For the Record

by David Cameron

  Britain was already the second-largest bilateral donor to Syria. And here we were, hosting a pledging conference that would raise more than any in history – over $12 billion – for food rations, relief packages, vac­cinations, health consultations and schooling. This was the great humanitarian cause of the decade, and Britain was not found wanting. Indeed, that was British leadership. At that point we were the only major country committing 0.7 per cent of GDP to overseas aid and 2 per cent to defence.

  So while it is fashionable to talk about the UK’s shrunken role in the world – even more so after we lost that Commons vote in August 2013 – we cannot underplay the importance of our leadership on these other vital things. Aside from the US, no Western country did more on aid, diplomatic endeavours and the defeat of ISIS than the UK. Of that we can be immensely proud.

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  Leading for the Long Term

  While the economy was growing, and we could rightly claim that the medicine was working, as 2013 went on I became obsessed by a different economic question. What sort of recovery was under way?

  The picture painted by the government graphs was clear: rising investment and increasingly strong growth. But were people feeling this great turnaround in their lives?

  The long dole queues that characterised the recovery from recession in the 1980s – there were still three million unemployed in 1986 – had been averted. More than that, we were about to hit record employment. Indeed – and this was to become a favourite statistic of mine – from 2012 to the beginning of 2015, the UK economy created more jobs than the rest of the EU put together.

  Yet the picture on living standards seemed less rosy. Wages weren’t keeping pace with prices. The Institute for Fiscal Studies (IFS) said this was inevitable: it would have been astonishing if earnings hadn’t fallen after the deepest crash in modern history. And on top of that, inflation was climbing due to rising oil prices.

  So, how to mitigate this as much as possible?

  Our answer was to make every effort to protect living standards. We had been able to ‘ease the squeeze’ by increasing pensions, freezing council tax and fuel duty, and raising the personal allowance (the latter alone was worth £905 a year to a basic-rate taxpayer by 2017). We had also exempted the lowest-paid public-sector workers from the pay freeze, and – in time – would radically increase the minimum wage.

  In my view, the measure to look at wasn’t wages, it was take-home pay – income after tax. But even on this measure we seemed to be struggling to make progress. The statistics available at the time showed that average disposable income was lower in 2013 than it had been before the 2008 crash. On average, since 2007–08 it had fallen by £1,200 in real terms.

  This, it appeared, was a jobs recovery rather than a living standards recovery. Obviously I would have preferred both. But if you had to choose between the two, surely it was better to have more people with the security of work, rather than higher wages for some and continuing unemployment for others.

  But there was no doubt that this gave Ed Miliband and Labour an opportunity to highlight falling living standards and point to a ‘squeezed middle’ demographic: too well off for benefits, but too poor to enjoy the security of the rich. It was one they didn’t miss, proclaiming a Conservative-induced ‘cost-of-living crisis’, a phrase which gained traction in late 2013, as GDP started to go gangbusters but families’ finances didn’t.

  On 24 September 2013 I sat in my office watching Miliband’s party conference speech. ‘He has been prime minister for thirty-nine months, and in thirty-eight of those months wages have risen more slowly than prices. That means your living standards falling year, after year, after year. So in 2015 you’ll be asking, “Am I better off now than I was five years ago?”’ Then came the big announcement of the conference: a Labour government would freeze domestic energy prices. It was economic nonsense, but political genius – and maddening, too.

  Nonsense, because a price cap would reduce competition and discourage investment – which we badly needed more of – in both the electricity and the gas markets, therefore leading to higher, not lower, prices in the long term.

  But genius, because rising energy prices were deeply unpopular, and the companies responsible were seen as profiteering. As a policy it had an immediate ‘retail impact’, because people could see they would be better off.

  And it maddened me because I knew that, as energy secretary in the last Labour government, Ed Miliband had introduced a whole series of measures that had the effect of putting prices up.

  When Miliband had finished, I pulled on my running kit. If I had a rare half-hour spare, that’s what I’d do: leave by the back gate of Downing Street and do a figure-of-eight loop around St James’s Park and Green Park.

  I spent a lot of time in the park. Taking Florence to play on the swings after school. Early-morning squats and sprints with my personal trainer Matt Roberts. And these impromptu runs, when I’d weave through an obstacle course of selfie-snapping schoolchildren, ducks, pigeons, squirrels and, supposedly, spooks (it was rumoured to be a hotspot for the secret services). And other things too … Once, as we ran past a couple enjoying a barely concealed spliff, one of the police protection officers urged me, ‘Breathe deeply, boss – it might help with the pain.’

  On that autumn afternoon in 2013 I pondered our big problem. We’d dragged the economy back from the cliff edge, but delivering prosperity for everyone would take time. Meanwhile, Labour was stitching together disparate issues, like rising energy prices and the cost of living, to form a damaging narrative. All with the election just eighteen months away.

  The rise of food banks formed another element of that narrative. Charities offering donations to hard-up families had been around for years – a valuable part of the Big Society. But there had been a recent increase due to the financial crash and rising food prices. A food-bank movement had grown up, and local churches and charities were enthusiastically joining in. This was the case around the world. Unlike Labour, we had allowed Jobcentres to refer people to food banks, thereby rad­-ically increasing both awareness and demand. That was the reality. But Miliband peddled a politically toxic mythology: victims of Tory austerity queuing for food parcels.

  Then there was a welfare reform that was just as nuanced and reasonable, but equally emotive.

  Housing benefit – welfare payments to support those renting in either the private or public sector – was now costing us half as much as the schools budget, and if we were going to control public spending while protecting services, cuts were plainly needed.

  It wasn’t just about savings, though, but fairness. I believe strongly in a welfare state. But something has gone wrong when, for instance, taxpayers are spending hours commuting to London every day to get to work, while funding the central London homes of those who don’t work at all.

  In reducing that bill, one change would take on particular potency in Labour’s narrative about Austerity Britain. The previous Labour government had changed the rules for private-sector tenants, so that they were only paid housing benefit for the rooms they needed to occupy, rather than for every room in the house or flat they rented. On 1 April 2013 we brought in the same change for tenants in council and housing-association homes. If the home was deemed too large for its occupants – in many cases there were spare bedrooms – the housing benefit they received would be reduced by 14 to 25 per cent. Either they’d have to move to a more appropriately sized property – freeing up bigger houses for bigger families, who badly needed the space – or pay the difference.

  Our opponents seized upon this, branding it a ‘bedroom tax’. Like the ‘pasty tax’, the name stuck.

  And even though it wasn’t a tax, and it was equitable, there was a difficulty with it. While private-sector tenants effectively choose the home they live in, council or housing association tenants have little such choice. And although we were building more council homes �
�� more than Labour, in fact – they were still in short supply, and therefore moving home could be hard. As a result, some people ended up receiving less housing benefit without being able to reduce their costs.

  But what was the alternative? If we were to bring housing benefit under control, something had to give. At least this proposal had the merit of levelling the playing field between the public and private sectors.

  Add the mythology around this so-called (incorrectly called) ‘bedroom tax’ to food banks, and we were in danger of losing the economic argument just at the moment the economic recovery should have been winning it for us.

  The underlying economic truth was that you can’t sustainably grow living standards without rising wages – and wage growth had been sluggish for many years, since long before we came to office. The problem had its roots in decades of underinvestment in skills and infrastructure, and low productivity. We were addressing the effects of a lopsided economy – tilted heavily to the south-east and to finance – but the dividends of long-term decision-making would take time to make themselves felt.

  That was how I saw it. We had a big argument: ‘Fix Britain’s long-term problems’ – and Miliband had a popular one: ‘Cut prices to help families.’ I knew we needed both. Yes, we needed to make long-term decisions to build a strong economy, but at the same time, my ministers and policy unit were told to scour the horizon for things we could do immediately to help with the cost of living, and we announced new measures every week.

  Freezing MoT test prices. A crackdown on whiplash-injury fraud, which was adding £100 to the typical car insurance bill. And action on energy bills. Unlike Labour, we had solutions that were workable. We could force companies to put customers on the lowest available tariff. We could also reduce some of the charges on bills that were paying for green schemes.

  Some of these schemes were extremely expensive. I was particularly furious about one called ECO, which encouraged people to install insulation in their homes and businesses, but also included very costly options that were increasing bills by an average of £90 a year. My anger landed me in difficulty when it was reported that I said in a meeting, ‘Get rid of all the green crap from customers’ bills.’ I don’t remember whether I actually used the ‘c’ word, but I probably did. The problem was that the phrase was interpreted as an abandonment of our environmentalism. The truth was quite different.

  When I started off talking about these issues during the husky days, I was accused of a PR stunt – that the snow was for show, and my passionate posture would melt away once I entered government. In the end, the opposite happened. I ensured that the green revolution continued in the background, without major interventions or speeches.

  So often people complain that politicians are all talk and no action. On this, I was all action and not enough talk. We proved beyond doubt that you could both cut carbon and cut the deficit, and we quietly became the greenest government Britain had ever seen. Environmentalism was about the long term – and so was my approach to infrastructure. More investment in railways than at any time since the Victorians. A new line under London – the biggest engineering project in Europe – Crossrail. And one of the most controversial projects I was determined to pursue: ‘HS2’. Since privatisation in the early 1990s, the number of rail passengers had doubled, yet we hadn’t built a line north of London for 120 years, and the West Coast Mainline from Glasgow to London was full to bursting. By the twenty-first century there was a new type of railway on the scene: high-speed. But Britain had only about 0.7 per cent of the world’s high-speed track, namely the Eurostar, or ‘HS1’. It was absurd that you could get from London to Paris on high-speed rail, but not from London to Manchester.

  It was becoming increasingly clear to me that we needed a new west coast line, and my view was that it needed to be high-speed. We announced our support for it while in opposition, and Labour concurred, setting out plans for HS2, from London to Manchester (between which it would halve the journey time) and beyond. Eventually reaching as far as Edinburgh, it would be like the new spine of a country standing tall in the world.

  But while other countries sped ahead with giant infrastructure projects and long-term ambitions, Britain was blighted by a nimbyist aversion to doing anything radical or big or expensive. This was setting us back in the global race. So the debate about HS2 was about more than productivity, or the cost of living, or even our electoral prospects. It was about the will of the West. Did we still have the stomach to do the big things? I believed we did.

  For this reason, one battle I regret not confronting was our long-term airport needs. The debate over Britain’s airport capacity had been going on for decades. Heathrow was now the busiest two-runway airport in the world, and a third runway was the favourite option for fixing this problem. And yet … we decided to push it into the next Parliament.

  Another issue lingering on successive governments’ to-do lists was the fate of Royal Mail. Turning inefficient state-run institutions into modern and effective service provision is instinctively Conservative. However, when its privatisation was proposed to Thatcher, even for her that was a step too far.

  Yet Royal Mail found itself in a highly competitive market, desperate for the freedom to invest, expand and innovate. Stuck in the public sector, it had lost £300 million in 2010 alone, and attempts to reform it, while not getting it back into profit, had set it on a path where it was possible to attract private-sector capital. Germany had shown it could be done successfully with its mail service. And so Royal Mail was sold off in 2013.

  For me, the move had a wider symbolism. Modern, compassionate conservatism was seen by some as timid, lacking in radicalism, and just a bit too left-wing for many in the party. This would infuriate me. I would sometimes reel off a list of all the things I did that Thatcher never dared to do, like increasing tuition fees in universities, reforming public-sector pensions, allowing private operators to run state schools, capping welfare, vetoing a European treaty, leaving the European People’s Party and privatising Royal Mail.

  By the end of 2013 it seemed voters were undecided when it came to the Conservatives’ long-term offering versus Labour’s instant fixes. Labour remained ahead in voting-intention polls, but people trusted us more with the economy, and preferred me in charge to Ed Miliband.

  But I sensed we had the edge. We might have the historical baggage of being cold, uncaring Conservatives, but they had the more recent and more potent baggage of financial profligacy. The polls also showed that the ‘bedroom tax’ wasn’t particularly unpopular. I was given a paper by the Department of Work and Pensions in 2013 which showed a plurality of people supported the policy both in principle and after a more detailed briefing of what it involved.

  This was brought home to me during the most extraordinary conversation, in Glasgow Airport of all places. A woman approached me. ‘There’s something I want to say to you,’ she said. ‘It’s about the bedroom tax.’ I thought, ‘Oh God, here we go …’ But she said she was a housing officer, and was totally in favour of it. ‘Don’t change your tack,’ she said as she left with a smile.

  There was another policy people were – and still are – desperate to talk to me about: our flagship housing scheme, ‘Help to Buy’.

  The increasing inability of young people to buy a home of their own was, I believed, a massive political and economic failure. A lack of house-building was now coupled with a crash that had dried up credit, and this in turn led to a huge drop in home ownership – halving for eighteen-to-twenty-five-year-olds in two decades. The average age of a first-time buyer was now thirty-three.

  This wasn’t just a big deal for the Conservatives – famously the party of aspiration. It was a big deal for Britain. Enormous security, prosperity and identity are derived from bricks and mortar. The opportunity to buy a home was available to me when I was young because I had parental help, and because houses were then so much cheaper. It should be there for o
thers who work hard too, but aren’t as fortunate. And the urgency went beyond that: what support would people feel for a global economic system in which they had no stake? What good is capitalism to a generation without any capital?

  Of course there were numerous reasons for the decline in home­ownership. The recession had hit families’ finances hard. Many small and medium-sized house-builders had gone under. The planning system had become hopelessly bureaucratic. And fundamentally, Britain had not been building enough houses for years.

  We were addressing all these things, for example replacing 1,300 pages of planning guidance with just fifty. But the housing market was still flat on its back. And while there were plenty of potential buyers who could afford the monthly mortgage payments, they were simply unable to get a mortgage.

  The problem was that the builders wouldn’t build unless the buyers could buy, and the buyers couldn’t buy unless the lenders were lending. And the lenders weren’t lending. Mortgages that had been available for most of my lifetime, that loaned up to 90 or even 95 per cent of the value of the property, simply weren’t available. This couldn’t be fixed by public spending or changing the tax system. It was a monetary-policy problem. So George and Rupert worked up the idea of Help to Buy – a deliberate reference to Thatcher’s Right to Buy – in order to get the market moving. With Lloyds Bank’s Antonio Horta-Osorio helping behind the scenes, George launched it in the 2013 Budget.

  The first part, the equity loan, would offer a buyer 20 per cent of the value of a new-build home, interest-free, for five years. The second part – the really radical element, never seen before in Britain – was a mortgage guarantee scheme. Since the inability to raise a large deposit – which nervy lenders were now requiring after the crash – was the biggest problem for buyers, we were saying the lenders could go back to offering 95 per cent mortgages, and government would take on the risk.