ALEX BRUMMER: Chancellor needs to act as a check on the sometimes unbridled ambition of PM

The most distinguished alumnus of HM Treasury, John Maynard Keynes, once described it as ‘an essential bulwark against overwhelming wickedness’.

That may be a trifle over the top. But it cannot be wise for No 10 to think that grabbing full control over economic and fiscal policy, in one of the most open economies in the world, is a great idea.

New Chancellor Rishi Sunak has a CV to die for, including real-world experience at the mercurial hedge fund TCI and at Goldman Sachs. 

Whatever his analytical skills, one has to wonder whether his political and intellectual grounding is as strong as such modern predecessors as Denis Healey, Nigel Lawson, Ken Clarke and Gordon Brown.

As someone who supported Leave, I was irritated by politicisation, in the shape of downbeat economic forecasts, made when George Osborne and Philip Hammond were at No 11. Fortunately, Osborne had put in place checks and balances in the shape of the independent Office for Budget Responsibility.

Treasury orthodoxy can be deeply frustrating. It needed political willpower to commit to the £106billion HS2 project in the face of pushback from fiscal overlords. Yet it is also important that there is an institution responsible for monitoring public finances. 

Recently, for instance, the Treasury rightly insisted that the public finances take account of the cost of student loans, which had the effect of cutting back the headroom for spending by £11billion.

That is 11 times what Downing Street’s proposed ‘mansion tax’ might raise.

All correspondence among department principal private secretaries passes through the Chancellor’s office. This is not control freakery, but a means by which the Treasury monitors decisions that might impact the public finances.

Among the reasons that the UK enjoys an elevated status in global economic institutions is trust in the Treasury. It was at the forefront of rescuing the banking system after the financial crisis. 

When, during the euro crisis, Cyprus went into meltdown, it turned to the UK Treasury, not EU masters in Brussels, to put things right. No 10 may fantasize that it can adopt a Trumpian approach to economic policy-making, but it can’t.

The UK doesn’t control a reserve currency. If the public finances were to fall into disrepair, because of the lack of a credible fiscal counterweight, then sterling would go into freefall, bond rates would surge and the necessary big spend on infrastructure would be stymied.

The Chancellor needs to act as a check on the sometimes unbridled ambition of the Prime Minister and the rest of the Cabinet.

If you don’t believe me, listen to Keynes.

Name and shame

Alison Rose is right to ditch the tainted Royal Bank of Scotland brand for Natwest. She also is correct to pare back Natwest Markets, where the returns have been negative.

But the new chief executive has to be careful that she doesn’t hack too far.

Failure to offer a full suite of bond raising, foreign exchange and other dealing services might drive away business clients and reduce commercial lending returns.

The best returns at Natwest come from personal banking, and the name change underpins that. 

But competition forces are huge. HSBC and Barclays’ ring-fenced banks are overflowing with cash and rivals in the mortgage market are driving down returns. Challengers such as Monzo and Starling are making all the running on fintech, and Metro is counting on fancy branches to turn the tide.

The big hope at Natwest is that it can gradually convert enough of its huge customer base to newly launched Bó, turning it into a go-to app, and migrate away from its spatchcock IT systems.

That may be a 30-year war, and the taxpayer won’t want to wait that long.

Back water

Now that electioneering is over, Britain’s water companies are freed from looking over their shoulder.

Four of them feel aggrieved enough about the Ofcom price settlement for the next five years to take their complaints to the Competition and Markets Authority.

They point out the calamitous outcome of under-investment in climate change. Thames Water, the biggest supplier, is steering clear of the complaint. Anglian, among others, may have legitimate concerns.

The complainants would not be appealing for clemency now but for past egregious behaviour when perceived payouts to investors trumped broader stakeholder interest.