For the Record

by David Cameron

  The third threat from the internet was hostile states and other actors determined to hack our systems, steal state secrets, leak classified information, disseminate propaganda and even launch cyberattacks on hos­-pitals, airports or financial infrastructure that could bring society to a standstill and endanger lives.

  I’ll never forget visiting GCHQ and seeing a world map on the wall that showed real-time red lines of attack striking out from Russia and China and into the UK – and being told that our ability to deter such risks was sorely lacking.

  That’s why I said we’d spend an extra £1 billion on cyber-security defence, even in tough times. It’s why I gave the go-ahead to a National Cyber Security Centre, which opened shortly after I left office. And it’s why I was uncompromising when it came to those acting to subvert our state and security services.

  In 2010, 250,000 stolen US diplomatic documents were published by the organisation WikiLeaks. Then in 2013 a contractor for America’s National Security Agency, Edward Snowden, stole an enormous cache of confidential data and gave it to various outlets for publication. Experts compared the magnitude of the breach to that inflicted by the Cambridge spy ring in the 1950s.

  When I read several files of the Snowden material I realised it wasn’t so much the individual pieces of information that were damaging – though of course they could be – but that, put together, they formed a bigger picture of our security services’ methods and techniques. Yes, I understood the need to scrutinise what the security services did in our name, but this data was indiscriminately dumped online – there was no scrutiny in that. I supported whistleblowing when there was a clear public interest, but there was no public interest here, only public injury.

  The Guardian was one of the outlets that were given access to the data. Civil servants advised me to issue an injunction to prevent publication. I advocated a different approach. I knew that the paper’s editor, Alan Rusbridger, and I had different politics, but I also knew he wouldn’t want to do anything that jeopardised people’s safety. So I asked Jeremy Heywood to go and talk to him about how dangerous this stuff was, and how susceptible to Chinese and Russian hacking. Although the Guardian would go on to publish stories about some of the individual revelations, Rusbridger allowed the hardware to be smashed up with GCHQ officials’ oversight.

  Then in April the European Court of Justice declared the rules we had used around retaining communications data since 2009 were invalid. I was warned that the public would be significantly more at risk as a result of this decision.

  It was essential to get that power back. Even though we were essentially retaining the status quo, the opposition was huge. I sent Paddy McGuinness and security officials to brief some Lib Dem MPs on the realities, and they were won over. Jeremy Heywood worked wonders in talking to Labour, culminating in a meeting in my office that included Ed Miliband and Theresa May, at which we explained that the law we were shoring up with this emergency fix had been passed by Labour. So in July 2014 we passed the Data Retention and Investigatory Powers Bill. It was made permanent in 2015 with the groundbreaking Investigatory Powers Bill, which brought together all the UK state’s intrusive powers while subjecting them to new and more stringent oversight.

  None of this is to demonise internet companies. But I was always clear that the market should only be free to flourish if it behaves acceptably. ‘You are not separate from our society, you are part of our society, and you must play a responsible role in it,’ I said in my speech on child protection. It was a warning that could have applied to them on many sectors. Anyone who says we refused to call out companies’ bad behaviour – the monopolising, the tax avoiding, the blind eye to criminal activity – that has led to the backlash against capitalism has a selective memory.

  The temptation to be reactive rather than proactive is a danger faced by all of us in public life, not least in politics. It is a sad fact of our world that it often takes a tragedy to induce change. A stop sign is erected at a junction after a fatal accident. A drug is banned only once it has claimed lives. This was certainly the case with technology. I was determined that from now on we should be one step ahead of the criminals, the hostile states and hackers, and of course the extremists.

  On that front, the situation was more desperate than ever. Indeed, just two years after that fateful train journey, François Hollande and I would find ourselves side by side in Paris once again, commemorating yet another attack in Europe, this time the deadliest to date.

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  Sticking to ‘Plan A’

  I’ve often said that I felt as if I was prime minister twice: once when Britain’s economy was growing, once when it wasn’t.

  When your GDP is on the up, your power rises with it. Your global stature increases, public confidence grows, your party’s fortunes rise, and your economy’s success sparks the interest of investors. Growth begets growth.

  But when GDP is stagnating or shrinking (or at least when you are told it is – the provisional figures don’t always turn out to be true), you’re in a permanent state of precariousness.

  From the start of 2012 until mid-2013, that was the position I was in. I felt exposed, one of the few leaders of a major power arguing that a radical strategy of monetary activism, supply-side reform and fiscal responsibility – a form of what has been labelled ‘austerity’ – was the right way to get our economy growing.

  Rescuing the economy was my biggest test – it was the thing upon which everything else rested. Yet, three years into office, it still wasn’t growing as we’d forecast. Indeed, figures showed in April 2012 that it had tumbled back into recession, and therefore into a dreaded ‘double-dip’.

  As the seasons rolled by, even when we were plunged into what felt like an eternal economic winter, I was determined to stick to the plan. After all, politics isn’t just about having the right philosophy, the right policies and the right people in the right positions. It’s about perseverance: knowing that you are doing the right thing, and giving it time to bear fruit, even when the critics are circling and evidence of progress is hard to point to.

  I believe it was that perseverance – and a handful of key people – that made the difference in the end.

  From the beginning of our time in office, growth had been sluggish – and there had been one quarter of negative growth at the end of 2010 (two consecutive quarters means you’re in recession). As I’ve said, we were doing everything we could to fire up the economy, from inward investment to infrastructure, education to entrepreneurs. There was a hike in the oil price, which had a big negative impact. But it was the Eurozone crisis, which reached its peak between mid-2011 and mid-2013, that really stopped us from seeing the fruits of our policy earlier in the Parliament.

  There were obvious political consequences. While the OBR would say in 2014 that – as we had argued – the timing and depth of the slowdown was much better explained by the Eurozone crisis than by our domestic policy, our opponents at the time found it easy to blame us.

  I spent many hours in meetings on the Eurozone chaos: whole nights under the harsh lighting of Justus Lipsius at emergency European summits. We were caught between the caution of Angela Merkel and the urgency of the Eurozone problems, as the member countries kicked the can down a road that stretched from Lisbon to Athens.

  It wasn’t until July 2012 – that magical Olympic summer – that we saw a glimmer of progress. On the eve of the Games I held that economic summit at Lancaster House to drum up investment from our overseas visitors. But Mario Draghi, the president of the European Central Bank, turned up with something even more valuable, our longed-for ‘big bazooka’. In carefully chosen words, he made the statement that ‘The ECB is ready to do whatever it takes to preserve the euro.’

  Whatever it takes. With those three words he achieved what we couldn’t during four European summits that year: calming the markets and restoring confidence.

  A former
Goldman Sachs banker, Mario had the intellectual self-confidence to take on the Germanic view that monetary activism was a dangerous heresy that would lead to inflation. In doing so, he was to prove one of the key people in saving Britain’s economy.

  This new approach, making clear that the European Central Bank would stand behind the euro and pledging to buy bonds across the zone if necessary, had a rapid and profound effect. Interest rates across Europe came down; investment and growth could begin once again. The contradictions of the euro hadn’t been solved, but the immediate danger had passed.

  I felt enormous relief. We badly needed that decisiveness. Now the euro was off death row, Britain’s economy could start to grow properly.

  Yet as that Olympic summer faded, global growth remained on a go-slow, credit continued to be rationed, and the crash was reassessed as being worse than originally thought.

  Also, on 25 July 2012 the second-quarter estimate for GDP growth was published at -0.7 per cent. At the time this appeared to be the third consecutive quarter of negative growth. The row over our economic strategy – was it the right approach? Was it time to change tack? – was raging. It also drove the OBR to dramatically downgrade its annual growth forecast in the 2012 Autumn Statement to -0.1 per cent for 2012 and 1.2 per cent for 2013.

  As a result, that Statement would have to contain an embarrassing admission. We wouldn’t be able to get our debt falling as a share of GDP by the end of the Parliament as we had pledged. We would have to delay it by a year.

  The wrangles with the Lib Dems over the Statement were fraught. They wanted another big increase in the personal allowance – effectively a tax cut. We wanted bigger welfare reductions to get government spending under control.

  Was this a case of good cops versus bad cops? No: it was idealists versus realists. Of course we wanted to cut taxes. We just believed that any cuts had to be paid for; with an ever-widening deficit they simply weren’t sustainable. And we knew that unless we got the deficit under control we’d never inspire the confidence that would lead to a genuine, long-term recovery.

  We also understood that structural changes to spending had to be made while voters still appreciated the importance of the problem and would support difficult decisions.

  Twice a year, the media would indulge in a frenzy of speculation about what rabbits George would pull out of his red box. But few saw the sorcery he performed in the lead-up to Budget Day.

  What he conjured this time was little short of genius: the support of a wary Treasury, the backing of an increasingly lily-livered Lib Dem leadership, and a Statement that would get the rich paying more taxes, government expenditure falling, the deficit dropping, and a series of inventive measures to help stimulate business and the economy.

  It’s important not to forget the position he was in. This was a chancellor who was serving up more bad economic news, who had not long delivered the ‘Omnishambles’ Budget, and who had been booed by the public when he handed out medals at the Paralympics that summer.

  Despite all this, he gave another forceful speech at the despatch box. We might not get debt falling until 2016, he said, but we had cut the deficit by a quarter already. Unemployment wouldn’t peak as high as expected – it was only 8 per cent, compared with 25 per cent in parts of Europe. And to put it all into context – to show what a vast difference our tough measures were making – we had already saved £33 billion on lower debt-interest payments. That was almost as much as the UK’s entire defence budget.

  Economists talk about stress-testing banks, and this was the ultimate stress test for George. He passed. Indeed, this display of confidence was one of many masterstrokes that would make him an absolutely key person in rescuing Britain from the brink.

  But we would have to wait a little longer before the results came through. Indeed, on the day after the Bloomberg speech in January 2013, at the dinner in Davos, I was given early sight of the next day’s GDP figures: Britain’s economy apparently shrank in the last quarter of 2012. Suddenly the double-dip recession was nothing: we might be heading towards a triple-dip.

  This seemed hard to believe. And Rupert Harrison didn’t believe it. As well as being a talented economist, Rupert had an acute political brain. In February 2013, at one of the many agonised meetings in my office discussing the forthcoming Budget, he made a daring prediction. He talked the team through the impact the Funding for Lending policy and rising business confidence were having on the economy. Low interest rates were finally being passed on to households through falling mortgage rates. Businesses were restarting projects that had been put on hold due to the chronic uncertainty over the future of the Eurozone. People were starting to feel more optimistic. This was the shot in the arm we needed, he said, adding: ‘The economy will be going gangbusters by July.’ Everyone laughed. We made him write down his prediction in Ed’s notebook. Ed then stuck it on the wall outside my office. I hoped to God Rupert was right.

  His confidence wasn’t shared by other experts. Support for our strategy from an external coalition of institutions, publications, economists and credit-ratings agencies began to fall away.

  First, the IMF’s chief economist Olivier Blanchard said it was time for the UK to ‘take stock’, and released a report that hinted at the need for a different approach.

  Moody’s then downgraded our credit rating from AAA to AA1. Our recovery, it said, was slower than after the recessions of the 1970s, early 1980s and early 1990s. The Economist, which had been steadfast in support of our approach, also began to voice doubts, calling for more government investment spending.

  Allies of Vince Cable briefed that he was ready to walk, and he wrote an article in the New Statesman that came very close to openly criticising the government’s economic policy.

  Boris had little to add to the rescue effort except a metaphor, this time complaining about our ‘hair shirt, Stafford Cripps agenda’ after Labour’s dour post-war austerity chancellor.

  Day after day, the airwaves were thick with hyperbole from interest groups. We were cutting just £1 in every £100 spent, but you’d think we had reinstated the workhouse. The gap between the much-discussed ‘pain’ and the delayed gain showed up in the polls: 67 per cent of people thought George was doing a bad job as chancellor, and only 7 per cent thought our economic strategy was working. That strategy was more and more frequently being referred to as ‘Plan A’, because there was talk of ‘Plan B’: a higher-borrowing, more Keynesian approach.

  But none of these factors convinced me to change tack. Of course our recovery was going to be slower than in the 70s, 80s and 90s – the 00s financial crash was the worst in modern history. Of course the IMF was turning on us: the pro-stimulus US government was using it to fight the pro-austerity Republicans in Congress.

  You’d never please Vince. Boris was Boris. The polls were unfortunate, but as Margaret Thatcher had said to me when I told her we were nine points behind, ‘That’s terrible – Labour’s lead should be far higher than that during the middle of your term.’

  And as spring sprang in 2013, there were signs that we were on the right track. A quarter of a million new businesses had been started. Unemployment was down. We had exported more cars than we’d imported for the first time in nearly forty years. But still there was no breakthrough – and certainly no gangbusters.

  I was confident that if we stayed the course, we would be successful in the end. The one thing that would be fatal was if the public lost a sense of the problem we were attempting to resolve. It was time to set out all over again not only what we were doing and why, but also why it was taking time.

  Standing in front of the hulking machinery at a manufacturing plant near Keighley, West Yorkshire, I delivered a speech reminding people of all the things that had gone so badly wrong in our economy under Labour. Excessive government spending. Reckless bank lending. High household debt. Over-regulated businesses. A housing price boom. Uncontrolled m
igration rather than proper training for UK workers. More and more public-sector jobs plugging the fall in private-sector jobs. Five million functionally illiterate adults. Half of all teenagers failing to get at least a C in GCSE English and maths.

  Understanding what Labour did wrong was key to understanding what the coalition was doing to put it right. At the heart of it all was the deficit reduction programme, vital to restoring domestic and inter­national confidence in UK PLC. A plan that risked losing international confidence, or that threatened higher inflation and higher interest rates, was no plan at all. Inflation wasn’t just a government statistic: a 1 per cent increase in interest rates would mean an extra £1,000 on an average family’s mortgage repayments.

  Britain’s fiscal credibility on the global stage really mattered. We had a mountain of both public- and private-sector debt. A sharp rise in interest rates, as had happened in countries that had lost the world’s confidence, would cause enormous economic damage, with companies going bust and families losing their homes. Low interest rates helped to steady international investors, who might otherwise have been ready to jump ship. Exports and foreign investment weren’t just good for businesses, they translated into jobs. Indeed, the factory I was speaking at was French-owned, exported 90 per cent of its goods overseas, and had hired more staff during the recession.

  Our approach was undeniably about people, about their lives and livelihoods. Still, Ed Miliband continued with the lazy attack that deficit reduction hurt ordinary people, and our plans for growth were all about helping the rich. But I suspected the British people would understand the simple logic of our position, given that it mirrored the tough choices they were having to make in their own businesses or household budgets. I concluded therefore that there was ‘no alternative’ to what we were doing – deliberately echoing the line used by Margaret Thatcher in 1980, when things were getting worse before they got better.