Gordon Brown’s decade at the Treasury is nearly up. The parlour game of predicting his successor is well under way. What sort of Treasury will the next chancellor inherit?

Under Brown, three key changes have been made to Whitehall’s most powerful department — all of which have cost taxpayers dear. If you want to know why so much money has been wasted, look to the chancellor.

First, the Treasury has become the principal originator of government policy, rather than an evaluator of policy. Of course the Treasury has always taken a keen interest in policy — and the chancellor has always sat on the most important cabinet committees. However, the Treasury always saw its primary role as a stern critic of the policy ideas of others, rather than the source of the ideas. That way, the Treasury would remain the one ministry focused on value for money.

Since Brown arrived, all that has changed. The Treasury has dictated other departments’ policy priorities. Instead of scrutinising departmental spending plans, the Treasury’s public services directorate is now focused primarily on creating new policies. It has become more fixated with developing and fighting for the next new idea, instead of making departments deliver on the current idea.

A classic tactic it uses is the “independent review”, conducted by an external consultant. The Treasury picks the expert, sets the terms and takes — how can I put this diplomatically? — a close interest in the final report.

Treasury-sponsored reports — such as the Wanless review on health or the Baker report on planning — lead to the devaluation and demoralisation of other departments. How would you feel if you were a civil servant at the Department for Transport, when the Treasury commissions an independent transport report? It doesn’t say much for the chancellor’s confidence in your ability to shape transport policy.

The second change Brown introduced to the Treasury was to shift from scrutinising how public money was spent to micromanaging it. The Treasury not only uses its 1,000 targets to direct policy, it also determines exactly how the departments should meet them. So when a department is failing, it is difficult to tell whether the cause is the policy itself or its implementation. This has made it almost impossible for the Treasury to judge poor performance.

For example, the Treasury judges the Home Office to be “ahead” of its target for “improvement in the level of public confidence in the criminal justice system”. Given the catalogue of serious failings at the Home Office over recent years, I’m sure this glowing endorsement will come as a surprise. This is not how the Treasury should operate.

The Treasury’s changed policy role and its obsession with micromanagement are compounded by one final change introduced by Brown. The Treasury has itself become one of the largest spending departments, with a budget of more than £20 billion a year — bigger than the Home Office. It now administers child tax credit, working family tax credit, child benefit and child trust funds. If scrutinising Treasury policies in other departments is tough, scrutinising Treasury policies administered by the Treasury has proved near impossible.

The shambolic administration of tax credits is a case in point. If another department’s policies had cost the taxpayer more than £2 billion a year through error and fraud, the Treasury would have come down on them like a ton of bricks . Instead, the Chancellor hasn't answered a direct parliamentary question on tax credits for two years. Criticism is not allowed. Gamekeeper has turned poacher.

The consequences of the failure to ensure value for money have been well publicised. Take the poorly negotiated public sector pay contracts. Or the NHS computer system that is costing £6 billion more than planned. But perhaps the most telling statistic is this new one: for every extra £100 that Brown has spent since 1997, only £30 has been used to improve frontline public services. Thanks to the way he has run the Treasury, the rest has gone on cost-inflation, bureaucracy and waste.

Departments like powerful ministers. So it is an irony that under this dictatorial chancellor that the Treasury has become an unhappy place. More than half of the staff have served only one chancellor. And the most recent staff survey reveals that more than 50% of Treasury officials leave the department within two years. That the chancellor relies on a tight cabal of advisers only exacerbates the problem. This small group decides which civil servants have access to the Chancellor, and plays a powerful role in determining Treasury policy. It has become like an imperial court — and few dare tell the emperor when he has no clothes.

The next chancellor needs to get the Treasury focused on value for money. The system of top-down targets and micromanagement must be dismantled. He or she should consider passing their spending responsibilities to other departments better able to manage them — such as the Department for Work and Pensions. The cabal must be sent packing and work left to the civil service. The Treasury should do less and do it better.

Alistair, Ed, Jack or perhaps Ruth — it’s over to you. Make the Treasury effective again. The big question you face is — will the new prime minister let you?

George Osborne is the shadow chancellor

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