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Keir Starmer is good in a crisis. The Prime Minister has risen to the challenge of Donald Trump’s pivot to Russia with self-assurance and poise. The collapse in trust between America and its

closest allies over the war in Ukraine has catapulted Starmer to the top table of European leaders. Starmer was equally sure-footed in his first month in the job when far-right riots

erupted across England and Northern Ireland last year. False claims that a Muslim asylum-seeker had stabbed several young girls at a dance party in Southport fed the flames. As with Ukraine

he moved swiftly, calmly and effectively. But foreign policy doesn’t win elections. To get re-elected in 2028 Labour needs to fix things on the home front in a way that voters can experience

in their daily lives. Despite its colossal majority Labour is on appro. Better statistics won’t cut it. You can’t fake progress. Voters want tangible proof. To win, Starmer will have to

show the same kind of clarity and decisiveness on domestic policy that he’s showing on Ukraine. Leaders are enticed by the world stage. Foreign trips are more fun than the hard grind of

running the country. But it’s the bread-and-butter issues – health, housing, crime, care, jobs – that get you elected. Starmer knows this of course. So do his wingmen: Pat McFadden, the

owlish Cabinet Office minister, and Morgan McSweeney, his ginger-haired political strategist. But the trio, who orchestrated a steely takeover of the Labour Party, followed by a thumping

election victory, appear curiously flat-footed when it comes to the home front. One obstacle to getting results may lie with Starmer’s next-door-neighbour and, more fundamentally, with the

department she runs. Rachel Reeves’s first few months as Chancellor of the Exchequer have been characterised by a series of avoidable missteps. Wooden at the best of times, she seems to have

fallen for the Treasury’s over-cautious orthodoxy. Her cut to pensioners’ winter fuel was a ham-fisted show of strength aimed chiefly at the bond markets. It wasted precious political

capital for hardly any return. The same goes for her general pitch that being tough is the answer to finding the money to generate real-term growth. Reeves seems to have swallowed the

Treasury line that delivering growth in productivity, which has been close to zero for a long time, lies primarily in meeting her fiscal rules, higher taxes, more austerity and deregulation.

Her £25bn raid on employers’ National Insurance contributions appears to have backfired. The fact that Britain has a long-term growth problem is not unique. But finding ways of breaking the

cycle requires real-world solutions to real-world problems. It also requires the courage to imagine solutions that are not in the Treasury playbook. And for that you need big political

beasts with real-world experience, good judgement and steel-capped boots. Reeves is not of that species. So far, and despite efforts by Number 10 to boost her, the impression Reeves gives is

of a journeyman. Her latest nickname, mostly in the right-wing press, is Rachel from Accounts. The ambition is there but not the flair. Which brings us to the Treasury. Despite being quite

small, the Treasury is the flagship of government. It’s the leader of the pack. Unlike most countries in Europe, it’s both an economic and a finance ministry. This means it sets the

direction of economic policy, ostensibly promoting growth. But it is also the sheriff that controls public spending. Therein lies a problem, a contradiction, perhaps a fatal one, that acts

as a simultaneous accelerator and a brake on the economy. Hence stop-start economics. One function requires a long-term vision, the other a short leash. These equal but opposing forces

stymie its ability to shape socially and politically important goals without which all governments are eventually toast. Breaking up the Treasury has been tried before. Harold Wilson’s 1964

government had as its strategic objective planning to promote growth and investment. Starmer (who admires Wilson) sings from the same hymn sheet. The intention of Wilson’s new ministry was

to hive off economic planning from the Treasury. Wilson wanted “creative tension” between the newly formed Department of Economic Affairs and the Treasury. But as the historian Christopher

Clifford has said: “If the creativity was occasionally hard to spot, the tension was never in short supply.” Variations on this theme have been tried since. Gordon Brown wanted to do it

apparently when he succeeded Tony Blair as Prime Minister. Brown pulled back because, he said without apparent irony, he wanted to avoid more Whitehall turf wars. The argument for leaving

things as they are is that an all-powerful, all-seeing Treasury provides the government with clarity based on aeons of experience. It has unique strategic powers. But is it wise for one

department of government to have a veto on every other department’s plans? Is it helpful for the Chancellor (or more likely her mandarins) to decide whether Britain needs more doctors, more

houses, more tanks or cleaner rivers? How can a department whose default response, like an insurance underwriter, is “no” be good for growth when the operative word is “yes”? Put it another

way: the Chancellor’s first obligation is to keep the nation economically secure by weighing competing demands in the great scales of state, adding a bit here, taking away a bit there. How

can she also simultaneously advocate fresh and sometimes risky projects to boost growth? Because that is how it works. The Treasury is masterful at finding compromises that keep grumpy

ministers happy while seemingly delivering what the voters want although not really, not when it comes down to it. Which is one reason why so many Prime Ministers end up at war with their

chancellors. In most other jurisdictions the ultimate arbiter of the final budget is the Prime Minister, not the Minister of Finance. Reeves’s next big moment is the Spring Statement on

March 26. That is when the Office of Budget Responsibility (OBR) publishes its forecast of the UK economy. This will be followed by a statement to the Commons by Reeves. The OBR is expected

to confirm that the £10bn financial buffer to meet her self-imposed budget, or so-called fiscal rules, has been wiped out. Number 10 has been laying the ground for further deep spending

cuts, partly to fund increased defence spending as Trump ditches the Atlantic alliance. Starmer laid the ground on Monday by telling MPs that Britain’s benefits system is the “worst of all

worlds”, thereby foreshadowing deep cuts to disability payments, which may reach £70bn by 2030. A great deal is at stake. I don’t mean for the government. I mean for us, citizens and

taxpayers. Years of austerity followed the financial crisis in 2008. Then came the pandemic. Then came the war in Ukraine. Now comes Trump and the prospect of trade wars. Britain is the 9th

most unequal country by income in the OECD. The top 10%, let alone the top one per cent, live on a different planet to the rest. When and how will Britain’s gradual decline be reversed?

Until the Great Recession in 2008, the British economy was growing. If that had carried on, average GDP per capita would have been £47,000 last year. Instead, GDP per capita was £37,000.

Adjusted for inflation, the average working person in Britain earned a lower wage in 2022 than in 2008. Nine months from his stunning election victory Starmer remains an enigma. He has

emerged as player on the world stage. But his ambitions for Britain, his “five missions”, lack the same clarity and urgency as his mission to help Ukraine and defend European democracy.

Starmer says he wants to shake up how Britain is governed to get things moving. He should start with His Majesty’s Treasury. A MESSAGE FROM THEARTICLE _We are the only publication that’s

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