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In Conversation: David Gauke and Liam Byrne

David Gauke and Liam Byrne have both served as chief secretary to the Treasury | Image: Alamy

8 min read

As a chancellor’s right hand, the chief secretary to the Treasury
has one of the toughest jobs in government. With a combined eight
years in the Treasury, Liam Byrne and David Gauke share their
experiences. Chaired by Georgina Bailey.

Georgina Bailey (GB): The Treasury gets a bit of a reputation for saying no – is that the reality? 

David Gauke (DG): To some extent, that does have to be its role. It is the one department that is there directly representing the taxpayer who is having to pay for everything. Of course, the Treasury should be more than just that; it should also be a department that works with other departments identifying the best way of spending money, thinking about the long term consequences for the economy and so on. But in the end, someone has got to make choices and priorities have to be made. 

Liam Byrne (LB): Joe Biden has a great phrase: “You talk about your values, well, show me your budget, and I’ll tell you about your values.” The Treasury is a political department, but it’s got to translate the politics of an administration into budget lines and it’s got to do that over time in a way that helps you as a governing party win the next election. But good chief secretaries are tough chief secretaries, because it is the chief secretary that has got to say no.

It is the one department that is there directly representing the taxpayer who is having to pay for everything.

I moved into the Treasury in summer 2009 so I did two major budgets, but the big challenge was obviously the fiscal consolidation plan. As we used to say, we knew what to do, we just weren’t quite sure how to get re-elected once we’ve done it – and that proved to be the case. 

We had to construct a plan that was going to halve the deficit in four years. We decided on a strategy where about two thirds of our consolidation was on spending cuts, and about one-third on tax [rises]. But then delivering that at a department level is pretty difficult. I remember [then-defence secretary] Bob Ainsworth was pretty constructive but others like [then-foreign secretary] David Miliband were definitely not. But ultimately – and this is where the phrase [he wrote in a notorious note to his successor] “there is no money” came from – the chief secretary’s role is to be the person who goes to the department and says “Look, I’m afraid there isn’t money to do what you want to do”. Obviously, the really difficult conversations go up to the Chancellor. And if it’s still a stalemate it goes up to the Prime Minister.

GB: If you were Rishi Sunak, what would you be doing in the autumn Budget?

DG: What we don’t know is precisely what the numbers look like. Most predictions suggest that the numbers are going to be a lot better than they were forecast in March so he’s got a little bit of money to play with. I suspect that will be enough to ensure that no department sees any real term cuts. I personally think he will do something with Universal Credit, cut the taper rate maybe from 63 per cent to 60 per cent. But [Sunak] is pretty fiscally cautious and conservative. I don’t think there’s going to be a significant tax cut in this budget, I think he’ll present lower borrowing numbers than were predicted in March.

I don’t think there’s going to be a significant tax cut in this budget

LB: Part of the challenge this time round is that the crisis isn’t over. There’s obviously some very significant and potentially quite persistent inflation pressures picking up. You are going to see UK interest rates rise, and given the levels of debt that we are carrying as a country that is going to have quite a significant impact. I don’t think interest rates are going to rise before the Budget but they are coming downstream. So it would be sensible to bring borrowing down at this stage or certainly put some of the gains towards debt repayment to show good intent. The cost of living pressure is going to be really acute, though. Those costs have not yet really rippled through to consumers, and they’re going to hit quite hard over the next couple of months.

GB: What can the government do about the predicted cost of living concerns?

LB: Universal Credit is the obvious one. I’ve got 77 per cent of my constituents who receive Universal Credit, it’s pretty much the highest in the country. Now we’ve got huge energy price pressures on top. We’ve already got food banks running out of food. A lot of the emergency spending that was put in place for local authorities during the crisis has now [run] out. So I think you’ve got to do something around Universal Credit, just because of the bills that are mounting up for families. There is then a broader question about local authorities that have just been cut to the bone where there isn’t fat to cut, and who are going to be on the sharp end of a lot of the poverty alleviation over the next three or four months. 

GB: Did you ever get the sense that colleagues maybe didn’t quite understand how the levers of the Treasury worked?

DG: Some departments and some ministers knew how to present a case to the Treasury, what sort of things would be seen as persuasive… strategic thinking, a willingness to take some political pain and do things that might be a bit unpopular, but have long term benefits and reduce long term costs. Whereas you had others who would just say, “Well, you know, it’s terribly difficult, just give us the money.” Those ministers and those departments have a much less sympathetic hearing.

LB: You’ve also got some departments that have very significant groups of stakeholders. The Department of Culture, Media and Sport is a classic example where you’ve got a lot of extremely well-connected stakeholders who are stewards of the nation’s cultural life and are very effective lobbyists who can ring up No. 10 to make their case. I remember trying to cancel the National Gallery extension at one point, because, frankly, I thought we should be trying to send a signal about things that were not a priority in the immediate moment of the fiscal consolidation. One Times front page later, and a number of phone calls to No 10, and my decision was completely overturned.

The real theatre comes in when you have departments that recognise when they’re going to settle. So the Treasury will go in with a game plan, which is, right, we need to nail some of the buggers in the early stages, and there will be some departments that are going to be left in the end game, and then you’ve got this middle ground. You’re trying to settle a couple of departments up front in order to signal to the rest of the government that there are rewards for good behaviour.

The real theatre comes in when you have departments that recognise when they’re going to settle.

DG: There’s a real game theory about it, and departments are playing it as well. They’re all working out: do I go early and get a prize for going early or is it worth holding out and seeing where you end up...

Some departments would fight it out publicly and would be able to get strong bodies of opinion on their side. Traditionally, chief secretaries very often have been quite frustrated with the Ministry of Defence [MoD], for not really being brave enough to take it on because of the politics of the armed services. They have tremendous abilities to send out the defence chiefs, and you’d have a story on the front page of The Telegraph about how something terrible is going to happen to our defence. Other departments, like the Ministry of Justice (MoJ), don’t really have particularly influential outside parties to make their case. When I was a spending minister in the MoJ, I took the view that you needed to be in the Treasury’s good books.

Being chief secretary is one of the most interesting jobs in government and it’s also one of the toughest in terms of workload. With the exception of the Prime Minister, the chancellor and the minister for the Cabinet Office, there’s nobody else that sees as much of what is going on in Whitehall, because anything that’s happening that involves money, you get to see it.

I was secretary of state for two departments afterwards, and the workload as a secretary of state was less than it was as the chief secretary. I got my weekend back!

GB: Well I certainly learnt a lot here! Thank you both.

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