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Andy Burnham, the Prime Minister, is embarking on an ambitious initiative to reshape the UK’s economic landscape by transferring growth policy responsibilities from the Treasury to a newly established unit at No 10 in Manchester. This move, which Burnham describes as “more significant than people realise,” aims to tackle the longstanding challenges posed by the Treasury’s influence over public finances. By intending to decentralise economic policies and empower metro mayors, Burnham hopes to foster a more innovative and long-term approach to economic growth.
A Historical Context of Treasury Control
Burnham’s aspirations echo a long history of tensions between British Prime Ministers and the Treasury. Previous leaders, including Boris Johnson and Margaret Thatcher, have grappled with the Treasury’s dominant influence. Johnson’s tenure saw him reshaping the leadership within the Treasury, while Thatcher’s focus on her economic adviser led to notable resignations. The historical backdrop also includes Harold Wilson’s short-lived Department for Economic Affairs, which aimed to inject long-term thinking into economic policymaking.
As inflation continues to rise, the need for effective economic strategies has become increasingly urgent. Burnham’s proposal to create a No 10 department dedicated to growth seeks to liberate economic policy from the Treasury’s traditionally cautious stance. He argues that the dual responsibility of managing growth while controlling public finances often hampers genuine economic development.
The Role of Devolution in Economic Strategy
Integral to Burnham’s strategy is a commitment to devolution. His administration has outlined plans to transfer more powers to regional mayors, thereby unifying growth policies that are currently fragmented across various governmental departments. Ruth Curtice, director of the Resolution Foundation, has noted that better coordination among housing, education, and planning could significantly enhance the effectiveness of this new unit in Manchester.
Critics highlight the need for a comprehensive approach that draws on expertise from multiple departments. Former adviser Michael Jacobs emphasises the potential for a new growth unit to coordinate across different policy areas, akin to the Office for Climate Change, which successfully integrated various governmental strategies.
The Challenges Ahead
Despite the ambitious plans, not everyone is convinced that a counterbalance to the Treasury is feasible. Former Conservative Treasury chief David Gauke warns that the Treasury’s control over taxation and public spending will continue to overshadow any new initiatives. He questions whether the Manchester unit will genuinely influence pro-growth policies, considering its limited access to the Prime Minister and other ministers.
Additionally, a Treasury source has clarified that No 10 North’s focus will primarily be on local growth rather than usurping the Treasury’s role in economic strategy. They are providing limited support to the new unit, which raises questions about its capacity to drive meaningful change.
Future Economic Decisions and Uncertain Outcomes
With a critical budget looming, the new cabinet faces immediate decisions regarding taxation and public spending. The potential for conflict between No 10 North and the Treasury is palpable, and how these disputes are resolved will be crucial. Jonathan Portes, a former senior government economist, underscores the importance of collaboration among economic institutions to ensure that they work towards common goals.
As Burnham anticipates a shift in the economic conversation, he may indeed find himself revisiting the caution that characterised previous administrations. His plans for radical reforms, including possible renationalisation of utilities, could clash with the Treasury’s inherent risk aversion, echoing the fate of the Department for Economic Affairs during Wilson’s tenure.
Why it Matters
Burnham’s initiative represents a significant pivot in the UK’s economic policy framework, aiming to decentralise decision-making and prioritise long-term growth. If successful, it could empower regional leaders and foster innovative solutions to pressing economic challenges. However, the inherent struggles of balancing the powerful Treasury’s influence with a new growth agenda highlight the complexities of governance in the UK. As the nation navigates these changes, the outcome will not only shape economic policy but also determine the future of regional empowerment and growth in the UK.
