The Lies of the Land

by Adam Macqueen

  ‘It is not going to happen. The Prime Minister has said it is not acceptable and therefore it won’t be accepted.’

  Harriet Harman, BBC Andrew Marr Show, 1 March 2009

  In October 2008 the British government, along with many others around the world, were faced with an unprecedented crisis in the banking system. Financial institutions, overexposed to ‘toxic’ sub-prime loans made largely in the US but bundled up and sold on as securities around the world, had been forced to write down the value of their own assets, while simultaneously finding themselves unable to borrow money from one another. Gordon Brown and his chancellor, Alistair Darling, had already had to nationalize one bank, Northern Rock, earlier in the year; now, over the space of one desperate weekend, they were forced to commit enormous amounts of public money to buy shares in several other, much bigger ones as they teetered on the brink of collapse.

  The government had very little choice, because if they didn’t act, customers were going to find cashpoints closed, cards useless and their money effectively evaporated – all within a matter of hours. £37 billion of taxpayers’ money was poured into Lloyds (whose takeover of the even more exposed HBOS had been personally brokered by Gordon Brown a month earlier11) and the Royal Bank of Scotland, whose rapacious overexpansion in recent years had left it living far, far beyond its means, in return for substantial shares in both institutions.12 It would not be the end of the story. Lloyds–HBOS would eventually soak up £20.5 billion, with the government taking a 43 per cent share in return (it has since paid all of it back).13 RBS needed even more – £45 billion – with taxpayers taking over a huge 79 per cent shareholding.14 Nine years on, despite George Osborne insisting on selling off some of the shares at a loss, we still retain 73 per cent of the bank. RBS has staggered from disaster to disaster ever since, recording cumulative losses of over £58 billion.15

  It was a take-it-or-leave-it deal, with Darling calling the bankers’ bluff by telling them he was going to bed at midnight on Sunday and it was up to them to decide if they still wanted to have a business when the financial markets opened the next morning. RBS boss Sir Fred Goodwin, who had continuously insisted that the problems were not as severe as everyone was saying, and even tried to talk down the amount of cash his bank needed, apparently complained: ‘This is not a negotiation; it is a drive-by shooting.’16 Despite the fact that his own departure, and that of his HBOS counterpart Andy Hornby, were a precondition of the eventual deal, Goodwin did very well for himself in the negotiations.

  With Darling departing to the land of Nod, it was left to his financial services secretary to look after the small print. Paul Myners had got through the fraught negotiations of the previous days on barely any sleep at all. He had only become a government minister a few days previously when Brown gave him a peerage and hoicked him into the Treasury as part of the ‘government of all the talents’ he was determined to recruit from outside the usual channels. He had spent decades in financial services himself, so big pay packets did not shock him in the same way they do mere mortals, but he vehemently insisted that he had made it very clear during the three-way negotiations with Goodwin and the RBS board that there could be ‘no reward for failure’.17

  The failure of RBS could be laid squarely at the feet of its overweening CEO, who had pushed through the takeovers of no fewer than twenty-six other institutions during his seven years at the helm, culminating in the aggressive acquisition of Dutch bank ABN Ambro, which had finally scuppered the company. Under his leadership the bank had spent £350 million on a new HQ outside Edinburgh; Goodwin’s own office suite was decked out in top-of-the-range materials and so large that it was used to house no fewer than eighty people after his departure.18 His pay packet in 2007 had been £4.2 million.19

  The board had always been in awe of Goodwin – the Financial Services Authority would later criticize them for their inability to rein him in – and when Myners pointed out that some sort of ‘gesture’ was needed, Bob Scott, the chair of the RBS remuneration committee, told Myners quite frankly: ‘Sir Fred Goodwin was not the sort of person to give things up’.20 They did manage to get him to surrender his entitlement to a year’s salary in lieu of notice – something Darling subsequently praised as ‘doing the right thing’ – but in an agreement signed in the early hours of Monday morning, the board also agreed to allow him to ‘retire’ rather than be sacked.21 Under the terms of his contract this meant his pension pot automatically shot up from an already stonking £8 million to a flabbergasting £16 million. He would be entitled to £703,000 every year for the rest of his life. And he was only fifty years old.

  None of this came out publicly for months. It was not until February 2009 that the Treasury select committee, conducting its own postmortem into the bailouts the previous autumn, started to ask some awkward questions. ‘One of the many frustrating things about the pension is the manner in which its startlingly generous terms have been made public,’ their report on the matter noted. ‘Only gradually has one surprising fact after another emerged, and we have had the feeling that we have been obliged to prise away until eventually the information was forthcoming.’22

  UK Financial Investments, the limited company the government had set up to manage the public stakes in the nationalized banks, blushingly admitted they had only just discovered that what they had thought was ‘an unavoidable legal commitment’ to give Goodwin his pension in full had actually been ‘partly discretionary’.23 But that discretion had long since been exercised. When he was asked about it, Myners stropped that he had had quite a lot of other things on his mind that weekend and ‘it is not the job of the government minister to negotiate or settle the details of individual transactions.’24

  Some of his colleagues begged to differ. Gordon Brown – who had taken very little interest in the rules governing financial services during his time as chancellor, only dipping in occasionally to publicly boast about his ‘light touch regulation’ – now stormed: ‘This is unjustifiable, unacceptable and we are going to clean up the banks so that this doesn’t happen again.’25 His deputy leader, Harriet Harman, was even clearer. ‘It’s not going to happen. The Prime Minister has said it is not acceptable and therefore it won’t be accepted.’ The problem was that it already had been accepted, months before. But Harman, surprisingly for a former lawyer, seemed unable to grasp this problem. ‘It might be enforceable in a court of law, but it’s not enforceable in the court of public opinion, and that’s where the Government steps in.’26

  Trouble is, all they could step in with was a polite request. Myners interrupted Goodwin’s peaceful retirement by phoning him at home in Edinbugh and, in Goodwin’s words, requesting that he ‘consider voluntarily taking a material reduction in my pension entitlement as a “gesture”’.27 The former bank boss made his reply public:

  I am told that the topic of my pension was specifically raised with you by both the Chairman of the Group remuneration committee, and the Group Chairman, and you indicated that you were aware of my entitlement, and that no further ‘gestures’ would be required…. Whilst I suspect that you will not now agree with it, I hope you can understand my rationale for declining your request to voluntarily reduce my pension entitlement.28

  He remained deaf to all similar entreaties. At the bank’s shareholder meeting that April, one angry attendee denounced Goodwin as a ‘benefit scrounger’, but it didn’t matter; he had left the building for good.29 Unions pointed out that more junior RBS staff – let alone the nine thousand sacked by the bank in a fruitless attempt to balance the books after its near-collapse – did not get quite such a generous deal.30 The Telegraph denounced it as ‘a giant bonus for foes of capitalism’.31

  Several months later Goodwin did finally agree to surrender some of his pension pot – but only as a result of legal threats from his former employer, not action from the government. He was still left with an income of £342,000 a year, and he got to keep the £2.7 million he had already taken out as a lump sum. The reduction –
£4 million – was equivalent to slightly less than half of the increase he had received for not being sacked.32

  In January 2012, as controversy raged over whether his successor, Stephen Hester, should receive a bonus of nearly £1 million despite RBS still being deep in the red with no prospect of profits, Goodwin was stripped of the knighthood he had received eight years earlier for ‘services to banking’. The BBC called it ‘a very British humiliation’.33 But it was a symbolic one, and that was all that the state could manage. Though the post-Goodwin RBS has been hit by fine after fine for crimes as varied as mis-selling of payment protection insurance (PPI), interest-rate rigging, fixing foreign exchange markets, failures to correctly report transactions and mortgage mis-selling in the run-up to the crash, the Crown Office in Scotland announced in 2016 that there was ‘insufficient evidence in law of criminal conduct either in relation to RBS as an institution or any directors or other senior management’ over the events which directly preceded the bailout.34 Maybe it hurt as much as everyone would like it to have done – the threat of being stripped of his knighthood seemed to be enough to force former BHS boss Sir Philip Green to stump up £363 million of his own cash for the pensions of his own staff in 2017.35

  At least Goodwin’s de-Sir-ification was less of an empty gesture than another that was contemplated the same year. After Jimmy Savile was exposed as a lifelong sexual predator who had preyed on children and adults alike, there was a campaign to take away his knighthood too. It was both pointless and impossible: he was already dead.

  ‘I did not condone phone hacking, nor do I have any recollection of incidences where phone hacking took place…. As far as I am aware there is no evidence linking the non-royal phone hacking by Glenn Mulcaire with any member of the News of the World staff.’

  Andy Coulson, testimony, House of Commons Culture Select Committee, 21 July 2009

  Despite departing his full-time employment in Downing Street at the height of the Hutton inquiry in 2003 – he’d shattered the spin doctors’ first rule of never becoming the story – Alastair Campbell cast a very long shadow indeed. Four years later opposition leader David Cameron was still convinced that to fulfil his avowed intention to become ‘the heir to Blair’ he too needed a former tabloid journalist by his side as communications director. Even then his choice of Andy Coulson was an eccentric one. Campbell had been political editor of both the Daily Mirror and Today; Coulson had edited the ‘Bizarre’ showbiz column in The Sun, where he specialized in having his photo taken with his arm round pop stars. The worst Campbell had done during his newspaper career was punch another journalist who was celebrating the death of the crook Robert Maxwell; Coulson, by contrast, had been forced to step down as editor of the News of the World after his royal editor, Clive Goodman, and a private detective on a £2,000-per-week retainer were jailed for hacking messages on mobile phones, many of them belonging to members of the royal household.

  Coulson maintained he knew nothing about it, and that the practice was limited to just those two underlings, but there were plenty of reasons to suspect he was lying. He was notorious as a hands-on editor who wanted to know every detail of the stories that made it into his paper. The handful of test cases on which the two men were tried included an MP, two prominent figures from the football world, the publicist Max Clifford (who had publicly fallen out with the News of the World and was refusing to deal with its editor) and a supermodel, none of whom would appear to have been of interest to the royal editor. The judge at the trial had even noted that in those cases the detective ‘had not dealt with Goodman but with others’ at the paper.36

  The editors of both the Guardian and Daily Mail warned the Conservative leader that hiring Coulson was a bad idea.37 They were ignored. Cameron got a strong recommendation from a newspaper boss whose advice counted for more with him: Rebekah Brooks from The Sun. She had preceded Coulson as editor of the News of the World during the period when the paper hacked the phone of murdered schoolgirl Milly Dowler, and the pair of them had also been cheating on their spouses with each other for several years.38 But very few people knew about either of those things at the time.

  Cameron and Brooks were great friends. They were frequently in and out of each other’s Cotswolds homes and went riding together, and he used to sign off his regular texts to her ‘LOL’, supposedly under the impression it meant ‘lots of love’ rather than ‘laugh out loud’.39 In 2009 she told him: ‘I am so rooting for you… not just as a proud friend but because professionally we are definitely in this together.’40 But he was far from the only politician she and her senior colleagues at News International were pally with. Prime Minister Gordon Brown’s wife, Sarah, had hosted a ‘slumber party’ at Chequers for Brooks, Rupert Murdoch’s daughter Elisabeth and his then wife Wendi Deng. Tony Blair had gone one better by serving as godfather to one of Murdoch and Deng’s daughters when she was baptized in the river Jordan. (Blair fell out with the media tycoon when it later came out that Wendi had taken a shine to his ‘such good body and… really really good legs Butt’, and started trying to arrange encounters when her husband wasn’t around.41)

  On top of maintaining good relations with these various rival politicians, Brooks was able to keep Coulson up to date on the cover-up she was overseeing at News International. She and other executives were busy negotiating bigger and bigger legal settlements with victims of phone hacking to disguise the fact that the practice of phone hacking had been rampant across both the news and features departments of the News of the World.42 When word leaked in 2009 that police evidence suggested between two thousand and three thousand phones had been illegally hacked by Coulson’s staff – actually an underestimate – the company issued a flat denial, and Cameron announced he was ‘very relaxed about the story’.43

  Coulson did have to go in front of a parliamentary select committee, where he once again denied all knowledge of lawbreaking and insisted it was all the fault of Goodman, a single ‘rogue reporter’.44 He scoffed at suggestions his staff had hacked the phones of Labour cabinet ministers, despite the fact that he had personally listened to the messages of former home secretary David Blunkett before fronting him up about his relationship with a married woman. Blunkett was one of many figures to receive a hush-hush payoff from News International.45 To keep things really cosy, they gave him a job too.46

  Brooks was called in front of the same group of MPs – she claimed to have been tipped off this was going to happen by another buddy in Downing Street, Gordon Brown – but she felt confident enough to decline their invitation with an officious put-down: ‘my attendance… would be pointless and a waste of the Committee’s time.’47 It’s not that surprising she wasn’t keen to chat. When she had gone in front of a similar committee in 2003 (while she was editor of The Sun), she had accidentally blurted out, ‘we have paid the police for information in the past,’ a straightforward admission of a crime.48 But she didn’t need to worry; nothing had happened as a result.

  And nothing happened to Coulson, who moved with Cameron to Number 10 after the 2010 General Election. One of their first visitors was Rupert Murdoch, a regular caller on every prime minister all the way back to Harold Wilson. ‘They… don’t want me to be photographed going out the front door or I don’t want to be,’ he would later tell the Leveson inquiry into the British press when asked why he used the back entrance to Downing Street, ‘but it also happens to be a shortcut to my apartment, so it’s quite okay.’49

  In 2011, however, things began to spin out of News International’s control. As the storm broke Brooks requested a ‘discreet’ meeting with Coulson to advise him he should probably leave his job at Number 10 because some ‘pretty incriminating evidence’ had emerged.50 ‘I am very sorry that Andy Coulson has decided to resign as my director of communications,’ the prime minister announced. With a blithe disregard for the chronology of the affair, Cameron complained that his right-hand man had ‘resigned from News of the World when he found out what was happening, I feel that he h
as been punished twice for the same offence. I choose to judge him by the work he’s done for me, for the government and for the country’.51

  Most of the country chose instead to judge Coulson on the facts that became incontrovertible not long afterwards. He and his colleagues on the News of the World had hacked the mobile phone of a murdered schoolgirl, as well as hundreds of others, including families of those injured or killed in terrorist bombings and relatives of servicemen and -women killed in Iraq and Afghanistan. At the end of an epic eight-month trial he was found guilty of conspiracy to unlawfully intercept voicemails. Four of his senior editorial staff pleaded guilty to the same charges.52

  The fact that Brooks was found not guilty at the same trial tended to overshadow just what a big deal this was: the prime minister had hired a criminal after his crimes had begun to be uncovered and ignored the warnings, installing him right at the heart of Downing Street. ‘I am extremely sorry that I employed him,’ Cameron blustered directly after Coulson was found guilty. ‘It was the wrong decision.’53 It was the wrong decision to speak out then too – in a magnificent example of the independence of the British judiciary, Mr Justice Saunders slapped down the prime minister for speaking out before the jury had returned their verdicts on all the charges in the trial.54

  During the Leveson inquiry, as revelations arrived thick and fast about the favours and freebies that were being exchanged not just between the press and politicians but senior police officers too (the evidence required to convict Coulson and his colleagues had been sitting in Scotland Yard since 2006), it looked – for a few glorious months – as if things might change. No such luck. By 2017 Rebekah Brooks was back in her old job. Coulson had a new job at the Telegraph. Murdoch père continued to enjoy access to Downing Street – he met Theresa May within weeks of her taking over from Cameron. Five years on from Lord Justice Leveson’s inquiry into the ‘culture, practice and ethics of the press’, its most notable result had been that fewer national newspapers than before are signed up to any kind of press regulator.