by Tom Bower
Hoon’s invitation to Boyce to ‘drop in for a cup of coffee’ seemed unremarkable to the admiral. Soon after the first cup was poured, Hoon delivered the bombshell: ‘We’ve decided not to extend your tour of duty beyond two years, and in fact would like you to retire by February.’ He noticed the admiral’s usually inscrutable face registering shock. ‘I was surprised,’ admitted Boyce later.
Boyce’s reply, when it came, was categorical. To dismiss a chief of the defence staff on the eve of war would be careless, even irresponsible. ‘You would be making a mistake,’ he said, explaining the complications of a handover in the midst of preparing the army for an invasion 3,000 miles away. Hoon was easily persuaded that neither he nor the prime minister had thought through the consequences, and agreed that Boyce should remain until the end of the war.
Blair’s position was unprecedented. No other British prime minister had planned to start a war while distrusting his chief of defence, the permanent secretary at the MoD, the Cabinet secretary, the foreign minister, the defence secretary and most of his Cabinet ministers.
TWENTY-SEVEN
Lights Out
* * *
For Blair, relying on Margaret Beckett was particularly distasteful. In July 2002, the minister responsible for the environment and agriculture had been summoned to Downing Street to discuss Dr Iain Anderson’s report on foot-and-mouth disease. Blair’s successful resistance to demands for a public inquiry had been vindicated, as Anderson’s conclusions were devastating. Each chapter’s headlines, including ‘panic’, ‘erratic’ communications, ‘haphazard and messy’ decision-making and criticism about Blair’s thirty-one-day delay while he reorganised the Cobra machinery, punctuated the chronology, which described the successive mistakes that ended up costing the country £8 billion.
Fortunately, unlike the £30 million inquiry into BSE, which had triggered a witch-hunt against named culprits, Anderson had been persuaded not to pick out individuals. Instead, he blamed incompetent civil servants for being ‘insensitive’ towards farmers and paralysed by a ‘fear of personal risk-taking’. By default, Blair had failed the test of leadership by allowing the crisis to run out of control for the first month, but he himself escaped criticism.
He had resisted commissioning an inquiry until pressure from Brian Bender, the permanent secretary, overwhelmed his objections. The result matched his fears. Clearly nervous, Blair told Beckett and Bender, ‘I don’t want any leaks.’ Looking at Alastair Campbell, he then ‘read the riot act’. All the potential political pitfalls were to be covered, he ordered. ‘No one was to misbehave,’ was the message. There was to be no mention about the waste of £8 billion. ‘Well, Margaret,’ said Blair as Beckett rose to leave, ‘I’ve got great confidence in you. You’re the safest pair of hands in the government.’ He spoke through gritted teeth.
Bender had already reported that the merger of the Ministry of Agriculture into the Department of the Environment had overstretched Beckett’s skills, and the department had become ‘messed up’, just as Blair’s relabelling of the DTI, her old stomping ground, had proved a costly embarrassment. ‘Reorganisation won’t magically make anything better,’ Bender noted. Rearranging departments, like changing ministers, Blair discovered, made little difference.
Beckett’s opposition to nuclear power remained the biggest obstacle to the security of Britain’s energy supplies. Until September 2001, Blair had ignored warnings that the country could face future blackouts. Convinced it was safe to continue relying on the market, the government praised itself in its 2001 manifesto for having ‘brought full competition to the gas and electricity markets’. The reality was the opposite.
The original privatisation of the electricity-generating companies had been the idea of Stephen Littlechild. Later, as the first electricity regulator, Littlechild had encouraged the generating companies to earn big profits, in the hope of attracting more competition into the market. However, after 1998, his model crumbled. With the government’s approval, several of Britain’s energy companies were bought and integrated into three giant foreign electricity suppliers. The DTI had not protested over the fact that EDF, the state-owned French energy monolith, now dominated the supply of electricity in southern Britain, or that privatised British companies had been renationalised by foreign-owned corporations, or that British industry was being stripped of the engineers needed to design and build future power stations. Simultaneously, as the independence of British companies diminished, cheap French energy was being imported through cables beneath the English Channel and undercutting British electricity.
Competition was shrinking, but Blair’s staff appeared unconcerned. Geoff Norris, the prime minister’s adviser in Downing Street, and the DTI’s energy experts were convinced that an energy market would permanently guarantee low prices. The department approved the creation of NETA, a new regulator to supervise the trading of electricity. NETA’s rules were too complex for any politician or civil servant to understand, an incomprehension that pleased the accountants of the electricity companies, whose increasing profits went unquestioned by Ofgem, the new regulator created to protect competition.
Blair had not understood the problems he was entrusting to his new team of ministers at the DTI under Patricia Hewitt. His instructions to her in 2001 had been perfunctory: ‘You know about business. Just do what’s to be done and build the economy.’ He remained uninterested in energy. His distraction extended to forgetting to tell her that she was also the minister for women.
In the weeks after the election, oil prices rose and gas supplies from the North Sea fell. For the first time in a decade, Britain was a net importer of energy. Reluctantly, Blair considered the implications. He was persuaded by David King, the government’s chief scientific adviser, that Labour’s 1997 moratorium on new power stations had diminished the safety threshold that protected Britain from blackouts. The country, said King, could not rely in the future on wind and solar energy, which together contributed only a small fraction of its needs. Nuclear power, Blair knew from his time as Labour’s shadow energy minister, was the only environmentally safe way to guarantee Britain’s electricity supplies over the next fifty years, but building new nuclear stations would require complicated negotiations and guarantees for private investors.
Blair’s commitment was supported by Brian Wilson, his new pro-nuclear energy minister. Norris convinced Wilson that, as ‘Blair’s vicar on earth’, he should deliver ‘the tablets of stone on nuclear’. One obstruction, Wilson knew, was Hewitt, who, like Robin Young, her permanent secretary, was anti-nuclear. Further down the chain, Wilson believed the DTI’s energy directorate was unqualified to steer the argument in the direction Blair wanted. But the major problem was Beckett. Wilson and Norris attended a succession of ministerial meetings with the minister. ‘We went round and round in circles’, recalled Wilson, ‘watching Beckett, supported by Peter Hain, killing off nuclear energy, which had become her life’s work.’
While concentrating on Northern Ireland’s problems in Belfast, Blair accepted Norris’s suggestion that, instead of entrusting a Cabinet committee to reconcile the differences within his government, he should ask Nick Hartley in the Policy and Innovation Unit to discover whether Britain was permanently guaranteed cheap energy and how soon the country could reduce carbon emissions by 60 per cent. Five months later, on 22 February 2002, Hartley published a sanguine report. Blair’s adviser saw no reason to abandon the policy enshrined by Nigel Lawson in 1982. ‘The process of privatisation and liberalisation’, wrote Hartley, ‘seems to have succeeded well.’ Britain’s competitive energy markets, he enthused, ‘should continue to form the cornerstone of energy policy’. Relying on markets, he predicted, was not a risk. In any future crisis, high prices or shortages would be benignly resolved by ‘efficient … price shocks’, which, thanks to the perfect operation of the market, would reduce consumption. The government, Hartley advocated, should remain detached and ‘monitor’ events while Britain increasingly reli
ed on imported oil and gas.
Hartley’s faith chimed with Blair’s championing of competition. During summit meetings with his fellow European leaders, Blair urged them to depoliticise energy by relying on the market. Gas prices across the EU, he argued, would be kept down in liberalised markets. His arguments were universally rejected. Europeans regarded electricity as a political, not a private, business. Blair’s energy advisers in Downing Street noticed his lack of interest in such nuances. Distracted from domestic policies by frequent trips abroad, he misunderstood how Labour was interfering in Britain’s energy market and had inadvertently politicised the country’s energy. New environmental taxes and government subsidies for coal, wind farms and solar panels had distorted the market, while the proliferation of additional agencies that enforced laws to fight climate change had deterred the generating companies from building power stations. As energy prices slowly increased, the government was indecisive. Blair accepted Hartley’s conclusions but ignored the author’s myopia regarding the dearth of private investment.
Brian Wilson took the opposite view. If an energy policy were not developed, he believed, Britain would face a serious shortage. The solution to Hartley’s blind optimism, he suggested, was a White Paper – the first since 1989 – in which the DTI should advocate nuclear power. With Blair’s support, Wilson presented drafts to Hewitt. ‘The meetings went again round and round in circles, with Hewitt doing nothing,’ Wilson complained. ‘It’s ridiculous,’ he told Hewitt. ‘This White Paper will have a huge hole in it – which is nuclear energy.’ The problem returned to Downing Street.
Previous governments had discussed the issue in a Cabinet committee supplied with briefing papers to support a structured debate. Blair disdained that forum. First, Downing Street talked to journalists to produce suitable headlines like, ‘Blair Set to Put Nuclear Power Back on Line’. Next, to overcome Beckett’s opposition, in late 2002 he invited Gordon Brown for another ‘chat’ in his office. Blair hoped that Brown would broker a deal with Beckett and Hain.
The chancellor arrived in a thunderous mood. As usual, Blair did not reckon on Brown’s self-interest. Most recently, they had argued once again over his refusal to share Blair’s enthusiasm for the euro. Blair suspected that Brown’s stubbornness was the prelude to a coup. ‘He’s behaving outrageously,’ Blair had told Mandelson. ‘This time he’s gone too far.’ But as usual, he had resisted dismissing his chancellor. Although the abuse was as bad as in 2001, when Brown had called him ‘a crap prime minister’, he had not organised his supporters effectively. Fearful of the party and of Brown himself, he had refused to strike.
Now, Brown fumed while Norris and Joan MacNaughton, the DTI’s director of energy, explained that, without new nuclear stations, by 2020 Britain would rely on gas for 70 per cent of its power, and 90 per cent of that gas would be imported. Britain’s energy security would, therefore, be jeopardised. At the end of the explanation, Blair hoped that Brown would pledge his support. Instead, he got up and walked out without revealing his intentions. To those left in the room, Blair appeared to underestimate his authority as prime minister. But he could only blame himself. He was semi-isolated within his own government.
To conceal his embarrassment, Blair summoned Hewitt to hear her proposals. Like Beckett and Wilson, she was unaware of her leader’s latest fracas with Brown. ‘Do you want a row in Cabinet about nuclear?’ she asked. ‘Do you want a fight with Beckett?’ Since any new nuclear station required fifteen years to plan and build, she continued, he should abandon the idea. Instead, she described her passion: a carbon-trading scheme operating across Europe that would commit governments to lowering carbon emissions and encourage the greater use of renewable energy.
‘I’ll think about it,’ Blair replied.
Even before Nicholas Stern, a civil servant, published an error-strewn review in 2006 warning about the dangers of climate change, Blair had been hooked on the political importance of controlling emissions. Labour’s 1997 manifesto had pledged to reduce carbon dioxide emissions by 20 per cent by 2010. No other country burdened itself with a mandatory law on climate-change targets. A law like that in a country like Britain, which refused to plan its energy supplies, was particularly dangerous without nuclear energy. And Brown was vetoing that development.
The deadlock gave Blair every reason to ponder Brown’s obstruction to reform. The chancellor’s track record was transparent. Contrary to his assertion that the New Deal’s £3.6 billion welfare-to-work programme was helping 1.2 million young people find employment, by February 2002 just 3 per cent of unemployed youths had found jobs. Two years later, at a total cost of £5.2 billion, only 130,000 young people had moved into unsubsidised employment.
Other indicators exposed the poor value of Brown’s redistribution of wealth. The number of people claiming incapacity benefits rose by 1 million to 2.7 million in 2004, costing taxpayers £19 billion a year. Unemployment was also rising: 7.8 million people of employable age – a fifth of the total – were not working, not least because since 1997 a million jobs had been lost in manufacturing. Despite all the new skills councils, development agencies and apprenticeship schemes, British industry invested less and produced less than its competitors. Brown’s forecast of an economic miracle was not materialising. Instead, the country was being transformed by his relentless increase in welfare benefits.
The proportion of the population receiving more in welfare than they paid in tax was rising towards 53 per cent, 10 percent higher than in 1997. Quite intentionally, the Blair government was overseeing the creation of a nation dependent on state welfare. Not only was work made less attractive than government handouts, but Downing Street’s task groups encouraged the disadvantaged to expect an equal stake in society. With the government’s blessing, a new majority of Britons classified themselves as victims. In Blair’s opinion, the growth of welfare dependency confirmed Britain’s transition towards a fairer society. His satisfaction was shaken only by his chancellor’s stubbornness.
On Brown’s instructions and with Blair’s support, John Prescott had begun the part privatisation of the London Underground. The Tube’s managers are ‘useless’, declared Brown, convinced that private companies would perform better. While the network would still be owned by the state, he proposed that private companies take over the maintenance and renewal of the track, rolling stock and stations. Incapable of mastering his brief, Prescott quickly lost control of the process to a group of businessmen, consultants and lawyers whose fees would total over £1 billion. Prescott was replaced by Shriti Vadera, a favourite banker close to Brown. Lacking any experience in such ventures, Shriti ‘the Shriek’ Vadera produced a 28,000-page contract that allocated the profits to the private companies and the risk to the state.
Suspecting that Vadera’s solution was chaotic and costly, Blair summoned Bob Kiley, the American manager of the Tube, to Chequers. Kiley arrived to discover the privatisation contract strewn over Blair’s desk. He confirmed the prime minister’s fears. Brown’s hubris ‘would cost’, said Kiley. The disaster, Blair was told, could have been averted by issuing bonds to borrow the money. Neither man could foresee that the final bill for taxpayers would be about £30 billion. Instead of confronting Brown with that considerable waste of money or highlighting the contradiction of his positions on the Tube and the NHS, Blair supported his chancellor’s scheme ‘as the only way to get massive investment into the ailing network’. He spoke with genuine conviction. Out of similar ignorance – or fear – he would also break a manifesto pledge in support of his chancellor and sell Britain’s air-traffic-control system to private owners.
It was not just that Blair had a complicated relationship with Brown; rather, after five years as premier, he had still failed to recruit a colossus to challenge the Treasury on his behalf. Instead, Downing Street employed about eighty special advisers running units focused on strategy, research, social exclusion, innovation and delivery, but not concentrating on the management of the economy – a
nd not least on producing a coherent energy policy.
It thus fell to Blair to fret about the fate of British Energy, the privatised nuclear company sliding towards bankruptcy. To support coal mining, the government had reduced the subsidies for nuclear energy, but no one in Downing Street had anticipated the consequences of slashing the income of the company (which generated a fifth of Britain’s electricity) or the company’s unforeseen liabilities in cleaning up Sellafield. Bankruptcy risked Britain’s lights immediately going out. Blair asked Norris to distil the crisis into bite-size options – ‘not too much detail’, he insisted – and a solution. Norris’s alternatives were to renationalise the company, bail it out or allow its sale to profiteering vulture funds. He favoured the sale. ‘There’s no point wringing one’s hands with Blair,’ he decided, and asked James Sassoon, a banker, to reassure Blair that a bail-out and a later sale would be ‘honest’. The crisis passed, but there was still no energy policy, and no agreement on nuclear power.
Admitting his failure, Blair accepted Hewitt’s advice to adopt a carbon-trading scheme with a 5 per cent carbon cap. The result was a commitment to spend billions of pounds on subsidies for installing generators powered by renewables and energy efficiencies such as home insulation, and to switch from coal to gas generators. The additional cost of electricity for consumers was unquantifiable but would be enormous. Even after those changes were made, carbon emissions were still destined to increase, which made the commitment to reduce them substantially by 2050 impossible without nuclear energy, and that was ruled out.