The Treasury looks to banking for talent
Bank of America veteran Jim O'Neil has been appointed Second Permanent Secretary to HM Treasury, with responsibility for that all-important "growth"
On Wednesday, and crowded out of the news by, you know, everything, the government announced the appointment of a new Second Permanent Secretary to HM Treasury. New York-born Jim O’Neil will leave his role as head of EMEA corporate and investment banking at Bank of America to replace Cat Little at the Treasury, but, while Little focused on public spending and international and national security policy, O’Neil’s portfolio will be centred on—come on at the back, you know this one—growth. To put it in the hollow Stepford Wife-jargon of the current administration:
His appointment is part of the government’s plan to deliver its number one mission to kickstart economic growth as part of the Plan for Change, and follows the Chancellor’s commitment to lead the most pro-growth Treasury in the country’s history.
There is almost something Trumpian in that final flourish, “the most pro-growth Treasury in the country’s history”. I’d be fascinated to know if either HM Treasury or the Government Communication Service has done even a moment’s research to establish if it’s true; given that the Treasury of England, the current department’s ancestor, was created some time before 1126, it’s quite a bold claim.
O’Neil—who, The Financial Times warns with due caution, should not be confused with Jim O’Neill, Lord O’Neill of Gatley, Commercial Secretary to the Treasury from May 2015 to September 2016 but also previously employed by Bank of America—has spent most of his career at the same institution, joining Bank of America in 1993. From 2010 to 2013, he was CEO of UK Financial Investments, a limited company established to manage HM Treasury’s shareholdings in the Royal Bank of Scotland Group, Lloyds Banking Group, Northern Rock and UK Asset Resolution. He returned to Bank of America to manage its global financial institutions group, and in 2017 was appointed to his current role in corporate and investment banking.
O’Neil will take up his post in July, alongside two other second permanent secretaries: Beth Russell, based at the Darlington Economic Campus, is responsible for taxation, public expenditure, devolution and regional growth, including engagement with regional and local government; and Sam Beckett serves as Chief Economic Adviser and Head of the Government Economic Service. The vacancy notice for O’Neil’s role fleshed out “growth” a little. It set a requirement of “deep financial, business, commercial and analytical experience”, and added that a background in private sector and corporate finance was “essential”. The successful candidate would be:
tasked with engaging the business community to continue to understand how government and business can work together to deliver enhanced growth and the government’s wider priorities.
The government has stressed, clearly having learned at least some lessons from its mistakes so far, that O’Neil “was appointed through a fair and open competition and has completed all of the necessary declarations of interest”. He has agreed with the Treasury that he will sell his unvested Bank of America shares as soon as he receives them.
O’Neil is the first senior City figure to serve as Second Permanent Secretary since Sir Charles Roxburgh, a McKinsey & Company veteran, held the post from 2016 to 2022. The Chancellor of the Exchequer, Rachel Reeves, has been effusive about O’Neil’s experience.
I’m very pleased to welcome Jim as our new Second Permanent Secretary, his extensive knowledge of the private sector will be vital in helping us deliver our number one mission to grow the economy. It’s fantastic to have him join the Treasury’s top team.
It is almost guaranteed, however, that the recruitment of a Bank of America lifer, and one born in New York (although he is a naturalised British citizen), will inflame the neuralgia of some sections of the Labour Party in relation to the financial services sector. Sir Keir Starmer chose Rachel Reeves as his Shadow Chancellor when he displaced the intelligent but lacklustre Anneliese Dodds in no small part because of her background at the Bank of England and Halifax Bank of Scotland—it has since transpired that the exact nature of her responsibilities and tenure were perhaps misrepresented—and believed that exposure to institutional finance and the private sector was essential in establishing the Labour Party’s economic trustworthiness.
Together they assiduously courted the business community, which, exasperated by the disintegration of the Conservative government, was willing to take bland reassurances at face value. Without wishing to say “I told you so”, I was sceptical of their genuine attachment to and absorption of the importance of the private sector and of free-market economics. I argued in City A.M. that Labour’s instincts remained fundamentally interventionist, that Starmer and Reeves saw the state, not private enterprise, as the real engine of prosperity, that Reeves regarded private wealth as a resource to be taxed, that the disenchantment of the business community within months of Labour coming to power was inevitable and that, despite spending more than four years as Leader of the Opposition before reaching Downing Street, Starmer was strangely bereft of ideas about how to encourage economic growth. I had said in The Critic back in 2023 that Starmer’s form of Labour ideology not only failed to understand how wealth was created but disapproved of the way it seemed to occur.
At the same time, Starmer’s sceptical colleagues on the left of the Labour movement see him as irredeemably in hock to Big Money, to corporate interests, to the City of London, to wealthy entrepreneurs and donors. MPs like Zarah Sultana (Ind, Coventry South), Richard Burgon (Lab, Leeds East), Nadia Whittome (Lab, Nottingham East) and the veteran Jeremy Corbyn (Ind, Islington North) can hardly pass a microphone without denouncing dirty money, the buying of access and influence, sinister Zionist conspiracies and all-pervasive, Establishment-sponsored racism as some of the most malign forces at work in contemporary politics. Even to mention the National Health Service is to invite obloquy for wanting, probably covertly, to privatise it.
Inevitably, neither extreme is accurate. For some, it is still 1964 and George Brown’s distrust of the influence of the “gnomes of Zürich” continues to smoulder, while others still seem to rankle at Ramsay MacDonald’s “betrayal” of the Labour movement in 1931. Equally, the days of Peter Mandelson telling Hewlett-Packard executives in California that New Labour was “intensely relaxed about people getting filthy rich… as long as they pay their taxis” is a level of understanding and indulgence generally absent from the current administration.
No doubt Jim O’Neil’s experience of the financial sector will be useful for ministers and officials alike. Importantly, his appointment seems to have been made rigorously and scrutinised. But a single second permanent sectary role, even one explicitly concerned with “growth”, will not be enough to move the needle for the government. It has identified some of the factors which it must at least address, like short-term thinking, excessively onerous planning processes for infrastructure development and a complex and often-impenetrable taxation system. What it has yet to do is make substantial progress on removing these obstacles.
Moreover, it is unlikely that a single civil servant, however senior and experienced, will be able to affect the ideological, institutional and attitudinal malaise which afflicts his department, the dreaded “Treasury brain”. This phenomenon, focusing on short-term balancing of the books, a fundamental hostility towards public expenditure and a belief that the revenue raised through taxation, duties and so on becomes the property of HM Treasury to be hoarded, is a massively limiting factor in policy turns. I talked about the baleful effects of this more than three years ago in City A.M., and expanded on the subject here the same year.
Rachel Reeves promised to push back against the stifling and inflexible orthodoxy, but, despite grand words in opposition, Labour has proved deeply cautious and risk-averse in terms of machinery of government and the way in which administration is carried out. There was no grand restructuring of Whitehall when Sir Keir Starmer became Prime Minister last July, and his vaunted “mission delivery boards” have proved damper squibs than anyone could have anticipated and to a degree which ministers should find embarrassing. (I suspect much of this may stem from Starmer placing far too much faith in the preparations for government made by Sue Gray, his Chief of Staff as Leader of the Opposition and then Downing Street Chief of Staff for just over two months before her abrupt resignation. She seems to have given the impression of exercising an iron grip while doing virtually nothing.)
In any event, to return from the macro level to the micro—if that is not a slighting description of a second permanent secretary—the recruitment of Jim O’Neil is interesting in the light it sheds on the government’s real and imagined relationship with the private sector, and especially with financial services. But he is unlikely to be a magic bullet when it comes to achieving the economic growth which Sir Keir Starmer so desperately wants and needs. That will take rather more than the occasional civil service appointment.