14 September 2022

UK and EU's Rutter: Sacking Tom Scholar-a move that undermines the Treasury, the civil service and the government?

Three significant civil service changes were made in the immediate wake of Liz Truss’s ascent to the premiership...Kwarteng may think he has stamped his authority on HMT. But he may find instead that he has made his already hard task even harder.

First, she reorganised No.10. She sacked most of Boris Johnson’s political advisers – as has become pretty routine, even when there is no change in the governing party. She slimmed down the operation (a bit of a habit from incoming PMs which they then reverse) – moving a lot of civil servants who on Tuesday morning could say they ‘worked in No.10’ to the other side of the green baize door, into the Cabinet Office. Many were reportedly very upset at what they saw as a status downgrade.   

She also changed her Principal Private Secretary (PPS) – the key official in her Private Office – bringing in Nick Catsaras, who had done the job for her in the Foreign Office (FCDO). Johnson did the same when he brought in the now notorious Martin Reynolds, also his PPS as Foreign Secretary (and who organised at least one of the Downing Street parties). That has pluses – the new PPS already has a well established relationship with the Prime Minister. It has minuses in terms of getting up to speed – but the fact that Catsaras has worked in No.10 before should make that easier.  

Second, she moved out the National Security Adviser (NSA), Sir Stephen Lovegrove, to what looks like the invented role of ‘Defence Industrial Adviser’ for the next few months, and moved in Sir Tim Barrow from FCDO. Sir Tim is arguably much better qualified for the NSA role than Sir Stephen. He has headed the ‘political’ side of FCDO – which is code for the security and threats side of their work – is a former Ambassador to Russia and Ukraine, and was head of the UK representation in Brussels during the Brexit negotiations. He will have got to know Liz Truss well at the Foreign Office.  

The post was first created by David Cameron in 2010 – and was originally intended to be held by a minister, but Cameron decided to appoint an official. There have been moves inspired by a change in PM before – but never at this speed. Theresa May dispensed with the services of Sir Mark Lyall Grant, who was accused of mansplaining to the displeasure of the PM, and replaced him with her former Home Office permanent secretary (and career securocrat) Sir Mark Sedwill. Boris Johnson dispensed with Sedwill as Cabinet Secretary and NSA, before briefly naming Lord Frost as NSA and then substituting him for Lovegrove days before he was due to start. Truss is making clear she wants people she trusts around her.   

But the biggest departure from previous practice and constitutional norms comes with the summary dismissal of long-serving Treasury permanent secretary Sir Tom Scholar.  

Treasury permanent secretaries have had a rough time when administrations change before. In 1979 the then permanent secretary, Sir Douglas Wass, gave uncomfortable advice to the new Chancellor, Sir Geoffrey Howe, about his proposed budget. Although he remained in post for another couple of years, he was marginalised and Howe established closer relationships with other senior civil servants. One, Sir Peter Middleton, predictably went on to replace Wass. Meanwhile, the key ideological appointment was a new chief economic adviser more sympathetic to the government’s monetarist approach. That led to the appointment of Terry Burns in his early 30s – which was seen as extremely young in a civil service which was still very age bound at the time.  

Burns eventually became permanent secretary but had his own falling out with a new Chancellor – in this case, Gordon Brown. He and Brown had a scratchy relationship from the start over the decision to take supervision of financial institutions away from the Bank of England when it was given independence to set interest rates. Burns hung on for a year, then left, and was replaced by another Treasury lifer, Sir Andrew Turnbull. Meanwhile Ed Balls, Brown’s policy brain, made the transition from special to Chief Economic Adviser. 

But on Tuesday night the incoming Chancellor sacked his permanent secretary as his first act. This may have been partly personal – it could be that Scholar crossed Liz Truss when she was Chief Secretary (no Treasury permanent secretary ever has much time for the No.2 minister at the Treasury) and she was determined on payback. 

Or it could be the opening shot in the war on the Treasury ‘orthodoxy’ that the new government sees as a barrier to the UK’s brighter economic future. But the Treasury knows its role is to give what it regards as the best advice, but then to implement the decisions ministers make. Ministers have often overruled Treasury advice, as is their absolute prerogative – and as Howe did in 1979. But Kwasi Kwarteng decided against even giving Scholar a brief chance to see if they could get on – a decision that has been attacked by a number of previous Conservative Treasury ministers.  

Inevitably overshadowed by the death of the Queen, Kwarteng and Truss’s decision looks like an attack on the impartiality of the civil service, applying a new ideological compatibility test to appointments. They have probably alienated many staff in the Treasury who looked up to Scholar. They have lost an official with an unrivalled track record of managing the economic fallout of crises – in the middle of a major economic crisis.  

Externally, they are risking their credibility with markets, at a time when the pound is feeble, already spooked by their attacks on independent institutions such as the OBR and the Bank of England. And they have made life much tougher for any potential successor who risks being seen as a yes-person. 

All in all it adds up to a difficult start at His Majesty’s Treasury and an immediate challenge to the constitutional norms around the civil service from the new government.   

Kwarteng may think he has stamped his authority on HMT. But he may find instead that he has made his already hard task even harder. 

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