Boris Johnson has weakened the Treasury. Progressives Should Be Grateful

When George Osbornes was Chancellor of the Exchequer, budgets were generally driven by an ideological commitment to reduce the size of the public sector. This made his budgets rather predictable.

Philip Hammond maintained the rhetoric of balanced budgets, although tensions within his party resulting from the Brexit negotiations limited and guided his choices.

As Chancellor Rishi Sunak's first budget approaches, media commentators have offered their usual speculation about its likely content. Across the political spectrum, a pejorative view of budget deficits, accompanied by valuable terminology, characterized these comments. Observer article refers to government plans "Splash cash" in a "spending madness", while another in the Financial Times invokes the "black hole" metaphor to describe the banal possibility of a larger-than-expected deficit.

Studies by the Institute for Fiscal (IFS) have lent superficial respectability to the predilection for balanced budgets, need to raise taxes to finance new expenses. The Resolution Foundation, new on the block with fiscal comment, alarmingly warns of "big spending plans" that would create a public sector "larger than ever under Tony Blair", reaching 40% of GDP. This almost universal use of negative language to describe desperately needed expenses points to the lingering power of the austerity dogma that was sold so well to the public by George Osborne in the early 2010s.

The conservative electoral manifesto has pledged to cover current ("daily") expenses with tax revenue, as has the Labor Party manifesto. The graph below shows that the current budget has been in surplus for more than two years. In the past six months, the current budget has maintained an annual surplus of nearly $ 15 billion, while public borrowing for investment has represented only a modest 1.4% of GDP.

Current account deficit and net indebtedness of the British public sector

Unlike the budget, the outlook for the economy as a whole looks dire. While the British economy has widened slightly faster than the euro area since 2013, growth has been lower than that of the United States. For at least ten years, the Chinese economy has been the engine of the world economy, growing at more than 6% per year during the decade. It is now imminent danger of recession largely because of the restrictions caused by the Coronavirus.

Contingencies beyond the control of the new chancellor will likely limit his budget. Foremost among these are economic shocks due to Brexit uncertainty, necessary health spending Coronavirus and a decade of austerity, and infrastructure requirements resulting from long delayed flood defenses.

Spending to deal with a likely healthcare crisis, as well as spending on infrastructure, would provide fiscal stimulus to counter demand shocks from the global economy. That would seem to be the obvious goal of this month's budget.

To oppose or not to oppose?

If the government presents an expansionary budget, as planned, the opposition will face a problem. In British tradition, the role of the parliamentary opposition is to oppose. This contrasts with the German system characterized by a consensus between the main parties since the end of the Second World War. The big advantage of the first is the virtual absence of behind-the-scenes agreements that shield politics from scrutiny and debate.

The adversarial system is not without flaws. If the opposition aggressively opposes all government policies, the nuances are lost. A good example of a missed opportunity for Labor to apply a more nuanced approach came when Prime Minister Boris Johnson forced his chancellor Sajid Javid and replaced him with an ally much closer to his views. Mainstream media interpreted Javid's departure and his replacement by Rishi Sunak as a "takeover" by the Prime Minister, which is undesirable since it undermines the long-standing independence of the Treasury as the British tax authority.

Guardians Larry Elliot says many former treasury insiders believe taking power is "doomed to failure"due to the institutional power and extensive technical expertise of the Treasury. evaluated Prime Minister’s decision.

Although lacking the German Minister of Finance legal power to veto ministerial budgets, the British Chancellor has a restrictive influence on the government's spending plans. More than "first among its peers", the British tradition attributes to the chancellor the status of responsible overseer of spending politicians. The Chancellor has played this role for generations, long before the era of austerity.

As a tax authority, the Chancellor exercises a conservative if not reactionary function which is often in conflict with the principles of representative democracy. The "independence" of the Treasury cannot be interpreted other than the power to limit the spending of the elected government. It indeed institutionalizes austerity at the Treasury. To my knowledge, no chancellor has ever asserted the independence of the Treasury by calling for increased spending.

Those who are enthusiastic about the independence of the Treasury justify it because of an alleged tendency of governments to spend too much. In practice, the independent chancellor is a milder alternative to proposals for budget advice with a veto over "excessive spending", as some economists have advocated. As i say in my new book, this approach treats informed citizens of democratic countries as selfish and easily corrupted by opportunistic politicians.

Looking forward to

Progressives Should Not Join Choir Condemning Boris Johnson's Chino Appointment chancellor"(name chancellor only), or more frankly, complain that Rishi Sunak serves as Prime Minister's "stooge". Johnson moved to undermine the long-standing power of the Treasury. If a Labor government attempted to do so, as Harold Wilson attempted in the mid-1960s, it would face harsh criticism for abandoning protection from reckless spending.

Rishi Sunak may not lead the Treasury because of his past Business affairs, as The ghost chancellor suggested. But what is considerably more important is that a Conservative Prime Minister has initiated a transfer of power from the Treasury on which a future progressive government can rely.

Whether the motivation is virtuous or venal, when the government acts in the long term interest of a sound economic policy, the opposition should clearly distinguish between essence and appearance change.

It may seem that a reckless and reckless Prime Minister takes power by installing a stooge at the head of the Treasury. But the essential effect could be very different; a step towards weakening what Robert Skidelsky described as "the oldest and most cynical ministry of government".