Associate director Guy Lodge and senior economist Tony Dolphin at the IPPR say the Treasury “sometimes gives the impression that it is trying to fight the recession with one arm tied behind its back”.
The IPPR, which traditionally has been supportive of Labour, says the radical transformation that has taken place at the Treasury over the past 15 years means the department has evolved into focusing more on shaping domestic policy and spending. But it says the Treasury is rapidly having to revert to its traditional role as the Government’s finance director and macroeconomic and fiscal policies are becoming top priority once more. It says these changes, coupled with staff cuts, cast doubt over the Treasury’s ability to tackle recession issues.
The IPPR’s concerns echo those of the Treasury select committee, which has raised the issue of whether the Treasury has the right people to face the turmoil after staff cutbacks.
Lodge and Dolphin say: “The existing tripartite system of regulation, under which the Bank of England is responsible for the overall institutional structure of financial regulation, appears to have failed.
“FSA chairman Lord Turner has called for a revolution in the way the financial sector is regulated. A review could conclude that too much accountability has been passed from the Treasury to the bank and the FSA and recommend an increased role for the department in the future.”