Liz Truss, the Tory leadership favourite, has ruled out splitting up the UK Treasury if she becomes prime minister next month, but she will turn Number 10 into an “economic nerve centre” calling the shots on economic policy.
Truss believes that many of Boris Johnson’s problems as prime minister arose because he did not have the economic heft in Downing Street to challenge Rishi Sunak as chancellor and a powerful Treasury.
The foreign secretary had previously refused to rule out splitting the Treasury into separate economics and finance ministries, but she told allies this week it would be “mad” to do that in the midst of an economic crisis.
Instead Truss, if she wins the contest, would beef up the economic capacity of Number 10, pushing through her agenda of tax cuts and deregulation.
Kwasi Kwarteng, the business secretary and a close ally of Truss, is widely tipped by her team to become her chancellor.
“Liz is a serious policy thinker on the economy,” said one close colleague of Truss. “She would set the clear direction and philosophy on the economy for the government to follow.
“That’s not to say Liz wants to neuter the power of any chancellor — far from it — but she does want Number 10 to be the economic nerve centre, working closely with the chancellor and his or her Treasury.”
Relations between Johnson and Sunak, Truss’s rival for the leadership, became toxic, with witnesses saying that the prime minister was often treated with little respect by the chancellor’s team.
A “joint economics unit”, set up by former Downing Street adviser Dominic Cummings to bridge the gap between prime minister and chancellor, ended up being fully subsumed into Sunak’s Treasury.
Truss told the Financial Times in an interview last week she wanted a “stronger economics unit” in Number 10 and that the creation of the joint unit had been “a mistake”.
“I think it’s also important to have a strong chancellor and a very strong team at the Treasury to get all of these things done,” she said.
Truss and Kwarteng both speak warmly of the close relationship between David Cameron and George Osborne, prime minister and chancellor respectively from 2010 to 2016, and view it as something of a template.
“The important thing was that there was respect,” Kwarteng has told friends. Although Osborne sometimes disagreed privately with Cameron — the chancellor’s plan for a mansion tax was overruled by the prime minister — he respected Cameron’s ultimate authority.
Typically the relationship between the neighbours in Downing Street has been much more fraught. Tony Blair and Gordon Brown famously feuded in the New Labour government, but some say the Johnson/Sunak rift became as bad.
Truss joked with the FT that she would not give the Treasury any “advance warning” if she intended to break it up but that any such thoughts had been abandoned — at least this side of a general election.
She is however critical of Treasury “orthodoxy”, claiming that growth has been choked off by high taxes and insisting, contrary to claims by Sunak, that cutting corporation tax rates will pay for itself by attracting higher investment.
“The Treasury has fantastic, very very clever people working but there is definitely an orthodoxy and there is a focus on . . . what I describe as abacus economics of making sure that tax and spend add up but not focusing enough on economic growth,” she told the FT.
“I am somebody who is prepared to take on that orthodoxy, sometimes the risk aversion, which I think is also an issue,” she added. “I think there is excessive risk aversion in parts of Whitehall to be able to get things done.”