feeling some smidgeon of schaudenfreude at the seeming overthrow of the once mighty HMT, in particular with regard to industrial strategy.  First with Vince Cable, and then later with Theresa May, half of my job for 6 years was building the  case for economic intervention, and always against the sharp brains and ruthless negotiators of Horseguards.

Now it feels like one of those episodes of Game of Thrones where a longstanding warlord is suddenly, ruthlessly murdered. Recent days have seen staggering announcements from my old stamping ground, now under the hitherto dry-ish Andrea Leadsom: a billion for electric vehicles, £200m for Fusion, a few more forests … and all of this against a backdrop of disintegrating fiscal rules . This is all before much of what the PM promised in his leadership charge is even costed.  All of these were ideas being worked up during Theresa May’s time, some amongst those refused by the then-Chancellor in the dying days (hard to believe, but nuclear fusion wheezes don’t just spring up from a few feverish caffeinated hours of pre-conference brainstorming. Forest wheezes, coin wheezes, maybe … ). 

This is politics, and it makes sense that the new administration frames everything as a pure consequence of their thrusting optimism about Britain’s future, even if this is somewhat unfair.  Well, forget the “somewhat”: for me this is the most galling paragraph of the weekend so far:

“Mrs Leadsom is a Brexit true believer. While her predecessor Greg Clark agonised about its impact, she sees a path to a shining future in which the UK will lead the world in artificial intelligence, green energy, automation and life sciences.”

Sorry to shout, but WHAT? Greg Clark, with the close and energetic support of Downing Street, led the charge in setting goals and missions for industrial strategy around the life sciences, Artificial Intelligence , the Future of Mobility, green energy, the Ageing Society, and much more. Rather unfair to imply that his widely-shared concerns about damage from the wrong Brexit betrays a lack of belief in our technological potential. Greg fought hard for R&D.

But as I said, politics – and there is some cynical truth to the implicit claim, “if it were not for us, these things would not happen”.  The current prime minister appears to be de facto First Lord of the Treasury to a degree that his predecessor wasn’t. Good advisers have a talent for feeling the winds of change; four years ago, the promise-threat of endless austerity was the recipe for winning elections, and now it’s the opposite. Principle should not become blind.  You can see no starker example than the shift of the current Chancellor – today’s Santa Claus was four years ago planning to convert grants to loans, not just for student maintenance but even for innovation, despite being warned of “potentially disastrous consequences”.  People who see George Osborne’s downfall as entirely stemming from the EU referendum forget the knock he had already taken from trying to cut tax credits too hard in 2015. The wind was already changing, and I suspect our current PM had detected it.

So, industrial strategists rejoice? I would throw in a few words of caution. I always felt that a good industrial strategy was one that beat the Treasury on the merits of the argument, not through political force majeure. Principles like:

  • avoid distorting competition
  • respect value for money
  • go with the grain of the country’s long term direction (ageing, services-led, inherently globalist, knowledge economy)
  • be realistic about gaming, crowding out, additionality
  • you are being lobbied, and everything seems more convincing than it really is

are worth heeding, always. There is a huge opportunity between mindless laissez faire and “do whatever the latest overpromoted Spad feels like” and the processes, arm’s length organisations, and continuous tedious challenge is part of finding that space.

I am reasonably sure that these announcements are good ones, because they have been brewing a long time. It makes sense to go for it on electric vehicles; I even like the Labour plan of massive subsidized loans to buy them (though bear in mind most of the cars bought will be foreign-made at first. And building three battery plants in the UK is punchy: I wonder if the Labour leadership realises that this will basically involve a lot of hard bargaining with the rare capitalists who are good at this). Nuclear fusion is a gamble worth taking: even if it is a one in ten shot, it is a technology that just might transform the whole planet’s energy system.

But, for the future, an industrial strategy constructed in a Treasury-free zone is a worrying thought. Its sudden, seeming defeat reminds me, unforgivably, of further Game of Thrones themes, in particular: the nature of the real enemy can shift.* Back in 2015, the people pointlessly urging us towards a fiscal surplus were a threat to national prosperity, in my view.  Now a far worse threat comes from those urging us on to a No Deal Brexit, and pretending it is somehow embracing the future.

Deciding you want a future filled with autonomous electric vehicles, AI-powered care assistants, green energy and quantum mechanics is the easy bit. Actually getting there means two things: staying relentlessly open to all the world best ideas, and being prepared to hear the word No a whole lot more. The Treasury may be a pain, but in the more recent chapters of this saga it has weirdly become one of the good guys.

*face it, it would have been helpful for Tywin Lannister to have taken on the Night King

Published by freethinkingeconomist

I'm a mid 40s, former special adviser (Downing Street 2017-19, BIS from 2010-14), former FT leader writer and Lex Columnist, former financial dealer (?) at IG, student of economic history, PPE like the rest of them, etc. This blog has large gaps for obvious reasons. The name is dumb - the CentreForum think tank blog was called Freethink, I adapted that, we are stuck now.

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Freethinking Economist

Economic advice. No longer special.

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