UK Treasury Useless in Times of Trouble

Performance Report Alistair Darling.

This is the chappie who graced our television screens last week. The damming article, (attached) provides details of his utter incompetence whilst in office as Chancellor. He is so brazen that he claimed the first he knew of any problems with the Royal Bank of Scotland etc. was when he received a telephone call, at home, watching television. He then had the audacity to ask the Scottish public to trust Westminster and reject independence. This time however the joke is on him. Scotland has woken to the corruption that is the Westminster political system. Vote, “Yes” in the referendum. Send them home to London, (or possibly second tax payer funded home) to contemplate upon their rejection by the Scot’s.

For more than a century the British Treasury has been by far the most feared, powerful and respected of all government departments. It has wielded near-dictatorial powers, and its superbly trained officials have been famed for their intellectual ferocity and rigour. The tradition of Treasury excellence has been of inestimable value to Britain, meaning that we have been unusually well equipped to cope with financial disasters such as the secondary banking collapse of the mid-1970s when dozens of small banks faced bankruptcy, or with Black Wednesday in 1992 when all looked lost as sterling was driven out of the Exchange Rate Mechanism.

Today, however, Britain faces economic and financial crisis on a scale that far outweighs even these catastrophes of the 1970s and 1990s. This time the Treasury is utterly unable to cope. Indeed, it is facing the greatest crisis of confidence in its history. This week two glaring examples of Treasury ineptitude have come to the surface courtesy of a National Audit Office report into last year’s banking crisis.

The first of these is the revelation that during the crisis the Treasury paid no less than £150million for advice from large city firms such as Goldman Sachs. For instance, the Treasury spent more than £80 million on consultancy fees relating to the bailouts of HBOS and the Royal Bank of Scotland.

In all previous financial crises it would have been unthinkable for the Treasury to contract out this kind of highly sensitive work to the private sector. Apart from the conflicts of interest involved, it would have been regarded as insulting to the highly trained Treasury officials whose job it is to sort out financial problems.

But such is the degradation of Treasury competence and morale under Gordon Brown, Alistair Darling and the department’s supine Permanent Secretary Nick Macpherson that it is now considered normal to sub-contract out this kind of work, which ought to be meat and drink to Treasury mandarins.

The National Audit Office report contains a second, and equally devastating, example of Treasury ineptitude.
Even after the collapse of Lehman Brothers, Treasury officials were clueless about what was going on in financial markets.

It reveals that just a week before the collapse of the Royal Bank of Scotland in October last year ‘internal papers prepared by the Treasury suggested that RBS’s capital position was reasonably strong’.

In other words, even as late as October 2008, and therefore after the collapse of Lehman Brothers, Treasury officials were clueless about what was going on in financial markets.

This is quite simply terrifying – and it shows that something has gone fundamentally wrong at the heart of British government.But Treasury naivety and incompetence does not stop there. For the fact is that the department seems to have lost any notion of what is happening to the real economy.

Chancellor Alistair Darling should be forced to own up to the Treasury’s consistent failure to grip the nature and scale of the economic recession. This failure is on such a scale that it amounts to negligence – for what it shows is that Mr Darling has been in no position to make the hugely important economic judgments that the country desperately needs at a time of crisis.

To understand the depth and seriousness of the problem, it is necessary to go back 18 months to the Budget of March 2008. This was in retrospect a dangerously complacent event. Neither Darling nor his Treasury officials showed even the remotest awareness that the UK was starting to plunge into the gravest economic recession since World War II.

The hapless Darling blithely – and inexcusably – predicted comfortable growth rates of 2 per cent or more for years ahead. Incredibly Darling had still not woken up six months later, when he delivered last year’s Pre-Budget statement in December 2008.

Darling was just as far out of his depth when he discussed future borrowing. For instance, in last year’s Pre-Budget Report he predicted a shortfall of just £118 billion for the current financial year – the true figure is likely to clock in at nearer £200 billion.

Meanwhile, Treasury officials who did their constitutional duty by giving impartial advice or telling the truth about Britain’s economic position were frozen out. In some cases their careers were ruined. Over a period of years Brown’s suppression of original thought, and encouragement of a tiny clique, destroyed the Treasury esprit de corps.

Matters have been made worse by Alistair Darling’s sheer cowardice as Chancellor. Senior Treasury officials have said that he succumbed to pressure from Gordon Brown in 10 Downing Street to project a more optimistic outlook than was justified by the facts.

A grave problem persists. The Treasury is no longer ‘fit for purpose’, to return to the damning phrase once used by the Cabinet Minister John Reid about the Home Office. This would be a matter of grave concern at any time, let alone a moment of grave economic crisis.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.