Power Trip

by McBride, Damian

  As well as filling vacancies, the junior ministerial positions presented some opportunities and some awkwardness. There were always some people who considered themselves ‘waiting on the runway’ for a Cabinet position who were gravely disappointed when they found out they were staying put, and equally some rising stars who were delighted to be told they were being made the No. 2 in a department, and therefore in a prime slot for take-off next time round. Arguably, being on the runway is the worst position in British politics, and it’s a very dangerous place for prime ministers to leave someone for too long.

  Once the junior positions were sorted out, we’d move onto the real headlines – any changes or new faces at Cabinet level. Gordon’s major chance to bring fresh blood into senior positions and to create new positions and departments came in 2007, and he did so with a fair degree of ruthlessness, although – again – we took a lesson from the Budget: if there were any unpleasant surprises, they had to be discounted by the media ahead of the day. Margaret Beckett may have been disgruntled to get the chop as Foreign Secretary in 2007, but no one was expecting anything else.

  The grid was now full, but that wasn’t the end of the process. We would look across the departments and see patterns and problems to be sorted out: a department that was too male dominated; an ambitious or troublesome Secretary of State with no trusted Brown allies keeping an eye on them; or alternately, a Brownite with too many old 2006 plotters in their ranks. We had to look at people’s mates too: it was no use thinking Alan Johnson would be happy with his new job if his closest ally, Gerry Sutcliffe, had been shafted.

  On the actual day, once the science of putting the whole package together was complete, it was up to Gordon – with the Sues literally at his elbow – to do the hard work of delivering the good and bad news, and to make sure there were no changes of plan. Once the grid had been worked out, just like the Budget scorecard, it was sacrosanct. If anyone refused to accept even a junior position, we had reserve lists and fallback plans, but we never made the mistake of starting from scratch.

  For me and Michael Ellam, our job was delivering the anti-botch: surprising the media with the timing and speed of the changes; being definitive about when things were happening and then beating our own projected deadlines; and crucially – especially in 2007 – removing the theatre of a procession of ministers going in and out of Downing Street, and delivering the whole plan via Gordon’s Commons office and by telephone. What we lost in terms of a photo opportunity we gained twice over in terms of avoiding the kind of ‘Whitehall farce’ headlines endured by Blair.

  Just like his Budgets, Gordon can look back at his reshuffles and say that – even if he made some minor mistakes which caused problems down the line, combining the jobs of Defence Secretary and Scottish Secretary for example – he executed them all near-perfectly, with the notable exception of his cold feet over replacing Alistair Darling in 2009.

  Besides that one, I regret to say Gordon’s biggest and costliest mistake was his failure to bite the bullet and get rid of me entirely in his 2008 reshuffle when he had the chance, and when I was urging him to do so. As it was, I ended up half in, half out – a solution which satisfied no one, least of all me, and which left me with idle hands in early 2009.

  I had come out of the 2008 conference determined to leave, and said as much to Sue, Michael, Stewart and others in the days immediately afterwards. But while they all sympathised and agreed that I needed to find a way to lower my profile in media terms, there was a nervousness about what it would mean for Gordon and the No. 10 operation if I was no longer around, and no little concern about what would happen to me if I was out of work and had nothing to do all day but drink.

  The whole October 2008 reshuffle was a balancing act. At my level, if I was going to be sidelined as part of the reshuffle, then it couldn’t be seen as a victory for the Stephen Carter contingent, so he would have to leave No. 10 too, albeit with a peerage and a made-up ministerial job as compensation.

  Higher up the food chain, after the recent manoeuvrings of David Miliband, Gordon wanted to shore up his defences by promoting Nick Brown to Chief Whip, and restoring ministerial roles to Tom Watson and others who’d been untouchable since the 2006 coup.

  In order to do that without inviting massive criticism, he needed his changes at Cabinet level to be impeccably Blairite and ‘reformist’. That meant promotions for Liam Byrne, Jim Murphy and John Hutton, and then the icing, the cherry and the whole cake, the return of – and proof of reconciliation with – Peter Mandelson.

  Gordon had been toying with the idea of offering jobs to Alan Milburn, Stephen Byers and even Charles Clarke, just to show he was a totally changed man and wanted the broadest tent possible, but – as he said himself – ‘If I bring back Mandelson, I don’t need to bother with that bloody crowd.’

  I didn’t know it at the time, but as part of Gordon’s negotiations with Peter over his return, there had been some discussion about who would be running the show in No. 10, and whether characters like me would still be wielding any influence, let alone wielding the knives we used to aim at Peter. It was inevitable that his return – formally as Secretary of State for Business, informally as Brown’s new chief consigliere – would be linked to any downgrading of my role.

  That was all the more reason why I just wanted out. From my point of view, it would avoid the embarrassment of looking like I was hanging around when my job had disappeared, plus I quite liked the kudos of Peter demanding my head before he would return. And from the point of view of Gordon and his standing, it would look strong, ruthless and decisive, and help manage the wider Cabinet balancing act of trading off Blairites versus their enemies.

  But Gordon wouldn’t hear of it and not enough other people he trusted were pointing him in that direction. There was a clear feeling that my contacts and relationships with the media were too important for Gordon, and that I was one of the few experienced people left in the No. 10 set-up who could be relied on to calm him down and keep him focused on the stuff that mattered. Plus Gordon just felt a debt of loyalty to me and wouldn’t see me cast adrift.

  Indeed, when I saw how difficult he found it even to tell me that I would be going into a made-up back-room role focused on ‘strategy’ and would need to stop my day-to-day briefings with the press, it was obvious he would have found it impossible to go further at that stage and sack me entirely, when – as far as he could see – my only offence was to have pissed off his enemies.

  He told me he was sorry and that he knew I’d only been doing my job, but that too many people were now saying it was impossible for me to maintain my front-line role. He reeled off names, all said with a scowl: ‘Harriet… Purnell… Darling… Douglas’, and then almost with a sense of disbelief, ‘Even bloody Ed’s complaining about you.’ By then, I didn’t have to ask which one.

  He asked what I thought of my proposed successors as special advisers on the media – Michael Dugher from Geoff Hoon’s office and John Woodcock from John Hutton’s. I told him I got on well with Dugher, but I’d clashed with Woodcock because of Hutton’s open defiance of Gordon over the unaffordable recommendations in Adair Turner’s review on the future of pensions. But I said they were both excellent, I’d support them however I could, and – more importantly – wouldn’t do anything to undermine them. ‘Good,’ he said, then as always wanting to finish on a positive note: ‘At least you won’t have so many lunches with journalists now – you can lose some weight!’

  Unlike most people who’ve had bad news at reshuffles, I had the luxury of knowing in advance, and I’d booked Balshen and myself on a weekend trip to Champagne in France organised by our good friend, a PR adviser to Michelin-starred chefs, Kirsty Stanley-Hughes.

  We boarded the Eurostar at St Pancras on Friday 3 October just as Adam Boulton announced in Downing Street that I’d been sacked, and it became apparent during the journey that many of the passengers in our group were feeling uncomfortable as they read reports about the reshuffle o
n their phones: ‘Do you think he knows?’ Balshen heard one of them whisper.

  When we got to the other end, Kirsty announced a toast to my ‘promotion’ to the role of ‘Head of Strategy in Downing Street’, but nobody seemed very convinced. That evening, I read some of the blogs that had been written by journalists about my demise – the likes of Ben Brogan and George Pascoe-Watson singing my praises, and offering stinging criticism of Gordon for bowing to my critics. Not for the first time, I thought: ‘This is the best note to go out on; why can’t I just go now?’

  When I passed Peter Mandelson for the first time in the Downing Street corridor the following week, he was doubtless thinking the same thing and immediately whispered to Sue Nye: ‘What is he still doing here?’ Whenever we were in the same room, Peter wouldn’t acknowledge my presence, and even when we were sitting in the same plane on Gordon’s trip to South America the following March, he looked through me as if I was a ghost.

  He and Gordon were sat together on the flight when I came and reported that Argentina’s President Kirchner had made her usual bellicose noises about the Falkland Islands on the eve of Gordon’s visit. While I wasn’t supposed to be ‘briefing the press’ any more, foreign trips were still regarded as my thing, so I was left to get on with it. I told Gordon and Peter cheerily that I thought it was a ready-made splash in The Sun and elsewhere if we issued an ‘over my dead body’ response from Gordon, hoping the Dark Lord would at least rate my news judgement.

  Without looking at me, he said: ‘Why must we play this silly game? Nothing’s going to happen with the Falklands. She says this stuff for the benefit of her press. You say it for the benefit of ours. What on earth is the point? Why don’t we just grow up and ignore it?’

  Gordon, mouthful of biscuit, said: ‘You’re right, Peter’, then to me: ‘Play it down. Say we’ve heard it all before; they just want to create a row, we’re not going to rise to it.’ I walked away deflated and a little embarrassed, until Gordon came running after me down the plane, and whispered: ‘Do a bit of the “over my dead body” stuff as well if you think we need it.’ But – even if he wanted the Sun splash on that occasion – there was no doubt that Gordon was listening closely to Peter’s advice.

  One Sunday morning late in 2008, I arrived at Chequers when Gordon was due to have a large group of media couples and their kids over for lunch.

  I walked into Gordon’s study and listened to him chatting over the phone with Ed Balls: venturing from the media and the Labour Party to upcoming speeches and policy issues, it was the kind of easy-going meander round the houses that they used to do all the time in the Treasury. I was surprised and rather pleased that Gordon was back to talking with Ed in that way because it always put him in a better mood and helped get a lot of decisions sorted out, and he’d clearly been missing those conversations since Ed had been busy with his own department.

  But as I eavesdropped, my own phone rang with Ed Balls’s name popping up on the screen. I was puzzled and asked the No. 10 clerk who on earth Gordon was talking to. ‘Mandelson,’ he said. ‘Same thing every morning.’ The world was definitely changing.

  48

  ‘ROUGH SEAS MAKE GOOD SAILORS’

  There were three times I felt genuinely shocked by things Gordon said. And the fact that they were all towards the end of my years working for him – when I thought I’d heard everything – made them all the more surprising.

  The first was that interview with Simon Walters and Jamie Lyons in Beijing, when I was amazed he was so dismissive and that his innate professionalism had disappeared to such an extent.

  The second was shortly afterwards when I was getting him to sign some letters in his No. 10 office. He closed the door and told me to sit down. This was even before the bankruptcy of Lehman Brothers.

  ‘Do you realise how bad this is going to get? We’re going to be in recession by the New Year. And there’s nothing we can do. And people will make that the big issue, but that’s not the worst of it. The whole bloody thing could collapse. I’m serious! The whole bloody thing.’

  I genuinely didn’t know at that stage what ‘the whole bloody thing’ meant. I was just reeling from the idea that we were going to be in recession, and how that was going to play in the press.

  Much as people can say it was foolish hubris for the Brown team or Gordon himself ever to imply that we’d ‘abolished the economic cycle’ in Britain – periods of either unsustainably high growth or recession – that was certainly how it looked for a long while.

  And those who criticise Gordon for using that rhetoric need at least to consider that it wasn’t just boastfulness on his part – although there was clearly an element of that, especially in Budget speeches – but a genuine feeling that the more people believed that there would be ‘no return to the old boom and bust’ and acted accordingly, it would become a self-fulfilling prophecy.

  Take for example, the ‘housing bubble’, its expansion driven by the fact that demand continued massively to out-strip supply year on year, making it ever harder to help those without property to get on the housing ladder, even with the benefit of cheap mortgages and shared equity schemes.

  One of the great frustrations on the supply side was the number of wealthy individuals and house-building companies sitting on land approved for housing development but refusing to overcommit to new projects because of their historic fears that they’d do so at the wrong point in the cycle and end up with houses they couldn’t sell and employees, materials and equipment they couldn’t use; it was far better for them just to commit to small, quick projects that were guaranteed successes.

  Following economist Kate Barker’s report for the Treasury on housing supply – commissioned as a result of the euro ‘Five Tests’ assessment – we did consider quite radical options almost to force land-owners and construction companies not to be so timid in their investments, including the announcement of a future date from which VAT would apply to sales of new housing on greenfield land, a proposal which unfortunately Gordon would never touch given his aversion to putting VAT on anything.

  But in that housing context and many others, Gordon’s primary concern was to convince banks, businesses, share-holders and wealthy individuals sitting on huge stocks of revenue, property and land, that – rather than short-term profit-taking and long-term asset-hoarding – they should keep expanding, take on more work and employees, and keep re-investing their income and assets for the long term, confident that it was not all going to collapse.

  That was why – despite his natural caution when it came to public statements about the economy – Gordon did allow himself those hostages to fortune around boom and bust.

  It’s also been argued since the financial crisis, including by the two Eds, that we were ‘over-reliant’ on the dynamism, profits and tax revenues from the financial services sector. Factually, that’s obviously true. But that implies someone should have noticed and done something at the time.

  The reality was that if even the highest-paid accountants in the country – working for the most profitable banks – had no idea that those banks’ balance sheets were reliant on worthless assets and debt that would be impossible to recover, how on earth was the Treasury, let alone No. 10, meant to guess that at a dozen steps removed?

  Subsequent to the financial crisis, we were told privately, although it’s never been confirmed publicly, that John Gieve – the old Treasury Head of Spending who became Deputy Governor of the Bank of England – had written an internal paper before the collapse of Northern Rock raising concerns about the balance sheets of a number of major banks.

  If that’s true, the Bank never shared the paper with Treasury ministers or – as far as I know – the Financial Services Authority, the two other members of the tripartite system responsible for financial regulation. That might add to the sense that Gieve’s views, which commanded huge respect within the Treasury, weren’t always so well received within the Bank of England.

  The upshot of it all was t
hat the government went into the crisis with not the slightest clue how bad things were at the banks, although typically, as soon as information started to emerge, Gordon devoured it all, ordered vast amounts more and rapidly became the country’s leading authority on the nation’s banking assets, closely followed by Shriti Vadera, and of course the omniscient Robert Peston.

  Gordon could not contain his newfound scorn for the likes of Fred Goodwin when they spoke over the phone to discuss the position at their banks, and he ended up telling them things they didn’t know themselves about the value of their assets. ‘How is this possible?’ he would shout incredulously afterwards. ‘How do these guys not know this stuff?’

  It may be one of the most frequent criticisms of Gordon that he was a micro-manager, but it made him genuinely baffled and angry to speak to people supposedly at the top of their profession who appeared to have taken no interest at all in the detail of their own banks’ investments and assets.

  By early October 2008, Gordon had come through the party conference with a significant bounce in the polls and delivered his successful reshuffle, including the return of Peter Mandelson. But financially, we were reaching the real crisis point.

  On Monday 6 October, the London stock market suffered its biggest one-day fall since 1987 as shares crashed around the world, and no one thought that we’d reached the bottom. Since the bankruptcy of Lehman Brothers in mid-September, it was simply a question of which major multinational bank would collapse next and when, not whether it would happen.

  I’d returned from my trip to Champagne with one conversation in my head: an actress with a rather affected hippy-dippy style who’d asked me to explain ‘the whole problem’ to her. I did my usual routine, imitating Jimmy Stewart in It’s a Wonderful Life, explaining that barely any of the money we think we have in ISAs or current accounts actually exists in the mythical bank vaults – it’s all re-invested in other people’s mortgages, loans and overdrafts.