The Chancellor of the Exchequer and the Treasury rose, and then rose again in its place in the twentieth, and rose again in the twenty-first century, to become, the biggest single challenge to the authority of the prime minister. No longer subordinate at all. Naked power, ambition, the knowledge that some were virtually unsackable, command over the purse and the backing of the mighty resource of the Treasury compared to the puny No. 10, ensured that Chancellors could be a power to themselves, strutting around Westminster and Whitehall at times like an overmighty baron in medieval England, making the job of prime minister at times impossible. Reaching this elevated position was not preordained, as we shall see in this chapter, and occurred through seven successive pulses, each associated with a commanding figure, usually the Chancellor, who has shaped the office, much as our landmark prime ministers have done to their own office. There are three great contemporary problems with the Treasury: its handicapping of the prime minister in shaping government strategy, its prioritising of financial over economic policy, and a diminishing role of Parliament in its oversight, have all had long roots.

Why didKeynes an exceedingly well connected young man with his feet very well planted in the English establishment,decide to take the risk of writing such an explosive book like The Economic Consequences of the Peace in 1919? After all, others had their doubts about Versailles; butnone went public;and ifor when theydid,it was certainly not to criticizethe peace settlementor the peacemakersin such a vitriolic fashion. SowhatledKeynes to write a book likeThe Economic Consequences of the Peace? What was his purpose in doing so? Who did he think he was writing it for?Was it his last word on the subjector was it – as Keynes believed at the time – merely the first step in a longer struggle to effectively render the economic parts of the Treaty invalid? Finally, why was the volumethe great success it turned out to be at the time, and whyis it still being debated today by both admirers and critics alike?

The chapter looks at Churchill’s economic ideas as a Liberal and then Conservative and their impact on his actions. Churchill was a free trader and accepted the self-correcting specie-flow mechanism of the Gold Standard. His political economy before 1914 rested on interventions to remove monopoly power and market imperfections that would allow ‘competitive selection’ by free enterprise and encourage individual responsibility. After the war, strains appeared in this coherent set of assumptions. Churchill’s tenure as chancellor was marked by creative accounting for pragmatic political reasons. He remained a devotee of sound finance and balanced budgets, and despite some reservations on the issue of the return of the Gold Standard, he could not go against the advice of Treasury officials and the Bank of England, or his own ‘deeply internalized convictions’ that coincided with their assumptions. After 1929 he took little systematic interest in economics. Churchill’s coherent political economy of free trade and the Gold Standard collapsed and he had nothing in its place.

This chapter examines the budgetary behavior of the former countries of the British Empire, now known as Commonwealth countries. Orginally created by the 1931 Statute of Westminister that recast the British Empire as a “Commonwealth of nations,” the modern Commonwealth consists of a fifty-four-country network of disparate people created in 1949. The chapter in particular examines the budgetary practices of the United Kingdom and India.

This chapter explains how a distinct constitutional model of public finance developed in the UK between 1700 and 1900, focusing on the legal and institutional relationship between Parliament and the Treasury. After providing critical economic context regarding the financial activities of British governments, the chapter explains how the complex inter-play of taxation and appropriation legislation distributed financial authority between parliament and executive government. It then moves to survey the growth of statutory public borrowing, the law underpinning the Bank of England's public financing functions, the appointment of the Treasury at the financial apex of Westminster government and the growth of a settled system of public audit. Special attention is paid to a number of topics: appropriation legislation (annual and standing); time-limited taxation statutes; the Treasury's power to adjust parliament's approved expenditure (virement); the connection between annual appropriation legislation and the UK's 'National Debt'; the Bank of England's powers to finance government; and the complicated relationship between Treasury and Comptroller and Auditor-General.

Chapter 7 identifies a conundrum of the EITC: It is intended to lift low-income individuals out of poverty, yet the credit is subject to capture by a number of creditors and agencies. Because it is delivered as a tax refund, the amount due to the taxpayer can be offset against outstanding federal and state tax liabilities, past-due child support, and federal student loan liabilities. The possibility of such offset betrays its function as an antipoverty supplement. Low-income families are subject to various economic stressors and are likely to have outstanding debts. In reconfiguring the credit into two distinct elements – an incentive to work and an antipoverty supplement – Congress might consider whether the latter should be protected from offset or garnishment (in whole or in part) in order to better serve its purpose. This chapter considers the pros and cons of such a protection, and proposes some possible structures.

In the wake of the recent financial crisis, Federal Reserve Chairman Ben Bernanke argued repeatedly that fostering healthy growth and job creation required legislative action. He warned that continued political battles over fiscal and monetary policy, financial regulation and the debt ceiling were “deeply irresponsible” and would have “catastrophic consequences for the economy that could last for decades.” At the same time, like Alan Greenspan before him, Bernanke joined secretaries of the Treasury and other technocrats in guiding and enabling legislation, helping presidents outmaneuver critics and compensating for political uncertainty when political battles between the President and Congress stalled economic legislation. Far from being apolitical actors, these technocrats manipulated authority, exploited deference from politicians and business leaders, and alternately bolstered and challenged national politicians in order to shape US economic policy, manage market behavior and coordinate global activities before, during and after the recent financial crises.