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'Davies knows what makes the chancellor and his department tick': Lord Macpherson reviews 'The Chancellors'

'Davies knows what makes the chancellor and his department tick': Lord Macpherson reviews 'The Chancellors'


Lord Macpherson

3 min read

Eschewing the dry and arcane, Howard Davies’ insider’s account of the past 25 years of British economic history is witty and essential reading for anyone who wants to understand the Treasury

Chancellors of the exchequer have been lucky in their biographers. Roy Jenkins and Edmund Dell between them covered the 100 years to 1990. And Howard Davies has taken up the mantle for more recent times, with his latest book covering the period from 1997 to 2021. 

Davies is as well qualified as anybody to tell this story. He had a ring-side seat throughout, starting the period as the deputy governor of the Bank of England and ending it as chairman of the bank formerly known as RBS. As a sometime Treasury official and special adviser, he knows what makes the chancellor and his department tick.

The contrast between what Mervyn King called the “NICE decade” – non-inflationary constant expansion – and the series of crises experienced since 2007 is central to the book. Davies argues that Britain’s relative economic performance held up well during the New Labour and Coalition years. As would be expected from the first chairman of the Financial Services Authority, he does not accept that removing supervision responsibility from the Bank of England caused the banking crisis. The clue is in the name: global financial crisis. However he does not hold back on the errors made by the Bank of England, FSA, and Treasury which facilitated the banking collapse.

Davies rightly points out that Brexit damaged the Treasury’s reputation

Davies’ book is as much about the Treasury as the chancellors. As he points out, it is the one department which has not had to suffer a name change in recent decades. It has also benefited from relatively stable political leadership. Between 1997 and 2019, there were just four chancellors, the same number as prime ministers. By contrast, there were 11 business secretaries. Davies is dismissive of proposals, such as John Birt’s “OperationTeddy Bear,” to break the department up. However, he does question whether the Treasury’s obsession with applying its own medicine to itself renders it less effective: its pay structure does not value experience.

Davies rightly points out that Brexit damaged the Treasury’s reputation. Its analysis of the GDP impact of trade disruption caused by Brexit has proven remarkably prescient. But it will forever be associated with George Osborne’s proposed emergency budget, the high point of Project Fear. Fortunately its handling of the Covid crisis and Rishi Sunak’s assured leadership (until this spring at least) has done something to restore the Treasury’s reputation. As Davies argues, “successive prime ministers have found that fighting the Treasury in the end makes them weaker and they come to rely on its support”. 

Davies may be a little too sympathetic to the Treasury, seeing the existence of a strong alternative centre of power as a valuable check on “elective dictatorship”. But this also adds strength to his criticisms: presiding over an ever more incoherent tax system and a lack of engagement on climate change.

Economic history has a tendency to be dry and arcane. Davies’ contribution is far from that. He avoids jargon, brings clarity to complex issues and peppers his narrative with acerbic humour. This book is essential reading for anybody who wants to understand the Treasury. 


Lord Macpherson of Earl’s Court is a Crossbench peer and former permanent secretary to the Treasury

The Chancellors: Steering the British Economy in Crisis Times
Written by: Howard Davies
Publisher: Polity

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