Mine's a double first and a job in the Treasury

The Secret Treasury By David Lipsey (Viking Press, #20) Reviewed by Peter Clarke

HERE is an odd book. It expertly fillets a British institution and then concludes that it does a good job of looking after the nation's accounts. David Lipsey is one of those rare authors who is so grand he has been promoted from mere journalist to a peerage and membership of august committees. He has been co-opted by the Establishment.

So I started with misgivings that this was going to be far too polite and soft headed about our greatest Department of State. He unearths no scandals and not many jokes. He must know of both.

Nonetheless, if you want an understanding of what the most powerful and hidden part of the State gets up to, then Lord Lipsey's essay is a sure-footed account.

I was refreshed to see how little Scotland figures. They send up their (our) billions and let the Scotland Office waste it as they wish. The Treasury struggled mightily to kill off devolution in 1978- 79 but expressed no dissent in 1995-6. This is because the powers given to our wee shrivelled assembly are so modest.

It is a comfort that Scottish MPs, notably Gordon Brown but including Alistair Darling and Helen Liddell, are present and busy being cautious and prudent. Page after page of virtue can become wearisome. Lipsey says Gordon Brown is on course to be rated one of the greatest of our Chancellors. A little too early and unctuous, I thought.

The Treasury, uniquely among our public bodies, does not seek popularity. I enjoyed the quote from James VI: "All Treasurers, if they do good service to their masters, must be generally hated." That seems a universal truth.

Lipsey enjoys the high grade intelligences that populate the Treasury. You will feel a bit of a duffer if you have not got a fast moving brain. "The Treasury is not satisfied with a first class man, they want a double first class man from Balliol."

There is no denying the wit of the top Treasury officials but like all intellectuals they are prone to vast sillynesses.

The greatest balls-up of the 20th century was the return to the Gold Standard by Chancellor Winston Churchill in 1925 - at the wrong price. These mandarins forgot to let the markets do their work. Gold would have been a triumph at the free market level.

Black Wednesday of 1992 was the same intellectual arrogance. "Europe", whatever it may mean, was "a good thing" - therefore we had to tie the Pound to the D-mark, at the wrong price. Again. The Tories will be punished for a generation. The Conservative's instincts are opposed to Euro-baloney but the Treasury supremos killed the Tory reputation for economic competence.

One of the most bold reforms of Margaret Thatcher was the scrapping of exchange controls. Who now even remembers we needed personal Bank of England permission to take holidays and cash abroad?

The entire tourist and time share industries were created by this liberalising move. The Treasury recommended no liberalisation. It took courage and conviction - by Nigel Lawson, cajoled by the Institute of Economic Affairs.

David Lipsey says the Treasury does an admirable job of supervising financial fraudsters in the City. Maybe, but markets do it better. The Treasury has turned a blind eye to the vast confidence trick of National Insurance - a posh name for another income tax which is merely a chain letter across the generations. NI is a pyramid scheme. It is a fraud.

Inflation is the process by which the currency is diluted by the State granting itself more credit than it takes in receipts. Infation's disfiguring effects are not caused by venal trade unions or grasping Arab sheiks. It is purely and solely a creation of the Treasury. Lord Keynes intoxicated the Treasury's best minds with a sort of crazy homeopathy - a little bit of inflation does you good.

Lipsey says the Treasury can claim credit for the stupendous UK policy success of the last two decades - privatisation. They certainly became advocates of what was a brilliant bluff of selling back to us what was meant to be ours already.

The evangelists for privatisation were really the naughty think tanks - the IEA, Adam Smith Institute and Centre for Policy Studies. It was lucky that the Tories couldn't think. They subcontracted good ideas to people outside the Treasury altogether.

If or when the Edinburgh parliament chooses a fight with London it will be the Treasury it takes on rather than the Commons. And it will be a repeat of Flodden, not Bannockburn.

The top intellects in Great Smith Street are busy thinking of Euro- ploys. They are primed to scrap the Pound and remove UK control over monetary matters. Here the text takes on a strange quality. The nominally most practical Department of State is busy preparing for the most loopy policy idea. The Treasury always goes wrong when it tries to rig markets.

So, if you have a double first from Balliol, don't work in the Treasury. Go and do something useful.

This is a lovely book but with a very sad ending - oblivion for both Parliament and Treasury. The Commons will become a sort of local authority and the Treasury will end up being merely a branch office of the Commission in Brussels.

Peter Clarke was the only special adviser to the Treasury who has ever been sacked

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