Cabinet Office minister Francis Maude then poured fuel on the firestorm. In an impromptu BBC interview he reassured the public that no fuel strike was imminent, but added that it might be best to keep a full tank of petrol, and maybe a little bit more ‘in the garage, in a jerry can’. This was absurd. We’d told people to fill up their tanks, not to decant flammable liquid into twenty-litre containers and take them home. Two days later a woman in York was badly burned while pouring petrol into a can in her kitchen. Francis was absolutely mortified.
At the press conference with the IOC I decided to tackle the whole thing head-on. When I was asked a question on fuel, I said that I thought a strike would be ‘completely irresponsible’. The Sun, of course, asked a question about the so-called pasty tax. I was able to say what I’d been longing to: that the small pasty seller was already paying VAT; this was just making it fair to them by ensuring that the big chains did too.
But I made a spectacular error when I was asked the inevitable question: where had I bought my last pasty? It shouldn’t have been difficult. I love pasties. As a child I had sat shivering on Cornish beaches devouring piping-hot steak-and-potato ones. These days I often popped into the West Cornwall Pasty Company and scoffed one on the train. Not having a photographic memory of every hot snack I have consumed, I took a punt on the last place I did that: ‘Leeds station,’ I said.
It not only turned out that that particular shop had shut five years before, but that that chain of shops didn’t charge VAT on its pasties anyway. So it was literally the wrong pasty at the wrong station at the wrong rate of tax.
By the following month, whole chunks of the Budget were just falling off. Interest groups and newspapers went apoplectic over the series of VAT tweaks that could be characterised as the so-called ‘church tax’ and ‘caravan tax’.
If all that wasn’t enough, there was the ‘charity tax’. On charities, the Budget stipulated that anyone seeking tax relief of more than £50,000 would have a cap set at 25 per cent of their income. There’s a good argument that there should be a limit to the tax relief you can claim. And there was a caveat to ensure that this measure would not impact significantly on charities that depended on large donations.
The motivation was that a lot of people were abusing charity relief to minimise their tax bill by giving to slightly dubious charities that benefited their families in various ways. The Quad were shown examples of rich British families having paid virtually no income tax since the 1960s because they supposedly gave all their annual income away, or set it against family expenses and employees. Our change was meant to be a tycoon tax, but very little in this Budget ended up being received as intended. Encouraging philanthropy was part of my credo, but the policy appeared to fly in the face of my Big Society philosophy. Far from completing the jigsaw, I seemed to be taking a piece out of it.
But it was the ‘caravan tax’ that would lead to the largest Conservative backbench rebellion on any aspect of the Budget. The caravan lobby in our party turned out to be bigger than those for churches or charities. ‘Lots of colleagues have discovered that they have rather more holiday parks than they had realised,’ my parliamentary aide Desmond Swayne wrote to me.
By May, Labour had notched up a ten-point lead. The press dubbed the Budget an ‘Omnishambles’.
Many people – friends, journalists, colleagues, Dessie – urged me to sack George. I didn’t consider it for a second. Yes, there had been oversights, but many of us were guilty of that. Plus, George and I were in it together.
I was briefly concerned about him. He wasn’t his usual waspish self during those weeks. The following Friday night I rang him from Chequers to try to cheer him up. But by the end of the conversation he was telling me not to worry. The old George was back: optimistic and self-confident. I was clear, however, that there would have to be U-turns.
The public would deliver its verdict on the Budget on Thursday, 3 May at the local elections, the London mayoral contest and referendums on city mayors. The comparatively calm sailing from the early days of coalition was over. We lost twelve councils and four hundred councillors. Only one city out of ten, Bristol, decided that it wanted a mayor, which was disappointing after all the work we had done on localism.
As for the London mayoral election, there was a widespread theory that I didn’t want Boris to win a second term – that we were such great rivals that I would rather see the capital go to Labour than my old rival triumph. It really wasn’t like that. Boris was the one who was full of jealousies and paranoias, which so often influenced his behaviour. I wanted him to win. He had been a great mayor, but I felt City Hall was dysfunctional, and that he could do the job a lot better. I had been advising him to pick winnable fights with the government on things he controlled and that we could try to accommodate – like transport – rather than economic policy, which wouldn’t change and which would leave us both coming off badly. But he chose to pick fights over everything.
In one meeting I had with him before his campaign, I asked him his top line, and he replied, ‘Driverless trains.’ This made perfect sense on brand-new networks, like the metro system in Dubai, but sounded hopelessly vague – and probably even dangerous – for a complex, older system like the London Underground. And anyway, Boris saying ‘driverless trains’ had the potential to frighten the life out of people. ‘I have a nine-point plan,’ he then said. But he couldn’t even remember the points.
On the eve of the election I sent him a text saying, ‘I’ve given you a great headline’ after an Evening Standard interview in which I’d said, ‘I want a Boris in every city.’ He replied, ‘Well, I hope I can survive your endorsement.’
For all our mini-run-ins, I liked Boris and he made me laugh. But I didn’t always trust him.
Thankfully, he won back the mayoralty – but by just 60,000 votes. There was no victorious hand-holding between us this time. Instead, we had a private chat in his office in City Hall. He came in – late – and said, ‘I’m going to do this job, and that’s me done with public life, I’m leaving public life after this. People say I want to be an MP. I don’t. I’m not going to do that.’ I took it with a huge pinch of salt.
At the end of May came the U-turns. George clarified that food would no longer be liable to VAT if it was ‘cooling down’ after being removed from an oven (though food on a warming plate would remain subject to VAT). He also said that VAT would only be charged on static caravans at a rate of 5 per cent, rather than the proposed 20 per cent. The tax-relief limit on charities was also restricted. Churches were to be compensated for the VAT on their repair bills by a grant scheme. An amazing programme of church and cathedral repairs followed, and vicars and archdeacons still point out their renovations to me, reminding me that our government paid for it. The age-related allowance, however, remained.
Looking back, should we have had a more simple, steady-as-she-goes Budget? After recounting the pain of the Omnishambles Budget, I can’t answer anything but yes.
But I don’t regret the 45p income-tax top rate for a second. It was a fight worth having and a reputational risk worth taking. It sent out that pro-business message, and fired up what John Maynard Keynes called the ‘animal spirits’ of enterprise. The figures justified our approach: when the new tax rate was implemented in 2013–14 there was an £8 billion increase in revenue from additional-rate taxpayers.
I also learned some big lessons.
The first two were fundamentally contradictory. Leaked Budgets are disastrous for positive coverage. Yet the more eyes on a controversial policy, the better.
The rest were more obvious. Don’t go against your own politics – if you say you back the Big Society, don’t undermine it with a tax on charitable giving. And frankly, never touch VAT definitions. It’s not worth the trouble. Beware symbolism. 20p on a pasty can cost you more than £1,100 off income tax. And remember that your motivations are as important to people as outcomes.
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br /> There were other forces at work too. The newspapers were gearing up for Leveson. Many of our changes to taxes and benefits were just coming in. We were in the mid-term, and the weariness that comes with that is unavoidable. And we were still in the middle of the Eurozone crisis.
The 2012 Budget also tested my partnership with George, and since I stuck by him throughout, it brought us closer together. Still, this tragicomedy of Shakespearean proportions was largely avoidable. It had been a terrible spring. We were determined to have a better summer. I didn’t want to get to the end of the year and find anyone channelling Richard III: ‘Now is the winter of our discontent’.
26
Coalition and Other Blues
When it seems things can’t get any worse in politics, they frequently do. If you were writing about the year 2012 in the style of a Daily Mail editorial, you could say that the government lost the public over the Budget, the press over Leveson, coalition unity over Lords reform and, potentially, the next general election over the failure to redraw constituency boundaries. These last two traumas brought the coalition the closest it ever came to collapse.
For both of the coalition partners these issues were seen as existentially important. For the Conservatives, the unfairness of the size of constituency boundaries had to be addressed. For the Liberal Democrats, it was unthinkable to be in government without at least attempting not just electoral reform but Lords reform too.
The AV referendum had been difficult enough, and I was relieved when the tensions of the campaign had begun to fade. But then came the Lords.
The red leather benches in the cavernous gilt-and-oak chamber were occupied by nearly eight hundred people, the overwhelming majority of whom were there because they had, at one time or another, been appointed by the prime minister. They included experts from various professions, former MPs, party supporters and advisers, Church of England bishops and those who were simply born into it.
I could see the point of the Lords. It could be effective at amending legislation. A fully elected second chamber might either simply pass everything the Commons passed or reject everything – a rubber stamp or a roadblock. However, a revising chamber with limited powers and a suitable range of expertise could be – and often has been – useful. That said, our second chamber is an anachronism. In 2010 it had no proper arrangements for retirement, for discipline, or even for throwing out convicted criminals.
All prime ministers are stuck, as I was, with a dilemma. If you add peers, you are accused of patronage. But if you don’t, your programme is frustrated by a previous government’s appointments. I was accused of making too many appointments in my attempt to rebalance the huge anti-government majority in the Lords. The result of these long-term dilemmas is a chamber now second in size only to China’s National People’s Congress.
I had a permanent reminder of the idiosyncrasy of the current arrangements because Samantha’s stepfather, William Astor, was one of the remaining hereditary peers. Labour had capped the number of inherited seats at ninety-two; some 660 had been appointed for life by governments past and present, and twenty-six were from the Church.
William has always been more than a stepfather-in-law to me. We are good friends, and share a love of the countryside as well as of political intrigue. He has a notoriously mischievous sense of humour. When Blair’s government was simultaneously threatening Lords reform and the abolition of hunting, he said to me, ‘What’s a man to do? I’ll have nowhere to go during the week, and nothing to do at the weekend.’ He was only half joking.
A great source of information about what was going on in the Lords, he played a vital role for me of explaining how the Upper House functioned and what its grandees were thinking. He – quite rightly – observed that most MPs are joyously ignorant of how the place works. But just as he would remind me of this, so I would frequently remind him of the reason he had an automatic lifelong seat at the heart of our democracy: his family had bought a hereditary title from Liberal prime minister David Lloyd George in 1917.
Yet despite my strong feeling that such quaint historical quirks as hereditary peerages had outlived their usefulness, I might have decided to leave the issue for another day. A second term perhaps.
The Lib Dems, however, didn’t see things that way. For them, constitutional reform was crucial, a matter of principle and – they believed – central to their long-term success. And now they had their first, potentially their only, chance to make it happen. Plus, they had lost 336 council seats in the local elections and a third of their membership in the last two years. They needed a win. And given that the Conservative Party’s policy set out in 2010 was to move towards a wholly or mainly elected Lords, it would have been bizarre for us to block what they wanted.
As for my own view, it hadn’t changed much since I was a politics student in the 1980s, when as part of my homework I read a proposal by the former Conservative prime minister Alec Douglas-Home, who argued for a mixed House of Lords with an elected element, an appointed element and the steady phasing out of hereditary peers. This, I believed, was the key to sorting out the House of Lords: not some blinding flash of reform, suddenly going from a bicameral system to one chamber, as Labour wanted during the 1980s, or going for an instantly fully elected senate, as Liberals tended to argue for.
I never understood the argument that you couldn’t have two classes of peer, one elected and one not. We already had different types of peer, and other countries seemed to manage with it.
Nor did I buy the argument that we needed to reform the role of the Lords before deciding on its composition. It was a successful revising chamber that improved legislation without directly challenging the authority of the elected government. It should carry on that way.
I watched Nick Clegg consulting, listening and compromising as he forged a White Paper and turned it into a Bill. I thought the process brought out the very best in him: collegiate, measured and meticulous. And when he came to report back in June 2012, what he produced was evolutionary and incremental. It would start with 120 elected peers, rising to 240 in a second phase and 360 in a third. The number of appointed peers and bishops would be steadily reduced.
Having accepted that we were going to move on Lords reform now rather than wait, I was strongly in favour of it.
While the ‘Programme for Government’ included a large package of constitutional reforms, two of the headline changes – a referendum on AV and the redrawing of constituency boundaries – were clearly linked. They came together on page 27 of the document, and they came together in law as part of the Referendum Bill. They were two sides of the same coin: we would decide whether to reform the voting system, and we would reform constituency sizes. More to the point, they were negotiated together, as a quid pro quo.
But on that point Nick began to show the worst of himself. He said that if we failed to achieve Lords reform, his party would sabotage boundary reforms. His argument was that all of the reforms were linked – that we shouldn’t expect the Liberal Democrats to deliver boundary reform if we couldn’t push ahead with Lords reform.
And because of a foolish mistake, he had us by the short hairs. We hadn’t ensured that boundary reform would go through automatically. The Referendum Act established the boundary review, but the recommendations of that review would ultimately go to straight Yes or No votes in both Houses of Parliament. Therefore the Lib Dems, combined with Labour, could make the passage of boundary reform dependent on Lords reform. They could make a false tit-for-tat link between Lords and boundaries. Which is exactly what they did.
Crunch time was scheduled for 10 July 2012, when the Commons would vote on the second reading of the Lords Reform Bill and, most importantly, the ‘programme motion’. This was essentially a timetable to get the Bill through all the necessary stages. Without it, MPs could talk it out of existence or amend it to death (talking and amending being an MP’s deadliest weapons). Labour support
ed Lords reform, but they would find the opportunity to defeat the government and cause tension in the coalition irresistible. So it would come down to whether our own MPs would let the programme motion pass.
While I genuinely wanted Lords reform, and was willing to put up with rebellions in my own party from those who hated it, I was not prepared to put the whole of our legislative programme in jeopardy by having the Bill stuck in the Commons for weeks or even months on end.
Because this Bill was a constitutional reform, the ‘committee stage’ of scrutiny would have to take place on the floor of the House of Commons, and not upstairs in a committee room. I had seen how Bills like this (the most famous being the one that implemented the Maastricht Treaty) had brought the Major government to a state of combined paralysis and civil war. I was determined not to let that happen to my government.
On 2 July, Nick wrote to me confirming that if my party rebelled and the programme motion was defeated, the Lords Bill would be dead – and so would boundary reform. We haggled and argued, but to no effect. He rejected the proposal I made of having a referendum on Lords reform, something I knew would change many of my MPs’ minds. He suggested delaying the implementation of both Lords reform and boundaries until after the election. That was unacceptable: it made it unlikely that either would ever happen.
I felt cheated by him. Here was this reasonable, decent person I had worked with for over two years being disingenuous and – frankly – dishonourable.
But while I was fuming, I also knew that I had to get over it. What was the alternative? Collapse the government and hold an election, which we would probably lose? We were bound together – and we both knew it. The considerable political pressure Nick’s party was under had created a dynamic of its own. He was desperate.
If a desperate deputy prime minister wasn’t going to budge, I thought there was a chance my hard-to-manage MPs might. But for some reason – and I’ve never quite got my head around why – many had started to rally around the cause of preserving the House of Lords as an issue of high principle. And their devotion to the status quo gathered pace in the days leading up to the vote. I had intelligent MPs like Jesse Norman getting on their constitutional high horse and firing off all sorts of specious arguments about why we should protect the House of Lords in its current state. One of his arguments was that it was so diverse. I thought, What planet is he on? There were two dukes, twenty-six earls and three marquesses – and the average age of all peers was sixty-nine.
For the Record Page 46