All change at His Majesty’s Treasury too, where a new Chancellor is at work preparing an emergency “fiscal event” to be presented to the House of Commons on Friday. While much of the Prime Minister’s focus in public has been on the aftermath of the death of the Queen, on attending services, and on the diplomatic and security headache of hosting world leaders, the work in the background has been centred on preparing those announcements to launch the new administration’s programme.
With the currency taking a hammering, a lot rests on whether or not Kwarteng, Chancellor, historian, rises to the challenge.
He is making these preparations for his announcements – for tax cuts, some deregulation, and assorted pro-growth adjustments – without the help of a Permanent Secretary, the most senior Treasury official, because the holder of that position was whacked by the Chancellor when he took over. A search is underway for a replacement.
Sir Tom Scholar, a civil service veteran who has served Prime Ministers and Chancellors for decades, was told by Kwarteng two weeks ago his services were no longer required. It is said Scholar expressed some astonishment. Was the Chancellor really ending his 30 year civil service career? Yes, came the answer.
The removal of Scholar has horrified senior former officials and some – note, not all – of the senior politicians he worked for. Ever since his sacking the airwaves and letters pages of newspapers have featured numerous complaints from ex-mandarins who detect capriciousness and a reluctance by Team Truss to listen to challenging advice.
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Lord Butler, a former cabinet secretary, worries that the neutrality of the civil service is being jeopardised. Shouldn’t Simon Case, the current cabinet secretary, have stuck up for Scholar?
When Lord Agnew, a former Treasury minister writing in The Times, published a rip-roaring denunciation of Scholar last week, he was criticised by mandarins. Agnew was furious about fraud in the Covid business loans scheme and blames Scholar’s running of the Treasury. Agnew’s background is business, and like many who go late and with reformist zeal from commerce into a department such as the Treasury they find the politics frustrating. A minister who is not the Chancellor will often get surprisingly little access to the top of the department. The Permanent Secretary acts partly as a gatekeeper, executing the Chancellor’s wishes. Resentments fester, and in Agnew’s case turned into fury at the waste of public money. Resentment was also a feature of Liz Truss’s experience of being Chief Secretary to the Treasury from 2017 to 2019, and it was a key factor in Scholar’s whacking. More of which in a moment.
Ahead of becoming Chancellor, Kwarteng was warned by more than one person that on entering the Treasury he might need all the crisis era statecraft experience he can get his hands on. It is always good to have someone on call who knows how and when best to place the crucial call to the US Treasury, the European Central Bank or the IMF.
The sacked Scholar was a veteran of the financial crisis. He was part of the team in HMT that devised and implemented the bailout of the banking system when the economy blew up in 2008. He was a character in the chapters on the rescue in my book, Making it Happen: Fred Goodwin, RBS and the men who blew up the British economy, published in 2013.
Interestingly, Scholar was not mentioned in financial crisis era Alistair Darling’s memoir of the same period, although other officials were. The pair were not close. Something in Scholar’s manner or sense of humour didn’t appeal to Darling when he was Chancellor.
Before he took office Kwarteng had considered phasing out Scholar, managing him out, having him on hand in the Treasury for six months or so during the immediate crisis while he identified a replacement.
Instead, in the days before they took over the decision was taken by Prime Minister and Chancellor that it should be a clean break. Scholar was out.
Scholar was the official guiding the negotiations with the EU for David Cameron ahead of the 2016 referendum. He was never forgiven, it is said, by Truss and other Remainers who had to switch to Brexit after the referendum, for not getting more from the EU in those pre-2016 talks. Truss was a Eurosceptic who was persuaded by Cameron and Osborne to back Remain in 2016 on the back of Scholar’s deal. Since then she has been reborn as a Brexiteer, approaching her work with the zeal of a convert and accepted as such by those who voted to leave.
Even more importantly, for Scholar, Liz Truss’s formative experience as Chief Secretary to the Treasury, under Philip Hammond in the May government, was a distinctly unhappy one. It is an understatement to say Philip Hammond as Chancellor was dismissive of Truss. Whispered tales circulated at the time of her being cut out. The atmosphere was deeply poisonous.
As Jill Rutter, of the Institute for Government, pointed out last week, Treasury Permanent Secretaries do have a habit of allowing the Chief Secretary only a limited role.
This, with Hammond, was way more than that. And Scholar, enthusiastically helping his then boss Hammond, made himself very unpopular with Truss. This was a political miscalculation. Turns out Philip “social kryptonite” Hammond was finished when Boris Johnson took over in 2019, and in the whacky races of British politics Liz Truss bested her rivals to emerge as Prime Minister three years later.
Some other ministers who worked with Truss earlier in her career found her difficult and unusually insistent on pursuing her own favoured projects.
Well, she has the power now. As Sir Tom Scholar can testify.
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