Labour needs a political history lesson

David Worsfold, Secretary, All Party Group on Insurance and Financial Services

Re-organising government departments is obviously the flavour of the month.

No sooner have we had the rushed - and hopefully not botched - splitting of the Home Office, than the Treasury is back in the sights of would be reformers. I say back in the sights because it never seems to be out of them for very long.

As the Labour leadership election gets under way in earnest, the Whitehall rumour mill is speculating hard that Gordon Brown will want to slim down the Treasury so that he can have more power centred on Downing Street. After all, he knows better than almost anyone just how powerful the Treasury can be, having ensured that it asserted the major influence over domestic policy over the past 10 years. The suggestion is that a new Department of Economic Affairs could be created, picking up a range of responsibilities from the Treasury and from the dismembered Department of Trade and Industry. This would leave the Treasury looking more like a constitutional style Ministry of Finance, still influential but not all powerful.

Recent newspaper reports have suggested that Lord Birt put a similar proposal to Tony Blair before the last election as a way of curbing Gordon Brown's growing hold over domestic policy from his powerbase at the Treasury. The problem is that it has been tried before and failed dismally.

When Labour snatched the 1964 General Election after 13 years out of office the new Prime Minister, Harold Wilson, was so concerned that the Treasury would block many of his sweeping economic reforms - laced with a generous helping of then fashionable socialist economic planning - that he immediately set up a new ministry and put George Brown in charge of it while Jim Callaghan went to the Treasury. The new ministry's name - the Department of Economic Affairs. Brown was actually the more powerful figure at this time as he was deputy Prime Minister.

It was a disaster and the running battle between the DEA and the Treasury was one of the reasons why the early years of Wilson's government were blighted by paralysis over economic policy. The DEA only really lasted two year's as a serious entity, although it was not finally wound up until 1969.

It is a pity that some of the people who write policy papers for the current government do not have a better grasp of political history. If they did, then the notion of recreating one of Labour's biggest disasters would never see the light of day.