The misfortune of most Labour Treasury teams has been to spend most of their time in office preaching austerity to resentful colleagues.
Joel Barnett, chief secretary to the Treasury, and Denis Healey, the chancellor, during the Harold Wilson/James Callaghan governments of 1974-79, were no exception. Their resistance to the demands of colleagues, interest groups and trade unions for more spending made them unpopular. Healey called himself Dr No while Barnett was Oddjob, after the villains in a contemporary James Bond film.
Labour ministers inherited a looming economic crisis from Edward Heath’s government in March 1974. They then exacerbated it with reckless expansion of public spending and borrowing. The IMF intervened in 1976 and a severe financial squeeze followed. Subsequent governments were determined never to repeat the pattern. Barnett, who has died aged 91, believed in government as a force for making life better for people, but at the Treasury he grew cynical, as funding decisions were driven by short-term political considerations; he admitted that having started as an optimist about Britain’s economy, he ended as a pessimist.
In 1978 he worked out the so-called Barnett formula to allocate increments of public spending to different parts of the UK. He wanted to end the annual spending rows between the Treasury and the secretaries of state for Scotland, Wales and Northern Ireland and head off demands for separatism by Scottish Nationalists. But during the referendum on independence for Scotland in September 2014, Barnett disavowed the convention that bore his name. He said it had been drawn up on the back of an envelope, was not based on need, and now unfairly gave advantages to Scotland at the expense of other nations, particularly England. It was now “a national embarrassment,” he said. The intervention was significant in fuelling demands for a better deal for England.
Son of Louis and Ettie Barnett, he was born in Manchester, opposite Strangeways prison. His father, a tailor, worked long hours and money was short. From a Jewish elementary school, he won a scholarship to Manchester central high school, but left at 14 to help the family finances. After second world war service he attended night school and passed his accountancy exams. In 1949 he married Lilian Goldstone, and her wage as a secretary helped support the family.
Barnett’s successful accountancy practice was combined with seeking a local parliamentary seat. He fought and lost Runcorn in the 1959 general election. He also began a lifelong friendship with two other young Jewish Labour politicians in the area, Robert Sheldon and Edmund Dell. They established the Left Wing Coffee House in a Manchester city-centre basement but it soon folded. All three entered the House of Commons in 1964, Barnett for the marginal seat of Heywood and Royton.
Given his numeracy and interest in taxation and economic policy Barnett was a weighty member of the public accounts committee between 1965 and 1971. He and Sheldon angered Wilson, the prime minister, and Callaghan, the chancellor, with their campaigns for a devaluation of the pound before it was done in 1967, and for withdrawal of British troops from east of Suez. He had earlier refused an offer from Robert Maxwell to chair the Commons catering committee; he had not entered parliament to be a caterer. He also used his accountant’s skills to help MPs complete their expenses claims.
In 1970 he joined Labour’s shadow Treasury team. Like Roy Jenkins, the shadow chancellor, he supported Britain’s entry to the European Economic Community. Following Jenkins’s resignation, in 1972 he continued under Healey. Despite their rows, he found Healey a warmer and more open colleague.
As chancellor, Healey had the three Mancunian MPs among his Treasury junior ministers – as well as Leo Pliatzky, another Mancunian, as a senior official. Barnett was in no position to control public spending in the first months. Wilson ensured that everything – including spending – was subordinated to winning another general election in October 1974. Ministers also had to appease the trade unions. Public spending and borrowing soared in anticipation of economic growth that was not delivered.
During the lengthy negotiations in November 1976 to gain an IMF loan, Barnett and Dell were the lonely supporters of Healey, who argued for accepting the bulk of the IMF demands for heavy public spending cuts. At times they were outnumbered by supporters of Tony Crosland’s advocacy of more Keynesian policies and the leftist alternative strategy of Tony Benn. Although Barnett attended all the cabinet meetings, he did not formally join it until 1977. Since then, all chief secretaries have been members.
Barnett was dapper, cheerful and compact. Like Healey he was also armed with a strong constitution and a sense of humour. Bernard Donoughue, head of the No 10 policy unit at the time, recalled that Barnett and Harold Lever were like a music-hall turn. Barnett’s numerical skills, unmatched in the cabinet, earned the respect of Treasury officials.
In the 1979 parliament following Labour’s election defeat, Barnett chaired the public accounts committee in the Commons. His seat disappeared following boundary reorganisation and he was defeated in his efforts to seek a nomination in two Greater Manchester seats. He was given a life peerage in 1983.
In 1986 Margaret Thatcher, who warmed to his hard-headedness, appointed him vice-chairman of the BBC board of governors. (She had earlier approached him indirectly to see if he would be a European commissioner). On his watch, in 1987 Alasdair Milne resigned as director general, to be replaced by Michael Checkland, an accountant, and later, in 1992, the tougher John Birt was appointed. Barnett retired from the post in 1993.
His Inside the Treasury (1982), recounting his experience as chief secretary, created controversy and embarrassed Labour. It told of his bruising battles to persuade colleagues and union leaders to recognise the economic facts of life. Thatcher and Conservative ministers eagerly quoted it. About the Labour government’s much-vaunted social contract with the TUC, he complained that “the only give and take in the social contract was that the government gave and the unions took”. He dismissed as “Benn’s follies” the politically driven subsidies for workers’ co-operatives, which turned out to be lame ducks.
After 1997 he approved the financial discipline Gordon Brown brought to the party’s economic policies in his early years as chancellor, although he opposed giving independence to the Bank of England. But like a number of traditional centre-right Labour figures he reflected that, under Tony Blair, he would be characterised as being on the left.
His public appointments included chairing the Hansard Society, serving as a trustee of the V&A and the Open University Fund, supporting the Hallé Orchestra in Manchester, and serving on business boards. He was a regular attender in the Lords, popular across parties, and without pomposity. His normal good humour and mischievous grin briefly disappeared in 2012 when the Leader of the Lords, Lord Strathclyde, accused him of “gross discourtesy” when raising a point of order; the rebuke was received badly by many peers. In their 90s, Barnett and Sheldon, usually sitting together in the Lords, would lunch in the Commons dining room.
He and Lilian had a daughter, Erica, who survives him.
• Joel Barnett, Lord Barnett, politician, born 14 October 1923; died 1 November 2014
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