Those who argued that all we needed was tighter financial controls and more government spending were wrong: this was a monetary crisis, and the most important part of the solution was monetary action: flooding the system with liquidity, preventing the collapse of systemic financial institutions, establishing new sources of finance – government ones, if necessary – to lend money to small businesses now starved of cash.
Confident of this analysis, the third thing we had to do was to be bold. In November 2008, we announced that we would move away from Labour’s spending plans. Championing prudence was particularly brave at a time when the whole world was fixated on a Keynesian ‘spend, spend, spend’ solution to the crash. But we genuinely believed that the government’s fiscal position was so precarious that it could not afford to go beyond the ‘automatic stabilisers’ of higher benefit bills and lower tax receipts that in any event push up the budget deficit when the economy stops growing.
Discretionary increases in government spending and tax cuts were all right for those countries that could afford them; those that couldn’t were playing with fire. So, in another bold step – particularly for a party that prided itself on supporting low taxes – when Labour announced a temporary cut in VAT, we voted against it.
The real boldness, however, was in directly advocating a policy of austerity in terms of cutting government spending for the future. After all, what party goes into a general election talking about cuts? And we were using that crucial word: cuts.
This caused more trouble for Gordon Brown, who, after having mistakenly declared himself to have ended the b-words – boom and bust – simply refused for weeks and weeks to use the c-word.
Some critics say that we were as naïve as Brown – and that we never saw the bust coming. But it was before the crunch and crash that I’d given a speech at KPMG warning about Labour’s unsustainable deficit and debt. We knew their overspending would come to bear on us all. We knew the economy was built on sand. We just didn’t know the meteorite would hit when it did.
Other critics say that we were desperate to cut public spending in order to dismantle public services. Well, since we’d promised in 2007 to match Labour’s spending plans, clearly that wasn’t the case. The reality was, in the phrase George coined and then made famous through endless repetition, they hadn’t fixed the roof when the sun was shining.
The reason for cutting was therefore the total opposite. It was to save public services. The greater the debt, the more money we would be spending on repayments. The weaker the economy, the less to spend on public services. We saw this clear as day, and I suspected that working people would see it too. They knew the UK hadn’t been living within its means, and that that needed to change.
We were making some tangible policies in order to prevent such a situation occurring ever again. That included another bold step, which was to give away a power that chancellors had long held.
I had some experience of the stringency with which annual accounts and results were published when I worked at Carlton. Lawyers and auditors would pore over every word to check for accuracy. But that was business. In politics, it seemed to be totally different. It was up to the Treasury to predict future growth on which its spending plans would be based. That gave it the opportunity to manipulate the growth forecasts and fiddle tax receipts, which Labour took full advantage of.
Gordon Brown and Alistair Darling’s forecasts became works of fiction. At every Budget and Pre-Budget Report they would become increasingly optimistic. When better estimates or true figures emerged, there were wild disparities. George and I proposed that an independent Office for Budget Responsibility (OBR) should make those predictions instead. Of course it wasn’t easy for anyone to guess how much the economy would grow (or, at this point, contract). But by removing the potential for bias, we could prevent figures being massaged to justify spending increases our country couldn’t afford.
That Christmas of 2008, shops like Woolworths and MFI were disappearing from our high streets. The New Year, 2009, brought confirmation of Britain’s first recession since 1991. What concerned people wasn’t just how the deficit would affect them today. It was how this ‘spend today, pay tomorrow’ culture was saddling the next generation with debt. How wrong it was – morally – to make our children pay for our excesses. This was perfectly captured in our poster that January – a picture of a baby with the line: ‘Dad’s nose. Mum’s eyes. Gordon Brown’s debt.’
Brown’s favourite insult to hurl at me was ‘This is no time for a novice.’ I worried deeply that, at this time of great financial turbulence, it would become especially potent. After all, George and I had never held ministerial office. And we did make mistakes.
But we had carefully thought out our strategy. We stuck to our instincts – instincts we believed the public would share – that a crisis caused by recklessness and secrecy should be met with prudence and honesty. And we ended the period with more people trusting us than the government on the crucial issue of managing the economy – the first time we had had a consistent lead over Labour since the 1990s.
But the second meteorite was about to hit.
Great political controversies tend to drive us all to think in simple headlines. This one seemed like a straightforward story: brave campaigner sets out on a mission to unearth grave wrongdoing; Parliament resists releasing information it ought to; the information comes out anyway, and it reveals appalling practices, illegality and corruption.
All those things are true of the expenses scandal, but the full truth is more complex. And I didn’t just have a front-row seat, I was on the judge’s bench – and in the dock myself. And what I saw from that unique position was, yes, wrongdoing that needed unearthing, but also unfairness, heartbreak and lots and lots of grey areas.
The context was this. MPs were entitled to claim an ‘Additional Cost Allowance’ (ACA) of up to £24,000 per year for running a second home, because they have to be based in Westminster for part of the week and in their constituency for the rest of it. There was also £22,000 of ‘Incidental Expenses Provision’ for office expenses, over and above the salaries for staff. Rules about employing relatives as members of staff were virtually non-existent.
The ACA in particular was treated by many as if it should be claimed automatically. Over many years the salaries of MPs had been held back – usually for political reasons – and their allowances increased instead. Often, MPs would just send a load of receipts in to the Commons Fees Office and let them decide what household expenditures or repairs should qualify.
Our party had a taste of what was coming when it was revealed that there was little evidence of what MP Derek Conway’s researcher, his son, had done to earn the thousands of pounds he’d received at the taxpayer’s expense.
Labour experienced its own preview of the scandal when some receipts for which home secretary Jacqui Smith had been reimbursed were published. They included two pay-per-view pornographic films, which her husband soon owned up to.
I knew I had to act fast. I made sure all our MPs filled out a ‘Right to Know’ form that provided the basic details of their expenses claim and whether they employed any relatives. These would be made public.
Labour’s reaction was to continue to attempt to keep the problem under wraps. Leader of the House of Commons Harriet Harman wanted the House to vote to ensure that MPs’ expenses were exempt from the Freedom of Information Act. But it was too late. The Daily Telegraph bought a stolen disc with every MP’s expenses claims set out in full, receipts and all. Day after day it published the details. Determined to remain ahead of the game, I called a press conference at the St Stephen’s Club. My response included an apology and a roadmap – and I didn’t conceal my anger about what had been going on: ‘Politicians have done things that are unethical and wrong. I don’t care if they were within the rules – they were wrong.’
I set up an internal scrutiny panel, a so-called Star Cha
mber, including my aide Oliver Dowden, known as ‘Olive’, who I also called ‘the undertaker’, since he so frequently brought me the bad news. The panel, assisted by a team that was combing through all the information, would examine the expenses claims of every Tory MP, and would decide who had to pay money back. Anyone who refused to comply would lose the whip. This was faster and firmer than the Parliament-wide independent inquiry that Brown would set up, and showed that we had understood the severity of the situation and had gripped it early.
The whole thing became a daily ordeal. The Telegraph would call up in the morning, give us details about whose expenses they were going to expose the next day, and allow us until 5 p.m. to respond. Ultimately the call – both the judgement call and the phone call to the MP – had to be made by me.
The calls included some of the strangest conversations. ‘Your entire family were working for you?’ ‘Why do you need a ride-on lawnmower?’ ‘What does your swimming pool have to do with your parliamentary duties?’
As before and since, I always tried to give people a chance to explain their situation, rather than being driven by arbitrary deadlines. But it was hard. Some colleagues didn’t help themselves by taking to the airwaves. Anthony Steen became one of the most famous examples. Having claimed over £80,000 for the upkeep of his country house, including rabbit fencing and tree surgery, he insisted to BBC radio that he had behaved impeccably: ‘I’ve done nothing criminal, that’s the most awful thing, and do you know what it’s about? Jealousy. I’ve got a very, very large house. Some people say it looks like Balmoral …’
He had to go.
I had to deal with Peter Viggers, who had claimed, among £30,000 of gardening expenses, for a £1,600 ‘floating duck island’. With Michael Ancram, whose swimming-pool boiler was serviced at taxpayers’ expense. With Douglas Carswell, who put a ‘love seat’ on expenses. With John Gummer, whose moles were removed from his lawn using public funds. It just seemed to go on and on, and to get weirder and weirder.
Then there was Douglas Hogg, who was, according to reports, reimbursed by the taxpayer for having his moat – yes, moat – cleaned. To be fair to him, he had never actually claimed for this directly. He had given all his receipts to the Fees Office and, satisfied that they added up to far more than the ACA, they had just given him the full amount. I could see his point. He was doing what he had been told to do. It was all within the rules. But, as Andy put it, the point was that he had a bloody moat.
There were some heart-rending examples at the other end of the spectrum. One MP who was asked to pay back thousands of pounds was desperate not to do so, both because it would look as if he was admitting guilt when there was no impropriety, and because as a young MP with a large family he genuinely couldn’t afford to.
The sheer, granular detail being unearthed made the scandal run and run. Receipt by receipt, the Telegraph gave an insight into MPs’ lives – and revealed a class that seemed completely out of touch with normal people. Never mind that most MPs had claimed only for rent or mortgage interest payments or the odd piece of IKEA furniture, and had been urged by the authorities to claim even more. The colourful examples stood out, showing a world of ride-on mowers, moats and mole-free lawns.
Of course, I had a colourful example of my own – violet-coloured, to be specific.
I had only ever claimed for the mortgage interest on my constituency home. It was a simple approach, specifically permitted by the rules, and seemed to me to be clearly within the spirit of what was intended. But one year I had an extra bill, which I handed to the Fees Office. Ordinarily this would have been logged as ‘maintenance’, and would have attracted absolutely no attention. Except, like a good West Oxfordshire tradesman, my builder had detailed the work he had done: ‘Cleared Vine and Wisteria off of the chimney to free fan.’ As with so many other claims, it was the detail that did for me. People still ask me how my wisteria is doing today.
Every party was embroiled. Which meant we could only fix the broken system if we worked together.
In fact, before the scandal broke I went to see Gordon Brown in his Commons office with Nick Clegg to see what the three main party leaders could do. He gave us a take-it-or-leave-it proposal: a per-day allowance for MPs – not all bad, but far from right.
Had we been with Tony Blair, the three of us could have thrashed out something workable. With Brown, it was pointless. He was sullen and stubborn, and couldn’t hide his contempt. Clegg and I both concluded that it was impossible – he was impossible.
What were the long-term implications of the expenses scandal?
We lost a lot of good MPs, as people who weren’t even guilty of any wrongdoing, such as Paul Goodman, left Parliament.
The British Parliament is one of the least corrupt in the world, but it would be forever tainted. I believe deeply that people go into it to make a difference and to serve, not to see what they can get out of it. Yet ever since 2009, my postbag has been full of letters about how venal our MPs are.
It left many Tory MPs feeling aggrieved with me. They felt that the system I had set up to clean house made them look as though they had done something wrong, when they felt they hadn’t. At one point Andy walked into my office and said there was a serious chance of rebellion. I said I didn’t care. ‘This is the right thing to do – if it’s going to take me down, then so be it.’
So while it stored up bad feeling between me and some in the party, I don’t regret the position I took. Politics ended up with a model that was more transparent and that cost far less, and our party drove that.
In the normal course of things the searchlight might land on politicians once or twice a year, but its harshest glare is saved for momentous events like the financial crash and the expenses scandal. Under that intense scrutiny, I thought we had demonstrated that we were the party with the answers not just to a broken society, but to a broken economy and broken politics too.
But we were also suffering from our own broken – a broken promise.
In 2004, Tony Blair had pledged to hold a referendum on a proposed European Constitution, but it was rejected at plebiscites in France and the Netherlands.
The European powers went back to the drawing board and came back with the Lisbon Treaty, which retained many of the elements of the constitution – creating an EU Council president, foreign minister and diplomatic service, eliminating national vetoes in many areas, and paving the way for more vetoes to be eliminated.
We argued straight away that if the government had said it was going to have a vote on the constitution, it must have one on this treaty – especially since it was more significant and far-reaching than its immediate predecessors, Nice and Amsterdam. I was clear about the lessons from Maastricht: it was right to give people their say on such important changes.
I thought – I still think – that Labour’s failure to hold the referendum it had promised in 2004 was outrageous. It had managed to avoid all questioning on the European constitution during the 2005 election campaign by saying it would be subject to a separate vote. And then it didn’t hold one. So in the Sun in 2007, as the treaty was still being negotiated, I gave a ‘cast-iron guarantee’ that a Conservative government would hold a referendum on any EU treaty that emerged from the negotiations.
In 2007 it seemed entirely likely that we would be able to fulfil this if we entered government, since we all thought that the Parliament wouldn’t run its full course to 2010. But as Brown delayed, member states had the time to ratify and implement the treaty – including the UK, which did so in July 2008.
By 2009, our last hope was the Czech Republic. I wrote to the president, Václav Klaus, pleading with him to wait until after a UK general election before he ratified the treaty. But he replied that he could not hold out that long – another eight months – without creating a constitutional crisis. The Czech Constitutional Court ruled against the one remaining challenge to the treaty, and Klaus signe
d it that November. On 1 December the treaty was passed into law. Our promise to hold a referendum on it was redundant.
I gave a speech declaring that a Conservative government would never again transfer power to the EU without the say of the British people, and that any future treaty would be put to a vote. (True to our word, we made this ‘referendum lock’ law in 2011.) In that speech I talked about ‘the steady and unaccountable intrusion of the European Union into almost every aspect of our lives’. I said: ‘We would not rule out a referendum on a wider package of guarantees to protect our democratic decision-making, while remaining, of course, a member of the EU.’
I could feel the pressure on Europe quietly building. The anger at the powers ceded at Maastricht and since was reawakened by the denial of a referendum on Lisbon. The anger was not just coming from the usual suspects and the Eurosceptic press, but from constituents and moderate MPs. I felt it too. I was thinking intensively about the issue, and about how to make this organisation work better for us. And I was clearly stating that a referendum of some sort might be on the cards at some point in the future.
11
Going to the Polls
There haven’t been many general elections in this country at which voters have shifted en masse from one party to another. The Liberal landslide of 1906, Clement Attlee’s triumph in 1945, Margaret Thatcher’s victory in 1979, the rush to New Labour in 1997 – these are remembered as some of Britain’s great swing elections, whose winning governments went on to change the course of our history.
As 2010 approached, I knew I needed to perform a similar feat. It wouldn’t be enough just to take a few extra constituencies. We would have to win 120 more seats, and retain all our existing ones, if we were to have any hope of a majority. No Conservative had achieved anything like it since Churchill in 1950, and even he fell short of an outright majority and needed another election to return to Downing Street. We had a mountain to climb.
For the Record Page 16