There is no more powerful or unpopular government department in the UK than Her Majesty’s Treasury. Whereas some countries divide the roles of finance ministry (raising revenue from taxation and controlling public spending) and economics ministry (seeking to deliver economic growth), the UK locates both responsibilities in one institution. This means that there is a barely a single government policy in which the Treasury does not have a say, usually a decisive one.

As a consequence, the Treasury tends to attract the most able civil servants and give them great power at an early stage in their careers. Officials from spending departments find themselves dealing with Treasury counterparts who are younger, cleverer and more powerful than them. Add to this dynamic the inevitable tension between departments wanting to do things and a Treasury wanting to control spending and it is no surprise that there is not a great deal of warmth directed towards the Treasury.

This hostility does not come only from other government departments. There is such a thing as the ‘Treasury view’, a perspective on the world that can be traced back to the chancellorship of William Gladstone in the 1850s. In short, it is a belief in the desirability of low inflation, sound public finances and free trade. These instincts have been attacked recently by those on the Left (because they led the Treasury to seek to consolidate the public finances following the global financial crisis) and the Right (because they led the Treasury to oppose Brexit in the 2016 referendum and, subsequently, to attempt to minimise the damage done to EU trade).

Howard Davies’s The Chancellors is a timely work. To some extent, the title provokes a misleading comparison with two larger books bearing the same name. Roy Jenkins’s The Chancellors consists of elegant pen portraits of those who served as chancellor from 1886 to 1947, starting with Lord Randolph Churchill and ending with Hugh Dalton. Edmund Dell’s work is a brilliant and acerbic account of the economic challenges facing those residing in 11 Downing Street between 1945 and 1990 and the choices they made. Davies’s book covers the period from 1997 to the end of 2021, but it is not so much focused on specific chancellors as on the Treasury as a whole.

Davies is well placed to write such a study, given his deep knowledge of the institution. He has worked as a Treasury official, a special adviser of sorts, director-general of the Confederation of British Industry, deputy governor of the Bank of England, chairman of the Financial Services Authority and chair of a high street bank. He has interviewed four of the six holders of the office of chancellor over the relevant period – Gordon Brown, Alistair Darling, George Osborne and Philip Hammond – as well as senior officials, special advisers and other ministers.

The result is a brisk and readable account of a turbulent period. Davies’s approach is to devote individual chapters to specific policy areas – macroeconomics, public expenditure, tax policy, Europe, Scottish independence, financial regulation, climate change – and allow the leading figures to make their cases. His own assessments of Treasury policy are balanced and considered. This is no polemic: he accuses no one of being a fool or knave; nor is his assessment of the performance of the UK economy either boosterish or doom-laden.

He is broadly supportive of the role the Treasury has played in tackling two major crises – the global financial crisis and the coronavirus pandemic. One senses his eyebrows being raised at the unusually political role the Treasury took in the 2014 Scottish independence referendum and then again in the 2016 EU referendum, though he has some sympathy for both the Treasury’s position and the need to intervene.

Davies also rightly has little truck with the argument that the Treasury needs to be brought down to size. There have been various attempts to do this over recent decades, usually coming from the prime minister’s staff. As Davies points out, a prime minister with a Parliamentary majority has a great deal of power, and the existence of a strong alternative centre of power is a check on an ‘elective dictatorship’. He is unconvinced that separating the roles of finance ministry and economics ministry would contribute to faster economic growth.

Davies recognises that he could be accused of being too much of an ‘insider’, but this doesn’t overly trouble him. He is more worried about whether the Treasury, and the ‘Treasury view’, will be sufficiently well equipped to address what he sees as the challenges ahead: levelling up, climate change, tax reform, pressures on the public finances, the demand for improved productivity and the need for closer coordination of monetary and fiscal policy. He argues that the Treasury will have to evolve to deal with these challenges by, for example, employing specialists with deep expertise and experience, rather than relying on outstandingly bright young generalists, which is how it has traditionally worked.

Davies also makes the point that the ‘Treasury view’ is now rather unfashionable. Brexit has diminished free trade and the pandemic has seen government debt rise steeply without much of a market reaction. He argues that the Treasury is ‘dangerously exposed to heretical policy proposals advanced elsewhere in government, especially on public spending’. Even in the time since Davies completed his book, one can argue that such perils have grown as the political position of the current chancellor, Rishi Sunak, has declined. Sunak – discounting his enthusiasm for Brexit and, less importantly, free ports – is very much a Treasury man, resisting the demands of a prime minister, Boris Johnson, who is very much not a Treasury man. As Davies explains, the position of the Treasury has waxed and waned over the period covered largely in line with the political strength of the chancellor at any particular point in time. A weakened chancellor means a weakened Treasury.

Some will welcome that, believing that Treasury thinking has held the country back. I would disagree. Looking at the challenges for the country that Davies sets out, we are more likely to overcome them with a strong and confident Treasury. We face substantial spending pressures as a consequence of demographic changes, but we are more likely to address those pressures if taxpayers’ money is spent wisely and efficiently.

There is a need for tax reform, especially as the spending pressures discussed mean that taxes may have to rise further. The problem has not been the lack of Treasury understanding of the issue but that no government has been in a strong enough position to make progress here. As for improving productivity, a good starting point would be a closer relationship with the EU, enabling us to bring down the recently erected trade barriers, something that the Treasury would favour.

Howard Davies has written a succinct and fascinating assessment of the Treasury’s crucial role since 1997. How the department responds to the challenges of the future is likely to determine the UK’s prospects for decades to come.