The Social Liberal Forum's Economy Working Group was founded in 2025 to help develop economy policy based on social liberal values.

1) A Necessary Challenge to an Over-Centralised Power

This week, Liberal Democrat Treasury Spokesperson and Deputy Leader, Daisy Cooper MP, announced a proposal to break up the Treasury and in its stead, establish a new Department for Growth based in Birmingham and a Department for Public Spending (equal to ‘Finance’ departments in other countries). Ideas like these represent significant institutional reforms which, from a social liberal perspective, should be welcomed as a serious attempt to confront a structural barrier that has long held back balanced national prosperity.

As outlined by the Liberal Democrats, Britain is “stuck in a doom loop of low economic growth,” and too often governments have allowed the “Treasury tail to wag the political dog.” These are not partisan criticisms – they reflect a broader and longstanding concern that economic power in the UK is overly concentrated in a single institution and a single city.

Social liberalism has always emphasised both economic dynamism and fairness of opportunity. It recognises that fair wealth creation and social justice are interdependent rather than opposing goals. When economic institutions become excessively centralised and risk-averse, they can inadvertently suppress innovation, limit regional development, and reduce the state’s ability to invest in the public goods that underpin social mobility.

The proposal to challenge Treasury dominance therefore aligns with a core social liberal principle: power should be dispersed rather than concentrated, whether in markets or in government. Decentralisation enables experimentation, encourages responsiveness to local needs, and helps prevent entrenched bureaucratic thinking from becoming an obstacle to progress.

Yet structural reform alone is not sufficient. Breaking up the Treasury will only produce meaningful results if it is followed by genuine fiscal devolution and sustained investment in regional infrastructure, skills, and innovation ecosystems. Without these, institutional changes, and announcements like moving the Treasury to Birmingham, risk becoming symbolic rather than transformative.

The real prize for social liberals is not merely administrative restructuring, but a more balanced and opportunity-rich economic model: one in which growth is both geographically inclusive and socially sustainable.

2) Breaking Up the Treasury: From Guardian of Stability to Barrier to Growth

The central critique underlying this week’s announcement is that the Treasury’s structure and culture have created a bias toward short-term fiscal caution at the expense of long-term economic development. Often dubbed ‘Treasury-brain’, the Treasury’s model of governance, relying on the Green Book, has been criticised by think tanks including the Future Governance Forum and the Centre for Cities.

The department currently combines multiple powerful functions: fiscal policy, economic strategy, and control over government spending. In a number of advanced economies, these responsibilities are distributed across separate institutions to avoid excessive concentration of influence. Not only this is important in terms of clear thinking on different policy priorities (the policies and ideas required for effective economic growth are not the same as that needed for effective financial planning), but also a matter of time – the expectation for HM Treasury to both increase economic growth whilst dealing with every other department’s funding asks is a monumental ask. 

From a social liberal viewpoint, this concentration creates systemic risks. When a single institution controls both the purse strings and strategic economic direction, it can prioritise fiscal restraint over social and economic investment – even when such investment would generate long-term returns.

The critique is not simply ideological; it reflects a widely recognised institutional reality. The Treasury’s traditional focus on immediate cost control has often made it wary of large-scale public investment projects, particularly those with long payback periods or indirect benefits.

This risk-averse culture can have significant consequences:

• Infrastructure projects may be delayed or rejected despite clear long-term benefits.
• Regional investment initiatives may struggle to secure funding.
• Policies that stimulate productivity growth may be sacrificed for short-term fiscal targets.

The Lib Dem press release explicitly links this tendency to what it describes as “short-term tax grabs” driven by political cycles rather than growth strategy. Whether or not one agrees with that characterisation, the underlying concern is widely shared: the UK has persistently underinvested compared with peer economies.

The solution lies not in weakening fiscal discipline but in rebalancing institutional priorities. Economic governance must support:

• Long-term strategic investment
• Innovation and enterprise
• Human capital development
• Regional equality of opportunity

The proposed Department for Growth aims to address this by creating a body explicitly mandated to boost prosperity, coordinate investment strategy, and align tax policy with economic development goals. 

In theory, separating growth strategy from spending oversight could allow each function to operate more effectively. A dedicated expenditure department would safeguard fiscal responsibility, while a growth-focused institution could take a longer view of economic transformation.

3) Birmingham and Beyond: Devolution as the Real Blockage to Regional Growth

Perhaps the most symbolically powerful element of the proposal is the decision to base the new Department for Growth in Birmingham rather than London… but this risks being a purely symbolic move, and discrediting the Liberal Democrats as a party without credible plans on major issues.

This announcement acknowledges a fundamental reality: the UK’s economic geography is deeply imbalanced. The productivity gap between London and many other regions remains among the largest in the developed world. Narrowing Birmingham’s productivity gap alone could add billions annually to national output. 

At the same time, a major economic institution outside the capital would send an important signal about the government’s commitment to decentralisation. It could also help shift policy perspectives by embedding decision-makers within a broader economic context. Of course, there is a particular, very valid concern about the practicality of having a senior Cabinet member and civil servants around 1 hour away from Whitehall… one for the legislation when it comes round.

However, from a social liberal standpoint, institutional relocation must not be mistaken for genuine devolution, and the Liberal Democrats should not assume (and to be fair, have not assumed) that their work here is done. True regional development requires more than moving civil servants – it demands transferring real powers and resources. Anything short of that condemns the Liberal Democrats to failing to tackle the issues our country is facing.

Effective regional growth depends on three key pillars (and very likely, a number more):

• Fiscal Devolution

Local and regional authorities need greater control over taxation and spending decisions. Without fiscal autonomy, local governments remain dependent on central allocations and cannot pursue tailored economic strategies.

• Strategic Investment

Infrastructure investment (particularly in transport, digital connectivity, and clean energy) and investment in sectors like skills, is essential for unlocking regional productivity. Projects such as high-speed rail networks, integrated city transport systems, and innovation clusters have transformative potential.

• Inter-Regional Cooperation

Economic growth does not occur in isolated administrative units. Collaboration between city regions – such as technology corridors, industrial clusters, and shared transport systems – is critical for achieving scale and competitiveness.

Social liberals have long supported initiatives such as regional economic partnerships, infrastructure connectivity, and local innovation ecosystems precisely because they combine economic efficiency with social inclusion.

Relocating the Department for Growth to Birmingham should therefore be seen as an initial step toward a broader agenda: empowering regions to shape their own economic futures.

Conclusion: Institutional Reform as a Path to Inclusive Growth

The Liberal Democrats’ proposal to break up the Treasury and create a new Department for Growth reflects a growing recognition that Britain’s economic challenges are structural rather than cyclical.

From a social liberal perspective, the initiative is significant not simply because it targets a powerful institution, but because it seeks to rebalance economic governance in favour of long-term investment, regional empowerment, and inclusive prosperity. Yet institutional reform must be accompanied by deeper changes if it is to deliver meaningful economic transformation.

Ultimately, the success of such reforms will be measured not by administrative reshuffling, but by whether they enable a more dynamic, equitable, and opportunity-rich economy.

That is the true social liberal objective: a Britain where growth is not concentrated in one city or controlled by one institution, but shared across communities and generations.