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Sir Douglas Wass: a stout-hearted Keynesian

Sir Douglas Wass, one of the most outstanding British civil servants of the post-war period, passed away on 4 January at the tender age of 93.

One of the clues to this fascinating man was a remark he made when delivering the annual BBC Reith Lectures in 1983 after his nine-year stint as the top civil servant at the Treasury department (1974-83) and two years as joint head of the civil service (1981-83).

In his retirement from the civil service – but not from work, as he took on a variety of banking and commercial directorships, including as chairman of the international arm of Japanese investment house Nomura – Wass was free to publicly indulge his reflections on governance. Much to the annoyance of at least one of his successors as permanent secretary to the Treasury, Wass became a champion of freedom of information, one of his objects being to render devious behaviour by ministers ‘difficult to conceal’.

He titled his Reith Lectures ‘Government and the Governed’. For me, the revealing sentence in those lectures was: ‘If incompatibility does arise, a minister should be able to remove his permanent secretary.’

The significance of this was that, under the Margaret Thatcher government elected in 1979, Wass himself was badly treated and sidelined, but not formally removed. Wass was, as I am, a stout-hearted Keynesian, with all the intellectual rigour of which Keynes himself would have approved. He was disdainful of the newly fashionable monetarist doctrines brought to Downing Street by Thatcher, Sir Geoffrey Howe, chancellor of the exchequer, and Nigel Lawson, their financial secretary who subsequently became chancellor in 1983.

Wass was proved right, as the ‘medium term financial strategy’, with its targets for controlling the money supply, proved faulty. It was old fashioned deflation and with it a rise in unemployment to over 3m by 1986, not control of the money supply, that brought inflation down.

Wass had offended the Thatcherites in 1978 in a public lecture in which, while acknowledging that the financial markets were a force to be reckoned with, he was decidedly lukewarm about monetarism.

For this and subsequent trenchant advice he was marked down as, in a famous phrase favoured by Thatcher, ‘not one of us’. His position was undermined by junior officials who subsequently rose to the top. Chapter and verse on this episode are expected to be revealed later this month when Sir Brian Unwin, who was effectively Wass’s chief of staff during this period, publishes his memoirs.

Wass had previously navigated the stormy economic waters of the mid-1970s, when policy-makers like himself had to deal with the onset of the oil crisis and the collapse of international confidence in the British economy. This led to the need to approach the International Monetary Fund for loans to prop up sterling in 1976.

Even Denis Healey, that especially robust chancellor, was feeling the pressure of events which nearly spun out of control and could have brought down James Callaghan’s Labour government. Wass famously chided him, saying it could be worse: the Russians might be invading.

Healey was tough, but so was Wass, who never tired of telling people that in the end there was no alternative to recourse to the IMF. In a masterpiece of an account of the IMF crisis, Wass took issue with Healey’s view that he would not have had to resort to the IMF if only the Treasury’s forecasts had been more accurate. As someone who followed the crisis from first the Financial Times and later the Bank of England, I agree with the Wass judgement. The atmosphere of the time made avoiding the IMF impossible.

The obituaries have noted that Wass was widely believed to be the model for Sir Humphrey Appleby in British political satire Yes Minister. He was also a model for my own fictitious character Sir Douglas Corridor, who used to make regular appearances at holiday time in my column for The Observer. But he was not the only one. There was a time in the 1970s when no fewer than three senior Treasury officials were called Douglas.

In his later years Wass was rather amused that Treasury officials, many of whom had not been born when he retired, sought him out for advice on issues as diverse as crisis management and the withdrawal of honours.

Wass remained sage and lucid to the last, taking to regular short walks, although less able to carry out his regular swimming. Only a few weeks before Christmas he telephoned me to check on the contact number of some friends who had moved house, adding that he was looking forward to lunch in the New Year. Alas, that last meeting did not materialise, but the fond memory of many such lunches remains.

William Keegan is Senior Economics Commentator for The Observer.

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