Ask almost any Whitehall official which government department is the most Eurosceptic and they would say it was the Treasury. So its conversion to being the most outspoken defender of Britain’s position in the EU has raised eyebrows — and hackles.
The Treasury has a history of suspicion of alternative sources of power, money and influence, fighting regular battles in Brussels and defending what it sees as Britain’s interests against the wishes of other countries, the European Commission and other UK government departments.
Yet somehow it has become a trump card in the Remain campaign’s armoury. Until purdah descended upon officials last Friday, the Treasury had published chilling reports on the consequences of leaving the EU, predicting that Britain would be £4,300 worse off per household in the long term, would suffer a recession, would witness almost a 20 per cent drop in house prices and would see £170bn wiped off the assets of pensioners.
These interventions have infuriated Eurosceptics. The Vote Leave campaign has repeatedly stated — incorrectly — that the Treasury thought that joining the euro would benefit the economy, while commentators such as Peter Oborne, writing in the Spectator, said that Whitehall integrity had collapsed. “George Osborne has now converted the Treasury into a partisan tool to sell the referendum, exactly as Tony Blair used the Joint Intelligence Committee to make the case for war against Iraq,” he wrote.
Old hands from the Treasury do not, however, see a contradiction in the way the department is behaving now with its usual Euroscepticism.
Sir Alan Budd, an official at the time of Britain’s entry into the European Economic Community in 1973 and the Treasury’s chief economic adviser in the 1990s, recalled that such was the despair in managing the economy in the early 1970s that officials thought that joining the Common Market was merely pointless. Britain’s prosperity could not be saved and EEC membership was just the sort of “futile gesture” that was called for.
Over time, membership came to be seen as a Foreign Office plot to grab more power, and then as a valuable component of economic policy of which the Treasury was determined to take charge. Sir John Gieve, a Treasury mandarin before he became deputy governor of the Bank of England, said that officials developed an “institutional strategy to take control of UK activities in Brussels from the Foreign Office. It has been very successful.”
The Treasury also sought to keep control by forbidding other departments to make deals in Brussels without agreement in London first, and by giving them a lower budget if they received any EU funding.
Rachel Lomax, whose career also took her from the Treasury to the BoE, said it was important not to confuse scepticism over some of the workings of Brussels with opposition to EU membership.
“You need to distinguish between the euro and its predecessors — fixed exchange-rate systems, about which [the Treasury] has traditionally been very sceptical — and the single market … and other EU constructs like the state-aid rules,” she said.
Nevertheless, even if the Treasury is now institutionally supportive of EU membership, its papers on the havoc a British exit could wreak on the UK economy have raised questions over its impartiality.
The chief economic adviser to the Treasury today is Sir Dave Ramsden, who led Gordon Brown’s five tests on the euro, which arrived at the conclusion that they had failed. It is Sir Dave who has been at the forefront of the chilling studies of Brexit’s impact that Mr Osborne has wielded to batter the Leave campaign’s economic credibility.
Eurosceptic politicians have derided the Treasury and its mandarins as stooges of the chancellor, but most of those who have worked there dismiss this as a conspiracy theory. Sir Alan said that the Treasury paper was a ministerial document over which ministers could make drafting suggestions, “but it is Dave’s responsibility that the analysis is of the highest quality and not the result of bullying by ministers — and I have no doubt this has been followed”.
Current officials say the technical approach was the same on the euro and EU membership: to analyse potential “regime changes” and be led by the evidence.
Sir John said officials involved in the Treasury’s short-term economic paper, which predicted the loss of more than half a million jobs, had a defence against too much political meddling. They insisted on Sir Charlie Bean, former deputy governor of the BoE, vetting the work publicly. “It enabled officials to counter political pressure with, ‘you won’t get that past Charlie’.”
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Jonathan Portes, who served in Norman Lamont’s office as a speech writer at the time of the UK’s ignominious departure from the exchange rate mechanism, called the notion of Whitehall purity “bullshit”. However, he added, “very few people in the Treasury would put their name to things that were wrong”, while the methods of analysis used by Sir Dave and other officials “are also the methods that mainstream economics would use”.
Rupert Harrison, Mr Osborne’s chief of staff until 2015, said that ministers “can never order particular conclusions — officials would never agree to publish something that wasn’t genuinely supported by their analysis. But equally ministers can always choose not to publish something if they don’t like the conclusions.”
All former and current officials consulted said it would have been more difficult for the Treasury had Mr Osborne and the government sought evidence for a Leave rather than a Remain vote, as that would have conflicted with the department’s free-trade instincts. No one should be surprised that the Treasury backed the government, said Jill Rutter of the Institute for Government, because it was explicitly allowed to by Sir Jeremy Heywood, head of the civil service, until the start of purdah.
“The more important question is whether we are happy the government uses the full machinery of government to support its position in a referendum campaign,” she said.
If the UK ignores all the dire warnings and votes to leave the EU, said one former official, the Treasury would just have to “face up to reality of how to negotiate exit and a new set of trade treaties — along with moving to a new chancellor and permanent secretary”.
He added: “Perhaps it would be time for Dave Ramsden to think about moving somewhere else.”