Can Andy Burnham Rewire the ‘Treasury Brain’ to Boost Growth?

The Treasury has long been a dominant force in British economic policy, its grip on public finances and short-term thinking frustrating left-wing politicians for decades. Under Andy Burnham’s leadership, Labour is attempting to break this stranglehold by separating growth policy from the Treasury’s control.

Burnham’s approach draws parallels with past premierships. Margaret Thatcher’s preference for Alan Walters over Nigel Lawson was a defining moment in her tenure, while Tony Blair and Gordon Brown’s power struggle was a Whitehall legend. Burnham’s plan also echoes Harold Wilson’s Department for Economic Affairs (DEA), which attempted to bring long-term thinking to British economic policymaking.

Burnham’s proposal has its challenges. The Treasury will maintain control over tax and spend, ensuring that it remains a powerful force in government. David Gauke, former Conservative chief secretary to the Treasury, is skeptical about creating a policy counterweight to the Treasury, arguing that stripping growth out of its remit would only exacerbate its tendency to focus on cost-cutting.

However, critics like Gauke underestimate the significance of Burnham’s move. By transferring powers to metro mayors and creating a new department in Manchester, he is attempting to bring together disparate growth policies scattered across Whitehall. Ruth Curtice, director of the Resolution Foundation thinktank, sees this as an opportunity for fresh thinking: “No one department has all of the levers – the Treasury does not own all of the levers.”

Burnham’s route to growth runs through devolution, a policy championed by his cabinet ally Louise Haigh. The new No 10 North innovation is more significant than people realize, allowing for greater coordination across different policy areas such as housing, education, and planning. This could be the most effective use of the new Manchester-based unit, rather than simply replicating existing structures.

A Treasury source has clarified that No 10 North will focus on “local growth” and devolution, but it remains to be seen how this will play out in practice. Jonathan Portes, professor at King’s College London, highlights the inevitable policy clashes that will arise between No 10 and the Treasury: “What happens when No 10 wants to do something, and Treasury says no – or says, ‘yes, we’ll pay lip service to this but don’t expect any spending to go along with it’?”

The onus is now on Burnham and his team to ensure that their vision for devolution delivers real results. With the new department’s relatively modest resources thus far, it will be a challenge to resist the Treasury’s tendency to micromanage. But if successful, this experiment could mark a significant shift in British economic policy, one that prioritizes long-term thinking and coordinated action over short-term fixes.

Burnham himself notes: “The dual job of growth and control of the public finances sometimes clouds the growth mission.” It remains to be seen whether his bold experiment will succeed in clearing this fog.