When Sir Humphrey Was Frit

Joshua Chambers has ha fascinating interview with former Cabinet Secretary Andrew Turnbull. It doesn't make happy reading. In it he basically says that civil servants were too scared to tell ministers (for ministers, read Gordon Brown) that spending and borrowing were expanding too quickly. It may sound pathetic, but there you go.

Speaking last month, the retired civil service chief said it was too difficult for civil servants to call for public spending to be reigned in until after the financial crisis hit.

The former cabinet secretary said that the Treasury was prone to “wishful thinking” and that “the politics” of the time had prevented civil servants from speaking more openly about the increasing level of debt.

He suggested that spending was too high because of “optimism bias” in the growth forecasts: “It was a forecast error, but also by a process of optimism bias, not enough people were saying: ‘Come on, do you really think we are able to expect 2.75 per cent growth indefinitely?’”

Questioned on whether he thinks civil servants should have come forward, Turnbull – who was permanent secretary at the Treasury from 1998 to 2002 – suggested that they were scared to. “Yes, maybe Whitehall should have,” he said. “But it’s quite difficult when your minister is proclaiming that we have transformed the propects of the UK economy.”

When asked directly what prevented civil servants from telling politicians that borrowing was too high, he said: “The politics was that we had put an end to boom and bust.”

Turnbull added: “We had a sense of overconfidence; it happened all around the world, but it was a rather extreme form of it in the UK.”

The problem, he argued, demonstrates a need for an organisation such as the Office of Budget Responsibility, which has been set up by the coalition government. “Having someone outside the process is helpful,” he said. “I think the OBR is something which is necessary, providing some degree of external constraint less prone to wishful thinking.”

Turnbull said that that excessive borrowing started to be a problem from 2005. “It kind of crept up on us in 2005, 2006, 2007, and we were still expanding public spending at 4.5 percent a year,” he said, arguing that the Treasury should have been putting more money aside. “You might have thought that we should have been giving priority to getting borrowing under better control, putting money aside in the good years – and it didn’t happen,” he commented.

Turnbull said that “there were some other places that had begun to accumulate surpluses for a rainy day; places like Australia.”

While Turnbull argued that the primary reason Britain is “in the mess that we’re in” is because “public spending got too big relative to the productive resources of the economy, by error” he added that a loss of output caused by the financial crisis has also contributed to the budget deficit.

Nice to know that Turnbull's analysis coincides with George Osborne's. But he does make his civil service colleagues sound rather pathetic and cowardly.

The full interview can be read HERE.