Prime ministers and chancellors: rarely the friendliest of neighbours

Harold Macmillan and John Selwyn Lloyd

If ever there was an example of the ongoing feud between the households at 10 and 11 Downing Street it was under the Conservative prime minister Harold Macmillan (1957-63). As with the dispute between the Treasury and Boris Johnson/Dominic Cummings, the prime minister’s desire for higher public spending and faster growth was the root cause. Two of Macmillan’s chancellors, Peter Thorneycroft and Derick Heathcoat-Amory, resigned. Their successor, John Selwyn Lloyd, lasted longer – nearly two years – before being fired. Indeed Macmillan was at odds with No 11 most of the time, preferring the advice of the Oxford economist Roy Harrod, in effect his unofficial adviser.

Edward Heath and Anthony Barber

A prime minister’s desire to dominate his chancellor was achieved most fully in practice in Heath’s government. His first chancellor, Iain Macleod, died within a month and his successor Barber (1970-74), whose main interest was tax reform, found himself dominated by Heath when it came to macroeconomic policy. Heath’s decision to speed up the pace of public spending and “go for growth” in reaction to what was then considered the high level of unemployment marked the first appearance of the phrase U-turn. The Tory manifesto of 1970 had said public expenditure needed cutting back. Heath became his own chancellor, with unhappy results .

Harold Wilson and James Callaghan

Dissatisfaction with the Treasury was rife in the first Wilson government of 1964-70 - so much so that the Department of Economic Affairs was set up under Wilson’s deputy George Brown as a rival to Jim Callaghan’s Treasury. The thinking was that the Treasury was too cautious and a restraint on economic growth. It was the decade of two National Plans, aimed at faster growth. However, Callaghan’s 1964-67 chancellorship was chronically impeded by Wilson’s decision in 1964 not to devalue the pound until the event was forced on him by the markets in 1967. This crucial prime ministerial decision also foiled the work of the Department of Economic Affairs. It was wound up.

Margaret Thatcher and Nigel Lawson

The most memorable clash between prime minister and chancellor over special advisers was between Margaret Thatcher and Nigel Lawson in October 1989. Lawson, who was struggling to persuade the prime minister to agree to the pound’s entry into the European exchange rate mechanism (ERM), was frustrated by what he regarded as the influence of Thatcher’s economic adviser Alan Walters, who reinforced her doubts. Lawson resigned in a huff. Ironically, Walters also resigned and a year later the new chancellor, John Major, persuaded Thatcher to relent. The UK entered the ERM in October 1990 and crashed out spectacularly two years later.

Tony Blair and Gordon Brown

The relationship between John Major, as prime minister, and Ken Clarke, as chancellor (1993-97), was relatively peaceful. But that between Tony Blair and Gordon Brown was notoriously stormy. Blair granted Brown an unusual extension of Treasury powers over domestic policy, but what soured relations was Brown’s persistent battle to become PM. Among many odd episodes, Blair’s economic adviser, Derek Scott, was excluded from many Treasury meetings, despite agreeing with Brown that the UK should not join the eurozone. After Brown finally took over in 2007 he himself often clashed with chancellor Alistair Darling.

David Cameron and George Osborne

David Cameron and George Osborne were good friends and keen to avoid a Blair-Brown-style conflict. They were conscious of Nigel Lawson’s dictum that the relationship between prime minister and chancellor was the most important in government. But historians may say the nation suffered from too close a friendship. Osborne has said he was against Cameron’s decision to hold a referendum on membership of the EU. If he had fought harder, threatening to resign, history might have turned out differently.