The thick of it: How to be chancellor (and survive)

No political office is more demanding – and as this week's revelations of tensions between Gordon Brown and Alistair Darling illustrate, none is less forgiving. For his latest BBC series, Michael Cockerell asked chancellors past and present how they survived Whitehall's toughest brief

LIFE INSIDE THE TREASURY

Kenneth Clarke

Chancellor 1993-97

"The Treasury was a brilliant department; the best I ever served in. It was like an Oxbridge College, brilliant minds engaged in open debate and completely detached from the real world."

Sir John Gieve

Treasury official 1979-2001

"Of course the Treasury had a reputation for being clever, and it did prize intellectual ability above all else. It was full of huge brains but not very great social skills.

"I remember walking down the corridor in the Treasury you'd find people slightly avoiding looking at each other and scurrying back to their office to sort of settle down into a good bit of analysis and writing a paper."

Alistair Darling

Chief Secretary to the Treasury 1997-98

"I think my first impression when I walked in was that it struck me as a rather gloomy cathedral. I remember walking with David Blunkett from my office. He'd come to see me about some spending issue and he stopped in the corridor and he said: "Is this really a gloomy place?" and I said: "Why do you think that?" He said: "I can just feel it." And he was absolutely right.

(Lord) John Kerr

Treasury official 1979-84

"The Treasury was amazingly un-hierarchical and wonderfully downbeat. The red lino was very scuffed and the paint was falling off the walls, and the Treasury liked that. It liked to demonstrate that it was a downbeat place."

(Lord) Norman Lamont

Chancellor 1990-93

"The Treasury always was a very dreary building, maybe suitable for its rather difficult task. It had an air of austerity, but I always used to say that it reminded me of a Russian or a Soviet psychiatric hospital.

"It had bright red linoleum floors, very broad corridors, swing-doors, and I always used to think that on other side of the doors I'd find some patient being taken away on a trolley and I'd bump into him."

(Lord) Nigel Lawson

Chancellor 1983-89

"The core of the Treasury is its hostility to public spending. The control of public spending is at the very heart of the Treasury, what it's all about.

"The Treasury is also instinctively hostile to reductions in taxation, partly, I think, because it never really believes that ministers will actually succeed in holding public expenditure down, even though it wants to see it held down.

It really is very cynical and doesn't believe it'll happen, and therefore you have to have high taxes in order to pay for it, that's the second bit, but also because there's a kind of rather austere, rather hairshirt, rather superior attitude among Treasury officials; that sort of: 'what have the public done to deserve tax cuts, you know, they haven't done nearly well enough and so we mustn't give them these sweeties'."

Sir Peter Middleton

Permanent Secretary 1983-91

"It's quite convenient for governments to describe it as the 'dead hand' of the Treasury, but the fact of the matter is that all governments have to be restrained in what they can do because there are only a limited number of resources.

"They realise that they have to explain that, and one of the ways of explaining it is that there are a lot of awful people in the Treasury who won't let them do things."

RELATIONS WITH NUMBER 10

Sir Gus O'Donnell

Cabinet Secretary since 2005

"As Cabinet Secretary you get a unique view of this. You sit next to the Prime Minister, on his right at the Cabinet table and as you look round that Cabinet table you see in front of you a whole array of spending ministers, and you have the lonely position of the Chancellor and the Chief Secretary who are the ones who have to raise it through tax.

"In terms of sheer numbers, it's a bit of an unfair fight, which is why the Treasury has a reputation for having to be very firm and have lots and lots of different words for 'no'."

John McFall

Chairman, Treasury Select Committee

"A chancellor has to be Scrooge, whereas a Prime Minister has to be Santa ... giving out the goodies."

(Lord) Denis Healey

Chancellor 1974-79

"The Chancellor, in a sense, is the bad policeman, and the Prime Minister is the nice policeman and the Chancellor is the nasty one but of course they work very closely together if the thing is going to work at all.

REALITIES OF THE JOB

(Lord) James Callaghan

Chancellor 1964-67

"As I walked out, a very urbane figure glided towards me and said in a silky voice: 'My name is Ian Bancroft and I am your Private Secretary. The Permanent Secretary would be very happy to see you if you would care to come through.'

"It was all said in tones of the utmost politeness and yet a clear indication that if I didn't go they wouldn't think much of me.

"So I went next door and was immediately sat down in the Chancellor's chair in the study there, and on the table in the middle of a blank sheet of blotting paper was a huge document which was about as thick as this [6 in]... literally as thick as this in foolscap, all beautifully typed.

"It was a brief that the Treasury had prepared during the election period and to read that really did... it was like throwing a bucket of cold water over me, because I realised for the first time that the figures we'd been working on about the balance of payments were really quite out of date – and not only out of date, but we'd underestimated them very seriously.

THE STERLING CRISIS

Denis Healey

"The only time I was really shaken as a minister was that famous day when the pound collapsed and I had to turn back from the airport to deal with it rather than go on to the Philippines where I'd have been out of touch with Whitehall for 17 critical hours, and I felt the world was collapsing around me."

Sir Peter Middleton

Permanent Secretary 1983-91

"It was absolutely terrible for the Chancellor. We did actually look into the abyss. We had to raise a loan from the IMF and we had to set about getting the economy into a state where we were more or less credit worthy in pretty short order, so there were very long nights worked and some desperately difficult politics. No joke having a foreign mission turn up in your country to tell you how to run it."

James Callaghan

Prime Minister 1976-79

"Denis Healey negotiated with the IMF. He went much further than his brief that I had given him. He once threatened the negotiators that if they didn't agree on what it was he was ready to go for, and which he and I had discussed, then we would have a general election! He'd got no authority to say that!

"And I was staying in Leeds that night. He came up to his constituency, which of course [was in] Leeds, he told me, he said: 'We're going to have a general election.' I said: 'Oh thank you very much!' But I didn't mind, because I knew it was a negotiating tactic."

THE THATCHER REVOLUTION

(Baroness) Margaret Thatcher

Prime Minister 1979-90

"I'm afraid that they had absorbed some of the decline that was obviously accepted by past governments, indeed it was reported to me that one of the senior civil servants had said: 'Our task now is the orderly management of decline'."

John Kerr

"I do think that Geoffrey Howe and the small group of ministers did feel a bit beleaguered in the Treasury of '79, '80, '81 because it was basically a Keynesian institution. They were keen monetarists."

Sir Steve Robson

Treasury official 1969-2001

"The Treasury took a long time to grasp the sheer radicalism of intent of the Howe/Thatcher approach.

"I remember vividly, I was then working on the public spending side of the Treasury and Geoffrey Howe came in and said: 'I want to have an early budget cutting public spending'."

(Lord) Geoffrey Howe

Chancellor 1979-83

"I was invited to meet this great band of mandarins with my ministerial colleagues and outline our budget proposals, and I expected to have much more interrogation – 'what, as much as that, Chancellor?' or 'are you sure that's right?' and so on. But in fact I was questioned as to what I meant, but not as to whether I should mean it."

Sir Steve Robson

"And the Treasury were sort of so taken aback that in the end the top guys shot off to the Conservative research department to find out what the Conservative Party had in mind when it said cut public spending. We just weren't grasping how radical they wanted to be."

Geoffrey Howe

"And to my astonishment... I was enormously impressed by the end of that Tuesday to have... I forget, a seven or eight-page minute from my private office, setting out what I had proposed, and it looked astonishingly coherent."

John Kerr

"Geoffrey Howe's '81 Budget was famously tough and in retrospect right. At the time, 364 economists wrote a letter to the press saying it couldn't possibly work. I thought of a good joke which Geoffrey used in a speech at the Mansion House where he said: 'An economist is someone who knows 364 ways of making love but he doesn't know any women'."

Nigel Lawson

She [Margaret Thatcher] said: 'Nigel, I'd like you to take over from Geoffrey as Chancellor.' She said: 'Just one thing, you must have your hair cut.' I used, at that time, to wear my hair quite long, and I suppose she thought it would not create confidence in the financial markets if you had a long-haired Chancellor."

Sir Peter Middleton

"The fundamental problem was that the Chancellor and the Prime Minister had ceased to get on, because the Chancellor came to believe that he should be left to run economic policy and prime ministers don't do that. It was like a disease affecting the Treasury. It was pretty clear that all was not well. You could see the symptoms of it, which was they weren't getting on and they were needling each other."

Nigel Lawson

"She was slightly paranoid by that time and was, I think, afraid that I may be up to something that she didn't know about. In fact that was never the case."

Peter Middleton

"Both of them began scoring points off the other one in places and at times which you'd had no control over or no influence on, so it was very, very difficult, that. You can't really run a successful economic policy if the Prime Minister and the Chancellor aren't getting on. You just can't do it."

Margaret Thatcher

"You could have knocked me down with a feather. For a Chancellor of the Exchequer, with all of the importance and reputation of that position, to come to me and say: 'Unless you sack one of your most loyal advisers [Sir Alan Walters] I will resign,' – I couldn't believe it.

"In retrospect I think Nigel was looking for an excuse to resign because of the inflation he had created."

Nigel Lawson

"Inflation didn't get out of control, and I hated resigning, it was certainly the last thing I wanted to do. No, that is... that is grotesquely wrong."

Sir Gus O'Donnell

"When you get big policy differences between the Treasury and No.10 and when a chancellor resigns, it's a dangerous time for Government. And it played a significant part in the end in there being a change of prime minister from Margaret Thatcher to John Major."

THE E.R.M. CRISIS

Norman Lamont

"When we raised interest rates, the hope was that it would raise the level of sterling, but sterling remained flat as a pancake. As I said to someone at the time, it was like being in a TV hospital soap where you were watching a heart monitor and it was quite clear the patient was dead even though you were hoping for a little blip, and I knew then the game was up."

"When I first became Chancellor, Sir Terence Burns, who was then to become permanent secretary, said to me: 'You do realise you will soon be the most unpopular man in the country', and I always say that the entire time I was in the Treasury that was the only forecast that ever came right."

THE BLAIR ERA

Ed Balls

Economic adviser 1997-2004

"For us the Treasury was this building that we drove past every day to go to the House of Commons or somewhere else. It was this place which did things which we criticised, it was faceless. And suddenly to have all these people there welcoming you was amazing."

Sir Nicholas Macpherson

Senior Treasury official since 1998

"The Treasury is not very given to sort of outbursts of emotional enthusiasm and in fact it's a fairly staid, cynical institution, and I was astonished to see all these people standing out on the steps cheering genuinely spontaneously. I think it reflects a wider sense one had ... for ... a new beginning."

Geoffrey Robinson

Treasury minister 1997-98

"There were a group of officials who had been there too long. They'd lost their enthusiasm, they'd lost their originality. They weren't really engaged in the same way that we were engaged.

"There was a staleness about the organisation, to be quite frank about it. A lot of people were without a sense of direction. And if I tell you that the paper that was being circulated as we went in the Treasury, which was preparation for the new millennium, was entitled 'Slouching to the New Millennium', you can sort of see a worldly-wise Treasury cynicism about it."

Gordon Brown

Chancellor 1997-2007

"We could have waited for months[ to give the Bank of England independence on interest rates], we could have had a consultation exercise, but the right thing to do was to do it immediately.

"I think the Governor was surprised by the decisiveness of the, but obviously I had to tell him that here were my proposals – and if we were to going to move forward they had to be accepted in total."

Geoffrey Robinson

"We had to make sure we weren't going to be seen as yet another Labour administration, good intentions, too soft and heading for financial disaster, and the biggest signal we could send that we were dead serious about being utterly financially responsible was giving the independence to the Bank of England."

Gordon Brown

"When I arrived, a very senior civil servant pointed to me three envelopes that had been left by a previous chancellor, each letter containing advice that if things went wrong he might choose to consult.

And he told me of the first envelope that when the first crisis arrived you would open it and the advice would be to the Chancellor 'blame your predecessor' – and of course we did something of that. When things deteriorated further you would open the second envelope, when the crisis got worse, and the second envelope said 'blame the statistics', and we did a bit of that as well.

"And the third, of course... When things got really bad and the disastrous proportions were clear that mistakes were being made, the advice was clear: start writing three envelopes to your successor."

BROWN VS BLAIR

(Lord) Robin Butler

Cabinet Secretary 1988-98

"The meetings between Tony Blair and Gordon Brown were very important right from the beginning.

"Now one of the oddities about that was that in the beginning, no civil servant, no record-taker was admitted to those, and this did make it very difficult to operate because you couldn't be quite sure what had been decided and the Treasury would get their account of it from Gordon Brown, 10 Downing Street would get their account of it from Tony Blair, and these accounts didn't always match. So there was some confusion.

Derek Scott

Economic adviser to Tony Blair 1997-2003

"Gordon, right from the start, was determined to exert his authority. He wanted to continue everything in his control as much as he could and it wasn't just in economics, it was in social policy and other areas as well.

"There was a reluctance to bring No.10 into policy discussions, a reluctance by the Treasury to bring the Prime Minister in, a lack of the Prime Minister's determination to make certain that he and the people of No.10 were brought in at an appropriate time on some budget decisions."

Geoffrey Robinson

"There was a problem with the Budgets in the sense that it was a very leaky operation that Tony ran and... you know... if we'd given them the most difficult things we wanted to do it could well have got into the press straightaway and it would have then been much more difficult for us to do it."

Derek Scott

"If a prime minister asks for a paper or a series of papers on particular subjects, I think it's outrageous that they do not come across from the Treasury, and that happened on a number of occasions. It was just a preposterous way for a chancellor to treat his prime minister.

Sir Steve Robson

"The Treasury became immensely powerful under him because Gordon Brown's sway over domestic policy was probably more complete and more far reaching than any other chancellor that I saw in office and of course the Treasury followed where his footsteps led."

Sir Gus O'Donnell

"When I finally became Permanent Secretary, I inherited an amazing open-plan building.

"We needed to get more people into a smaller amount of space. It was a very Treasury thing, you know, this was going to deliver for us better value for money for the taxpayer.

"It was great, you know... it really helped create atmosphere. I had my desk in open-plan, and we didn't want people working in their little office, working alone, we wanted them actually interacting with each other, talking about policies and so it got rid of the hierarchies and you found people stopping by, talking to each other, very informal.

"And a brilliant restaurant which was also an attraction and I think the symbol of that open-plan building and the difference that made to the way in which people worked was really tremendous and I was just incredibly lucky to inherit that on my first day as Perm Sec."

Norman Lamont

"The building has been completely changed by Gordon Brown. He's spent huge amounts of money on it and it now looks like a Marriott Hotel."

THE BANKING CRISIS

Alistair Darling

Chancellor since 2007

"When I came back here as Chancellor, Nick Macpherson, the Permanent Secretary, said to me: 'You know, there's only three people here who have ever been through a recession and he was... at that time he was worried, you know, not in an active way but he was worried that the collective memory of the institution was beginning to fade.

"I'm not just saying this because I'm now 56, as opposed to being 12 years younger when I first became a government minister. But there is something to be said for ensuring that you've got sufficient people who remember the nuts and bolts, who know how an economy works, who know what to do when there's a crisis, who know how to respond.

"I remember on the day that it was obvious that RBS just couldn't carry on, being phoned up by a couple of its top people and listening to someone with panic in their voice saying: 'We can't go on beyond lunchtime' and you thought, this is one of the biggest banks in the world and they're telling me that they don't think they can carry on, and me speaking to the Governor of the Bank of England, saying look – we've got to do whatever it takes to keep this bank going.

"In my experience, if you're faced with a situation like that there's two things you can do, you can panic, which is daft, or you can get on with it and sort it out."

"In the Treasury people were working non-stop for days on end, they were working overnight to make sure that on the Monday morning when we announced the recapitalisation that the banks were open for business.

"Now that was a crisis. It meant that people had to work flat out, they had to draw on their reserves, they had to explain to... domestic things to their families why they hadn't been home for several days.

"But of course the world banking system was standing on the very brink, it was looking over the edge. We were in a situation which would have been unthinkable where the bank doors couldn't have opened, the cash machines wouldn't have functioned. All over the world people couldn't have got money. It would have been catastrophic."

Michael Cockerell's documentary, The Great Offices of State: The Secret Treasury, is broadcast tonight at 9pm on BBC4

BOOM AND BUST: THE MODERN CHANCELLORS

Derick Heathcoat-Amory

1958-1960

Conservative

The so-called "reluctant minister" once delivered this one-liner: "There are three things not worth running for – a bus, a woman or a new economic panacea. If you wait a bit, another one will come along."

Selwyn Lloyd

1960-1962

Conservative

Lloyd failed to reverse the fortunes of an embattled treasury, eventually falling victim to the "Night of the Long Knives" (when Prime Minister Harold Macmillan sacked seven cabinet members in a breathtaking purge).

Reginald Maudling

1962-1964

Conservative

Maudling sipped Martinis when he wasn't pursuing progressive economics. When jeered about a plan to cut beer tax, he replied: "I detect one or two notes of acidity, no doubt arising from mixing cheap bitter and sour grapes."

James Callaghan

1964-1967

Labour

As chancellor, "Sunny Jim" resisted devaluing the pound but was forced into it 1967. He offered to resign but instead swapped jobs with Roy Jenkins to become home secretary, later serving as PM during the "winter of discontent".

Roy Jenkins

1967-1970

Labour

The miner's son became, according to critics, an over-prudent chancellor whose lacklustre 1970 budget failed to cure the country's sickly economy. A New Labourite before his time, his Social Democratic Party advocated a new "radical centre" with limited success.

Iain Macleod

1970

Conservative

The only chancellor who has failed to deliver a Budget, Macleod died a month after his appointment following Conservative victory in the 1970 election. A respected orator, he had previously edited The Spectator and coined the word "stagflation".

Anthony Barber

1970-1974

Conservative

Propelled to the Treasury by Macleod's death, Barber proved ambitious but highly controversial; he is associated with the 1973 "Barber boom". His "dash for growth" led to inflation, miners' strikes, the three-day week and power cuts.

Denis Healey

1974-1979

Labour

Healey's sharp intellect and biting oratory were in demand when he inherited the Treasury. But the man with the bushy eyebrows, now 92, was forced to go to the IMF for a loan and beg the party to make cuts.

Sir Geoffrey Howe

1979-1983

Conservative

Healey described an attack by Howe (when Howe was shadow chancellor) as "like being savaged by a dead sheep". Reborn as Healey's successor, Howe then became, some observers assert, the most successful chancellor of his era – and the man who triggered Thatcher's fall. He called his dog "Budget".

Nigel Lawson

1983-1989

Conservative

After waging Thatcher's war against the miners as energy minster, Lawson as chancellor launched a series of controversial privatisations and deregulated financial services. After leaving the front bench he lost five stone and published a best-selling diet book.

John Major

1989-1990

Conservative

Only three months after his surprise appointment as foreign secretary, Major succeeded Lawson as chancellor. His one and only Budget in 1990 was the first to be televised live. Major served for just over a year before he entered the Tory leadership race.

Norman Lamont

1990-1993

Conservative

Hamstrung by the European Exchange Rate Mechanism, Lamont struggled to tackle inflation. On Black Wednesday in 1992, he was forced to withdraw from the ERM – too late to boost confidence.

Kenneth Clarke

1993-1997

Conservative

Clarke's success as chancellor – his tenure saw interest rates, inflation and unemployment falling – wasn't enough to stop the 1997 Labour landslide. A Europhile, his later bids for the Tory leadership failed.

Gordon Brown

1997-2007

Labour

Only William Gladstone had a longer stint as chancellor. Over 10 years, Brown gave control of interest rates to the Bank of England, extended the Treasury's reach, and (behind the scenes) feuded with Tony Blair.

Alistair Darling

2007-present

Labour

Owner of the second most famous eyebrows in Treasury history (after Dennis Healey's), Darling hit the ground running with the Northern Rock fiasco. In 2008 he warned of hard times ahead.

SIMON USBORNE