Harold, Herbert and the teddy bear
Lessons from history for No 10 North
I always make a point of reading Tom Watson’s Substack and doing so today was particularly gratifying. We drew more or less the same conclusion from Andy Burnham’s first big speech as prime minister presumptive.
Most of the criticism of said speech you might have yesterday was reflexively brutal. Some wrote the whole thing off before it was even finished. Burnham spoke about Manchester in Manchester, dressed half-casually in what he calls his “Manchester clothes”. He told us of his plans to open a prime ministerial office in Manchester, too, and of the untested philosophy of national government he calls Manchesterism.
Then he got into his car, having taken no questions from us travelling hacks, and quoted Is It Really So Strange? – a Smiths B-side. I left the north, I travelled south/I found a tiny house and I can’t help the way I feel…
The Smiths were from Manchester, by the way. And so much of the commentary on the speech went like this: nice enough delivery, but is that it? Manchester, Manchesterism, mayors, and the former mayor of Greater Manchester doing Manchesterism from an office in Manchester? Doesn’t he know any other tunes? What’s the plan? Where’s the detail?
I do understand this criticism, even if levelling it requires a bare minimum of intellectual energy. Expend a little more of it – and even then, only a little – and the substantive point of Burnham’s speech is right there, hiding in plain sight, signposted as baldly as THE NORTH is along the M6. Tom puts it well: “The speech should not be filed under local government, mayoral ambition, or northern mood music.” Burnham had, in fact, “made a speech about the structure of the British state”. I agree, and explain why at greater length in my dispatch from the People’s History Museum for Tuesday’s Times.
Westminster got a nasty whiff of gimmickry from No 10 North, Burnham’s new branch of Downing Street. The name alone evokes countless other unloved and underpowered satellite campuses of the public sector – enforced and resentful moves to the provinces, expensed trains, monthly deputations of the really important people who still live and work in London.
But, as I put it in the first line of my piece – if you don’t have a subscription already, you can spend a quid to get three months of access to the full thing and everything else The Times offers – it is a deceptively substantial idea. “It would be the biggest constitutional change in 100 years,” one of the Burnham brains trust told me earlier.
That’s probably a bit hyperbolic. But, if we’re talking about No 10-11 relations specifically, perhaps only a bit. Here’s how Burnham himself described it.
We will create a more streamlined state with a clearer purpose: to power up all parts of the country and put a laser-like focus on growth and regeneration. Good growth.
The change will be driven through the prime minister’s office in an extended operation based here in Manchester. But here’s the important thing – it will only be based here.
The job of No 10 North will be to make power flow into the Midlands, into the South West, into the East of England and, yes, into London as I said before, as much as the North East, Yorkshire & the Humber and here in the North West.
A little later, he offered this very clear outline of its mandate.
No 10 North will support the regions on three clear tasks: reform of essential utilities, reindustrialisation, and the regeneration of places.
Read that all again. Those three clear tasks are three chunky macroeconomic priorities. And they will be driven through the prime minister’s office. Deceptively substantial indeed. Very quickly it struck me that Our Andy branding obscured the seriousness of intent. This is the most serious challenge – let’s put it no more strongly than that yet – to Treasury authority in half a century.
A couple of conversations with Burnham people confirmed me in my view. That was the real point. It was also elucidated in public. Lucy Powell was on The World at One just after the speech. She said: “This new office of No 10 of the North… didn’t sound like a branch office of No 10, but sounded like a really powerful reimagining of some government machinery that is there to work with places to really distribute the power and resources that people need.”
Really the “No 10” bit matters just as much, if not more, than the suffixed “North”. The prime minister will be taking control and ownership of a very clear set of economic priorities. “The political direction I set will not be up for negotiation,” Burnham said in a passage that was notionally about whipping but may as well have been addressed to the Treasury. What really matters, I concluded in my Times piece, is this: “The levers of economic power that will make or break our next government’s priorities will indeed be leaving London. But it’s Burnham who’ll be pulling them.”
There’s a broader discussion of these ideas – and whether it will work – on this week’s episode of the State of It podcast, too.
To me the obvious point of comparison is Harold Wilson’s Department of Economic Affairs. Watson’s Substack makes the same point at greater length than I could in the paper.
Wilson wanted a growth department to challenge a control department. That was the logic of the Department of Economic Affairs, created under George Brown after Labour won office in 1964. The Treasury kept tax, spending, monetary policy, sterling and the Budget. The DEA was given planning, industrial strategy, prices and incomes, regional economic policy and consultation with industry.
The DEA failed – and quite quickly at that – because the Treasury kept control of the budget and thus won the battle for supremacy on Whitehall. This was not what Brown’s cabinet colleagues expected at the outset of Wilson’s first term. Reflecting on their first month in office, Richard Crossman noted in his diary on 22nd November 1964 that the economic affairs secretary was “becoming the deputy prime minister, in charge of the home front”. He went on:
That suits me perfectly well. But there is a very delicate relationship between George Brown and myself because he, as head of the DEA, is responsible for economic planning, and I, as minister of housing, am in charge of physical planning. Almost inevitably there is a collision between my well-established job and George Brown’s new ideas.
By 3rd January – barely ten weeks after Wilson’s arrival in office – Crossman can basically see that the experiment will fail.
Though George Brown is a great success, the division of power between the DEA and the Treasury is a development for which we are having to pay a heavy price in divided authority and dissension in central planning.
On the eve of the government’s first proper budget, April 5th, Crossman records his pleasant surprise that the cabinet meeting at which it was finalised was a mere formality.
In fact, it turned out to be a pretty good budget without any of the rows and alarms the press had taught us to expect as a result of the deadlock between George Brown and James Callaghan… in the battle between the Treasury and the DEA, the Treasury is coming out on top in terms of prestige and status.
A fortnight later, on Easter Sunday, Crossman’s all but called it.
The planning of economic policy, which was supposed to be Brown’s essential contribution, had hardly started in the DEA – what planning there is is still basically done in the Treasury. It is the economists and officials there who have had all the influence, not those who were taken out of the Treasury and put on Brown’s staff at the DEA.
Edmund Dell, who I’ll try not to quote for a third time in a week when I next write, concluded in his history of the chancellorship that the DEA never really overcame this existential question: “If neither department was superior to the other, how would decisions be made in those cases where the two departments had different priorities?”
Despite Wilson’s grand ambitions, the answer turned out to be the same as it ever was. The Treasury decided, just as it has when other economic departments materialise as challengers to its power. Think BEIS, DLUHC, and sometimes – but not always – DESNZ. Brown forming what Crossman euphemistically describes “rather dissolute” habits didn’t help either.
Burnham’s response to this troubled history is the firm smack of prime ministerial authority. You’d assume that Dell’s question is answered more straightforwardly if one of the two departments belongs to the big boss, otherwise known, lest we forget, as First Lord of the Treasury. (Of course, No 10 is not a department. Not yet, anyway.) Wilson did take control of the DEA himself in the end – in 1967, with Peter Shore as secretary of state in name only – but by then it was much too late.
Here’s Watson again: “The DEA had the plan. The Treasury had the purse. The DEA could argue; the Treasury could refuse. The DEA could talk about production, regions and long-term renewal; the Treasury controlled the Budget, sterling and the spending machine. There is the warning for Burnham.” Quite right. As is this: “No 10 North will be judged not by where it is based, or what it is called, but by whether Whitehall actually gives up authority.” This time it is the prime minister who is telling them to stand and deliver. Can the next one succeed where none before had?
Whenever I write about Labour history in The Times I hear from proper experts in the field, most even nerdier than I, in very short order. On Monday night, just after my piece from Manchester went live, I was reminded by one of them of another experiment in driving Labour’s economic policy from outside of the Treasury. So I picked up a book that’s been gathering dust on my desk in our parliamentary office for a while: the 2001 edition of Bernard Donoughue and G.W. Jones’s life of Herbert Morrison.
The job Morrison really wanted after the 1945 election, of course, was Clement Attlee’s. But his plot to force a leadership ballot of the PLP before Attlee could go to the Palace never got off the ground. Then he asked for the Foreign Office. Attlee rebuffed him, then suggested Morrison become Lord President of the Council – “a sort of overlord on the home front”, responsible first and foremost for economic planning, nationalisation – including of utlities – and getting it all through parliament under a sensible legislative timetable.
Morrison knew he was probably on a hiding to nothing. As Donoughue and Jones note, he “at first refused, aware that a co-ordinating minister without portfolio is at a disadvantage in any confrontation with a great officer of state”. This instruction from Ernest Bevin to a No 10 official is a case in point. “Keep your eye on ‘Erbert when I’m not ‘ere, Francis. Let me know if he gets up to any of his tricks. I wouldn’t trust the little bugger any further than I could throw him.” So too this characteristically sniffy verdict from the FT at the time: “He is spreading a veneer of planning gospel over a vast deal of higgledy-piggledy departmental practice.”
Still, it unquestionably worked for a little while. Morrison roamed across the piste of government and built mechanisms for delivery that achieved most of what Labour had set out to achieve in its 1945 manifesto, which promised to nationalise the economy’s commanding heights but offered next to nothing on the how. The same criticism has been made of Burnham’s speech, of course.
But barely two years later, in September 1947, Attlee created the first Department of Economic Affairs to counterbalance Hugh Dalton’s Treasury – there’s nothing new in Labour politics, really – and gave that job to Stafford Cripps, who seized much of Morrison’s brief. Barely two months later, Dalton had quit, Cripps was chancellor, and the Treasury began to reassert its dominance after a bad war.
Again, a new model of economic policymaking and delivery doesn’t survive for all that long. The Treasury fights back. The chancellor subjugates a prime ministerial plenipotentiary because, ultimately, Morrison or Brown or whoever is not actually the prime minister and can thus be squeezed out if the prime minister himself isn’t willing to die in a ditch for them.
Oswald Mosley also learned this at the cost of his own sanity and place in posterity. His appointment as Chancellor of the Duchy of Lancaster by Ramsay MacDonald at the height of the Great Depression was not, whatever MacDonald had implied and Mosley rashly assumed, an invitation to rewrite British economic policy in its entirety.
Mosley rubbed everyone up the wrong way – not least a younger Morrison – and when he implored the prime minister to adopt his proto-Keynesian ideas as a fiscal vaccine for unemployment, MacDonald inevitably sided with Philip Snowden, the dry-as-dust chancellor who had forgone his old radicalism to embrace the Treasury and its Victorian orthodoxies.
They too embraced him, Churchill observed, with “the fervour of two long-separated kindred lizards”. Mosley resigned, the Treasury and its Victorian orthodoxy won, then came 1931 and Labour’s ruin.
So yeah. You could well understand, given all this history, why no Labour government since Wilson has not dared to challenge the Treasury in any serious way. Even Tony Blair bottled it. In 2003, he wanted to check the power of Gordon Brown and so his intimates devised a plan to split the Treasury in two. Here’s the Times report in which it was first revealed, from July 2010.
Operation Teddy Bear has, until today, remained a secret kept within the walls of No 10. It was so named to avoid the slightest hint of its intention and was devised by Lord Mandelson, John Birt, the former BBC chief who became a No 10 adviser, and Jonathan Powell, Mr Blair’s chief of staff.
Under the plan, a US-style Office of Budget and Delivery would be taken from the Treasury, leaving Mr Brown in charge of a new Ministry of Finance to handle macroeconomics, taxation, markets and financial services. Crucially Mr Brown would have lost control of departmental purse strings.
Mr Blair, increasingly infuriated by what he saw as Mr Brown’s block on reform, agonised over the idea for several weeks, knowing that his decision might determine the fate of his second term and his record as Prime Minister.
When he outlined the plan to Mr Brown, the Chancellor responded with a flat “No”.
Blair was unwilling to impose it by fiat and so the plan died a quick and lonely death. Brown was too strong, too dangerous. Burnham, by contrast, is seeking to check the power of the Treasury himself, by enhancing the authority and responsibilities of his own office. He has made that as the founding principle of his premiership, and whoever he hires as chancellor will have to sign up to No 10 North before entering No 11. That warning from his speech again: “The political direction I set will not be up for negotiation.”
But that clear marker of prime ministerial power is designed to be the difference neither Harold, Herbert nor the teddy bear could make.
Good piece – Tom Watson's too. Starmer has left Burnham a 4.5 billion leaving present, and not in a good way. Radical change is needed and Burnham is clearly addressing that. But the economic inheritance is truly daunting. I wish him and the government well.
He will need an election because I cannot see a world where this gets through the Lords (and even if there was time it’s not in the manifesto so can’t Parliament Act it)