Shortly before Christmas, Ruth Kelly made a presentation to the Cabinet. A sullen Prescott sat through it grunting his unconcealed dissent before loudly complaining that it would lead to first- and second-class schools. He then gave an interview to a Conservative newspaper conducted by Susan Crosland, widow of a former Labour Cabinet minister. Prescott gave encouragement to rebellious Labour MPs by declaring that there was ‘a great danger’ that city academies would become grammar schools by a different name. The old seaman was now visibly inciting mutiny against the Prime Minister.64 Shortly afterwards, more than ninety rebel Labour MPs put their names to an ‘alternative White Paper’.
In the New Year, another dangerous opponent, Neil Kinnock, unfurled his banner. The former Labour leader was also shaped by bitter memories of the 11-plus and how the selection exam branded generations of children as failures. Kinnock’s opposition was the more potent because until now he had been impeccable in his public loyalty to Blair. ‘I had to speak up,’ says Kinnock. He thought ‘the multiplication of types of schools was a false objective that was bound to come to grief.’65 Within Number 10, they saw that ‘Neil was a big problem. He legitimised the rebellion.’66 Blair had three meetings with the former Labour leader to try to talk him round. When they got nowhere, Kinnock eventually said: ‘I’m wasting my bloody time and yours. Let’s talk about something else.’67
Kinnock chaired a meeting at the Commons in mid-January at which Blair’s reforms were denounced. Alastair Campbell and Fiona Millar were an eye-catching and headline-generating presence sitting on the front row. Though Campbell once described earlier schools reform as the end of the ‘bog-standard comprehensive’, he was viscerally opposed to the entire choice and diversity agenda.
Blair was rightly impatient with their view that parents should be compelled to use the local state school whether it was decent or rotten. ‘It’s true that if you create more good schools, then people will want to go to them, and it’s also true that the middle class will fight very hard to get into the best schools,’ he argued.
Middle-class folk will always find their way through the system. That is just the way it is. That’s life. It cannot be a reason for not creating more good schools. I’m more concerned about people living in an area where there isn’t a school that offers them anything other than a three in ten chance that they can get five good GCSEs, never mind getting into university. It’s not on.68
He had the arguments, but not the numbers. ‘We’re losing it badly,’ said one of his senior aides in the New Year. ‘We’re not going to win this.’69 They had ‘misread the opposition that was going to come his way’, says Wegg-Prosser. ‘In the end, it was daily battle stations.’70 Blair had to announce further retreats from his original ambition, says Phil Collins, because it was ‘hell’s own task to get it through even in diluted form’.71
He was thwarted in his intention to introduce mechanisms to speed up the closure of bad schools and the expansion of good ones. He had wanted local education authorities to be stopped from setting up any further schools so that all new ones would be established by independent providers. He gave way on that, too. A strict admissions code was conceded in order to appease the fears about the extension of selection. ‘Tony just cut his losses in the end,’ remarked one disappointed ally.72 This was Blair’s last battle on public service reform. Stymied in his original ambition to free all schools, he would devote the remainder of his premiership to rush-building the elite city academies, a programme almost single-handedly driven by the evangelical Adonis. By February, Prescott was sufficiently satisfied that the legislation was neutered that he made a speech in support. The more radical spirits at Number 10 concluded that Blair ended up ‘kidding himself’ about what finally emerged and the legislation was so compromised that it was ‘not really worth putting on the statute book’.73
Blair had believed that saying he would fight no more elections would ‘liberate’ him to be more boldly reforming in the third term than he was during the first and second terms.74 The fatal flaw in this calculation was its assumption that his party would let him be as radical as he wanted to be. The ‘almighty struggle’ over this legislation ‘brought it home’ that Labour MPs were not going to let him do just as he pleased.75 His tragedy was that by the time he finally arrived at clarity on what needed to be done in education and other public services he was drained of the political capital to achieve the vision.
The size of the rebellion left him riskily dependent on Tory support. When the Bill was published in late February, David Cameron and his education spokesman, David Willetts, declared that they would vote for it because they agreed with the thrust and could use it to go further when they were in government.76 ‘I’m saying to the Prime Minister: if you want these education reforms, you can have them. Be as bold as you like, because you’ve got my backing,’ said Cameron, who praised city academies as ‘a very good idea’.77
This was tactically astute. It made Blair look like a leader who needed Tory help to prevail over the jurassic types in his own party. Cameron also calculated, correctly, that his support would make Labour MPs more suspicious of the legislation and more inclined to damage the Prime Minister by rebelling.78
MPs voted on the crucial second reading on 15 March 2006. The result was a superficially resounding victory. The Bill was passed by 458 votes to 115. Conservative support guaranteed its safe passage. The problem for Blair was that he had only won because of Tory votes. A total of fifty-two Labour MPs voted against and a further twenty-five abstained. On a later vote on timetabling of the legislation, the Tories swung into opposition and the Government won by only the alarmingly thin margin of ten.
No leader can expect to last for long if he is dependent on the unreliable support of the principal Opposition party. To some of his colleagues, Blair’s position was becoming reminiscent of David Lloyd George’s towards the end of his time at Number 10. Tony Blair was turning into a Prime Minister without a party.
22. The Hollowed Crown
At a quarter to seven on the night of the crucial education votes in the Commons, a key Labour functionary was at a television studio in north London being dusted with powder. Jack Dromey, the Deputy General Secretary of the Transport and General Workers Union and Treasurer of the Labour Party, was an angry man that evening. Ninety minutes earlier, he released a statement announcing that he was setting up an inquiry into ‘the securing of loans in secret by the Labour Party’.1 Now he was going on television to explain why. Just as Tony Blair was negotiating one minefield in Parliament, Dromey detonated the ‘cash-for-coronets’ affair by lobbing dynamite directly at the door of Number 10. On Channel 4 News and later that evening on Newsnight, the party Treasurer made several extremely damaging accusations about the way in which Labour financed its 2005 election campaign. Elected officials such as himself were ‘kept in the dark’ about a secret funding operation. He went on: ‘We have once and for all to end any notion that there is cash for favours in our political culture.’ He pointed the finger at the Prime Minister. ‘Number 10 must have known about the loans.’2
This struck a spark which led to a police inquiry that culminated in Tony Blair gaining the unenviable distinction of being the first sitting Prime Minister to be interrogated in the course of an investigation into criminal corruption.
The origin of the affair was his desperate attempt to scrabble together money to fund the last campaign. Labour was ‘broke’ in the run-up to the 2005 election.3 Blair was ‘in a state of panic’ about the lack of funds and ‘seized by the fear’ that they would be ‘fatally outgunned’4 by the Tories, who were able to direct large sums at target seats thanks to the long pockets of Michael Ashcroft, the billionaire Tory peer from Belize.
Blair turned to Michael Levy, his fund-raiser for more than a decade. Levy was an East End boy made good. He escaped an impoverished childhood in Hackney, trained as an accountant and then became a millionaire pop impresario whose creations included Alvin Stardust. When Blair b
ecame leader, Levy spotted another star in the making and hitched himself to it. Blair grew fond of Levy, shared his passions for tennis and religion, and was wowed by the way in which he raised huge sums for Jewish Care, turning it into one of Britain’s most successful charities. Those prodigious fundraising talents were exploited for New Labour.
Both men agreed that the party needed to reduce its dependence on money from the trades unions. The union contribution fell from two thirds of funding when Blair became Labour leader to less than a quarter at the lowest point. Levy liked to boast that he had entirely changed the rules of the game.5 So he had. But not by raising money from a mass membership party. It was from rich individual donors that Levy harvested some £100 million between 1995 and 2005. Labour now aped the Tories by relying on plutocrats. That made both the main parties unhealthily dependent on a cash stream from a small number of very wealthy men.
The ebullient Levy was permanently tanned with immaculately coiffed grey hair. A natty dresser, he stood five foot six in stack-heeled shoes. Baron Levy of Mill Hill, as he had become in Blair’s first honours list, operated from Chase House, his hacienda-style mansion in Totteridge in north London. His genius as a fund-raiser was to understand the craving for status and recognition among men like himself who had risen from poor backgrounds. Levy denied the legend that he baited potential donors with an invitation to play tennis at the mansion with a hint that Tony might drop by for a set or two.6 What he did do was throw dinner parties at which he mingled members of the Government, VIPs and celebrities with wealthy men whose cheque books he wanted to prise open. The guests clustered for drinks on the pristine white fitted carpets. They gawped at the nouveau riche gold-leaf decorating the mansion. They might envy the huge lawn, the tennis court and two swimming pools, indoor and outdoor. Once they were seated at the glass and marble dinner table, the star guest would appear: the Prime Minister. Blair told friends that he ‘loathed and despised the business of raising money’ but swallowed his distaste because ‘it needed to be done.’7
Donations were not discussed at the table. It was not that crude. Levy waited until later to snare rich men by gripping them with his firm double-clasp handshake. Then he would pat, hug, wink, flatter and charm before going for the squeeze: ‘You look like you could afford a million.’ He revelled in his image as friend and tennis partner of the Prime Minister and in his role as a Middle East envoy. In an odd way, he even derived pleasure from being known as ‘Lord Cashpoint’, embracing the soubriquet as a compliment to the way he treated ‘fund-raising as an art’.8
Even this world-class schmoozer was struggling to raise funds in the run-up to the 2005 election. Blair’s magic had faded. Rich men were fearful of the media attention attracted by big donations. ‘Fund-raising was getting very difficult,’ says Levy. ‘People didn’t want to pay. They didn’t want to be beaten up by the media any more.’9 Disaffection with the Government had caused party membership to shrivel to less than 200,000. Blair didn’t want to appeal to the trades unions, who were alienated from him anyway. Gripped by panic, he decided to break a last taboo about fund-raising.
He had cleaned up elements of party funding during the first term by legislating to ban secret donations and ones from abroad. It was no longer lawful, as it was under the Tories, for parties to trouser enormous sums and keep the source of the cash indefinitely concealed from the public. The Elections and Referendums Act 2000 compelled declarations of donations over £5,000. But the law left a loophole. Cash that came in as a loan could be kept hidden. Here was a mechanism for securing extra funds at a time when rich men had become averse to publicity because of earlier money scandals of the New Labour era. Thus did previous sleaze eruptions lead to the most volcanic of all.
Labour had previously forsworn copying the Conservative practice of taking money in hidden loans. Blair’s fear of being financially out-gunned during the 2005 campaign was amplified when Levy warned him that the Tories were raising ‘a fortune in loans, at least £25 million.’ Levy argued that it was ‘nuts’ to let their opponents have this advantage and the law should be changed to ban undisclosed loans.10 On his account, it was Blair, against the fund-raiser’s advice, who made the ‘ill-considered, panicstricken’11 decision that Labour should start taking loans as well. Levy did not like it on the grounds that ‘loans, unlike gifts, had to be paid back.’12 That wasn’t true, though, if a sugar daddy was later persuaded to change a loan into a donation. This was not illegal, but it hardly met the ‘purer than pure’ test that Blair once set for his Government. It was a blatant violation of the spirit of disclosure in the rules on funding that New Labour had itself enacted. Loans had the potential to be more perverting than straightforward donations because they left the party in debt. Any lender disappointed that the money was not reciprocated with an honour or favours could demand his or her money back.
Levy was becoming disillusioned and estranged from Blair, who had bruised his ego by going behind his back to approach Ronnie Cohen, another multi-millionaire, to do some fund-raising. He nevertheless set about collecting loans before and after the election. The curry meal king, Sir Gulam Noon, agreed to lend £250,000. David Sainsbury, the grocery lord and Science Minister, added a further £2 million in loans on top of a £2 million donation. The stockbroker Barry Townsley lent £1 million to Labour in addition to the £2 million he spent sponsoring a city academy. Other loans were raised from the property developers Sir David Garrard and Andrew Rosenfeld. Garrard pledged a £2 million loan; £1.5 million was raised in a loan from Chai Patel who founded the Priory group of clinics.13 Blair ‘knew about every single one’.14
Violating the spirit of transparency by taking clandestine loans showed how far Blair had left behind his promise of ten years before that he would re-establish ‘the bond of trust between the British people and the Government’ and be ‘tough on sleaze and tough on the causes of sleaze’.15
The first ‘cash for peerages’ headline appeared in the Independent on Sunday in October 2005.16 It then emerged that Blair had nominated for peerages Garrard, Noon, Townsley and Patel, who had between them made loans to Labour of £4.7 million.17 The loans had not been disclosed to the House of Lords Appointments Commission, the body set up by Blair to scrutinise peerages after earlier scandals. The loans were hidden from Labour’s own fund-raising committee and concealed from Ian McCartney, the party Chairman, who signed the nomination forms for the four peerages in his hospital bed while recovering from a heart bypass operation.18
The four peerages were blocked by the commission or withdrawn. Early in the New Year, an undercover reporter from the Sunday Times recorded Des Smith, a headteacher from Essex, claiming that for a donation of £10 million to a city academy ‘you could go to the House of Lords’. He resigned as a Government adviser the next day and was arrested in April.19 The police abandoned interest in the shattered model head when they grasped that Smith was making a cynical observation rather than a criminal one. The focus concentrated on the loans and peerages.
The story rumbled for months, but it only became a full-blown crisis once Jack Dromey publicly pointed the finger at Number 10. He felt he had been lied to over the previous forty-eight hours about the sums involved. A news conference at Downing Street the morning after his intervention was one of the most squirming of Blair’s premiership. He was compelled to admit for the first time that he had not told the scrutiny committee about the loans to Labour from his nominees for the peerages.20 Downing Street was ultimately forced to confess that a total of £14 million was raised in hidden loans from a dozen wealthy men. An MP of the Scottish National Party, Angus MacNeil, lodged a speculative complaint with the Metropolitan Police. The Commissioner, Sir Ian Blair, was fighting for his own professional life over the de Menezes shooting. There was widespread surprise when he ordered an investigation by Scotland Yard’s Specialist Crimes Unit. From March, John Yates, a Deputy Assistant Commissioner who dealt with highly sensitive inquiries, was on the case at the head of a team of ei
ght detectives.
A toxic cloud hung over Number 10 for the remainder of Blair’s time in office. Then and ever after he believed that this chain of events was deliberately triggered by Gordon Brown. To a senior aide, Blair said: ‘This didn’t happen by accident.’21 Dromey was married to Harriet Harman. Sacked from the Cabinet in the first term, Harman was back in Government as a minister at the Department of Constitutional Affairs. Her boss, Charlie Falconer, was one of the Prime Minister’s closest friends. He reported to Blair that Harman was being ‘immensely disloyal’. She had directly said to Falconer that Blair should quit and be replaced by Brown.22 That was not the only reason why Blair saw Dromey’s intervention as an act of naked aggression by the Chancellor.
His relationship with Brown was at a new nadir. ‘The rows were constant,’ says one Cabinet minister. ‘Absolutely stupendous rows.’23 Staff on both sides of the divide ‘felt like children of a dysfunctional marriage where mum and dad are too busy arguing to ever talk to the kids. We’re sitting there on the bottom of the stairs, saying “Could we have a decision please?” and the crockery is being thrown around.’24
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