My Life, Our Times

by Gordon Brown

  This accorded with what Tony was telling me directly: that he would stand down in his second term. But he now added two reasons why he, rather than me, should be leader at the next election. I was Scottish, he said, and I was unmarried. We could not, he said, have two leaders in a row from Scotland. I reminded him that he too was Scottish: born in Scotland of a father raised in Glasgow, and also educated at a school in Edinburgh. The only difference seemed to me that people knew I was Scottish and assumed he was not.

  The ‘being single’ charge was more insidious. At least one or two of Tony’s adherents went out of their way to imply to the press that they knew more about me than the public did. In conversations with colleagues, some MPs were persuaded to raise questions or cast aspersions about my private life. In the dark world of rumours and counter-rumours that swirl around Westminster, people believed what they wanted to believe and what suited their purposes. This was echoed in a low moment for the BBC two years later, when I was interviewed for Desert Island Discs, and the presenter Sue Lawley insinuated that being unmarried meant I was gay. I was not. But the insinuation was born of prejudice: that somehow there was something wrong with being gay. The allegations were as untrue as they were unworthy, but during these years damage was done.

  On the Friday, I attended John Smith’s funeral at Cluny Parish Church in Edinburgh. Donald Dewar, who had been closer to John than almost anyone outside his family, spoke movingly. He was emotional, but with a twinkle in his eye, talked of the John ‘who could start a party in an empty room’. On that day, when the mourners assembled after the funeral, Tony was also seeking another meeting with me. But so immersed was I in talking to John’s family and close friends that the meeting he wanted – which Sue Nye and Tony’s assistant Anji Hunter were coordinating – had to be repeatedly postponed and rearranged. In the end, we met again at Nick Ryden’s home, but the meeting was far shorter than Tony wanted.

  Soon another story was planted, this time in the Scottish press, which attempted to take my strength and support in Scotland and turn it into a weakness. Scottish MP colleagues, the headline claimed, now wanted Blair and not me. In fact, when the Scotsman contacted forty-two out of forty-eight Scottish Labour MPs to ask their preference, twenty-one said they were already backing me and only six said they would vote for Tony. Simultaneously there was also a campaign to whip up anti-Scottish sentiment among English MPs, with a suggestion from some that it was time to ditch the ‘Scottish mafia’.

  Two days after John’s funeral, I made my speech in honour of him at the Welsh Labour Party conference in Swansea in which I set out a vision of a party awash with ideas, vibrant with dynamism and purpose, that would reform the welfare state and appeal beyond our heartlands. It did not make the impact with the media that I had hoped for. I had an agreement with Tony that we would not attack each other’s speeches, but a briefing went around that I had made my speech to appeal to what an unidentified briefer termed – without a hint of irony – ‘forces of darkness’ within the party. The phrase appeared prominently in the next day’s Times. There was evidently a campaign under way to characterise me not just as unelectable but anti-reform too.

  The briefing had its desired effect. In the days that followed, I attended a memorial service for John in his constituency and then criss-crossed the country – playing a full part in the European election campaign – from Morecambe to Aberdeen with a visit to Luton in between. On the way to Luton I had a further meeting with Tony. But my mind was already made up. I would accept his assurances. He would give me control of economic and social policy and would stand down during a second term. Unwilling to see the party divided in a way that would endanger the prospects for reform, in the days leading up to 30 May I informed those closest to me of my intention not to stand.

  The rest was a formality. On 31 May, I sat down again with Tony near his home in London, at a restaurant called Granita. Ed Balls travelled with me to the restaurant and, after a few minutes, he left. I always smile when commentators write that we hammered out a deal in the restaurant. The Granita discussion merely confirmed what he had already offered and I had already agreed. The only new point was Tony’s overture that he wanted to show that, unlike the Tories under Mrs Thatcher, Labour was not a one-person band but a partnership. As we walked out of the restaurant towards his home, he emphasised the word ‘partnership’ again and again, telling me it represented a new departure for British politics.

  On Wednesday 1 June, I travelled to Nottingham with Ed Balls to honour a European campaign commitment. I penned a withdrawal statement that I sent in draft to Tony. At the same time, our usual ‘lines to take’ for any press enquiries were being hammered out – amended and re-amended in a process involving Tony, Sue Nye and Peter Mandelson, as well as me. They were there to reflect what we could explain publicly by way of background information when questions were asked by the press. This draft, leaked years later to the Guardian, contained Tony’s guarantees about my control of economic and social policy. It was, of course, the part of the agreement we could allude to in public. The other part – that he would stand down in a second term – was an explicit, but private, understanding between ourselves and would, of course, not be referred to in public.

  I made the formal announcement to the Press Association at 3.30 p.m. Originally, we planned to be photographed in public to affirm the strong partnership Tony had talked of. The plan was to walk between Westminster and Lambeth Bridge on the pathway overlooking the Houses of Parliament. But immediately after I published my statement, Tony’s team changed tack. Andrew’s diary states:

  The whole episode was nearly a disaster. Tony had agreed to a photocall immediately after the statement was issued … But Tony’s aides took cold feet. After GB had issued his press release withdrawing, TB threatened to break his agreement and not take part in a photocall. His advisers were suggesting that – even with no interviews by either TB or GB – he would be in danger of breaking shadow Cabinet rules on not making any pronouncements on the leadership question until after the European campaign. I suspected even worse than that. Without the photocall – particularly in TV terms – GB would have looked like a loser – and it would have been interpreted that way. After at least five phone calls between the two offices, Tony eventually succumbed to a photocall which took place much later than planned – at about 4.45. The pictures themselves showed Tony looking very uncomfortable – and hardly acknowledging GB.

  When I offered to chair Tony’s leadership campaign, he demurred. And while I helped write his leadership speeches, I was frozen out of the campaign. Long into the future, the focus of the 1994 leadership race would wrongly remain on what was said at Granita. The restaurant did not survive; and ultimately neither did our agreement.

  A week after his election as leader, Ed Balls and I visited Tony at his home in Islington. We were in for a shock. Sitting in the garden lapping up the sun on a very bright morning, we were both surprised when he announced that Labour must rule out forever any rise in the top rate of tax. I agreed that we should rule out a rise in the basic rate – indeed, we were considering a lower band, a 10p rate – but I said I didn’t know how we could meet our promises unless we left open, for the time being at least, the possibility of a top-rate increase on very high incomes. I said we had to do in-depth work on the costing of our programmes – for example, the needs of the NHS – before we made such a unilateral move. He was adamant: no party he led would ever raise the top rate of tax. Of course, it made for good electioneering – the British version of ‘read my lips: no new taxes’ – but, as Edward Heath had pointed out years before, the better way of dealing with taxes was to say that we did not want to raise them but, if circumstances arose where it was necessary, we would take the action required. By putting a pledge never to raise the top rate at the centre of our modernisation, we did prove that we had changed, but it was not in the national interest to rule out the possibility of even a modest change in the top rate for the highest earners.
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  It was a fateful decision which meant we could do far less than I had hoped about the needs of our public services and the rising inequality in our country. In government, we would struggle to fund the NHS and education. We would need a great deal of lateral thinking: in addition to the windfall tax, we would raise National Insurance for high earners. It might have been better all round, however, if we had heeded Heath’s advice. Levels of inequality were rising across the whole western world, not least in egalitarian Scandinavia. Our decision on tax meant that in the end we would be able only to stall rising inequality – not reverse it. As it has worked out, even the Tories now accept what Tony ruled out that day: a 45p rate at the very top.

  For the next three years, I combined my duties as shadow chancellor with overall responsibility for election strategy, while day-to-day campaign planning was in the hands of Peter Mandelson and Philip Gould. Philip was more than a pollster: he was a strategist whom, before his tragic early death from cancer in 2011, I got to know well and came to admire greatly as a man of courage and humility. Every morning I presided over meetings to implement and finesse our message. Even so, I was not informed in advance of Tony’s decision to announce the repeal of Clause IV of Labour’s constitution, the iconic commitment to nationalisation of all industry. Others, like Jack Straw, had floated it in the past, but Tony masterfully delivered the change and positioned it as a hallmark symbol of the fresh approach of New Labour.

  Our strategy group had a two-pronged approach: first to persuade the electorate that Labour had changed, with new policies to back that up; and second to expose the mistakes of the Tory government. To win an election we needed both approaches, the positive and the negative. Within weeks of Tony’s election as leader, a plan I had been working on under John Smith came to fruition. It was to mark the most significant parliamentary defeat of the Conservatives since 1979.

  Any rise in gas and electricity costs can have a dramatic impact on the personal finances of millions of families. So, when the Conservatives announced that they would impose an increase in VAT on fuel in two stages – 8 per cent in 1994 and 17.5 per cent in 1995 – I was determined to stop them in their tracks. The Conservatives successfully passed the first of their two VAT increases. Having done so, they assumed they would need no further parliamentary approval for the second rise. But our team, led skilfully by an ever-inventive Nick Brown, had devised an ingenious manoeuvre to force a vote by tabling a procedural motion. Our other weapon was the personal promises made by Conservative candidates in their constituency manifestos at the 1992 general election that they personally would never vote to raise VAT. With the help of a young researcher, Chris Leslie, who was later to become an MP and, for a time, shadow chancellor himself, we embarrassed the benches opposite by publishing the specific pledges each Conservative MP had made, constituency by constituency. Every time they stood up in the Commons to ask a question, we challenged them on their breach of faith with their constituents.

  To head us off, Ken Clarke offered an extra £120 million to help the elderly. That was not enough. In a dramatic December vote, our amendment to stop the second VAT increase passed by 319 to 311. Just enough Tory members had defected. We could now argue that the only party which had delivered a major tax cut in the 1992–7 parliament was Labour.

  We learned something from this episode. From then on, we relentlessly exposed the personal promises of Conservative MPs who had not only pledged never to raise VAT, but never to raise any other taxes, including National Insurance – which was exactly what they had just done. Clarke made matters worse when he said that no one should take seriously promises made in hustings ‘on a wet Wednesday night in Dudley’. He was wrong: the public did.

  Having put the Tories on the defensive, it was time to move on to the positive case for Labour on economic policy. But our attempt at a new economic policy had an inauspicious start. Ed Balls and I had organised an international conference on new economics with Larry Summers, Robert Reich and Richard Freeman of Harvard. Ed had prepared a paper setting out some of the new ideas in the economic literature and referred to ‘neoclassical endogenous growth theory’, by which he meant improving the supply side of the economy through R&D, training, the quality of investment and so on. Without properly thinking it through, I inserted the term in my speech. Although the media pointed the finger at Ed – and Michael Heseltine famously joked ‘it wasn’t Brown, it was Balls’ – I was wholly to blame for the ridicule that ensued.

  In the first half of 1995, Ed Balls, Ed Miliband and I hammered out a series of major speeches. Underlying them was a consistent theme: that a Labour government could deliver higher levels of growth and lower levels of unemployment. In a May Day lecture to Labour’s Finance and Industry Group, I delivered the first speech, entitled ‘The Dynamic Market Economy’, setting out what I called my ‘iron commitment’ to macroeconomic stability and financial prudence. The second speech, two weeks later, was perhaps the most important I gave as shadow chancellor. Under the title ‘Labour’s Macroeconomic Stability’, I set out the principles, based on a paper by Ed Balls, that would later underpin our decision to make the Bank of England independent. Side by side with a new monetary policy designed to maintain low unemployment and low inflation, I articulated the fundamentals of our fiscal policy on public spending and borrowing. The newspapers were to dub this ‘Brown’s Law’. Simply put, a future Labour government would borrow only to invest. In my third speech, at the end of May, I argued the case – controversial then in Labour circles – for using public-private partnerships to rebuild Britain’s infrastructure, hospitals and schools.

  In 1995, I also worked with Tony Wright on a book, Values, Visions and Voices, which aimed to make people even more proud of Labour. But therein lay an embarrassing story: we could not afford to pay fees to the publisher who had the copyright for Harold Wilson’s speeches and writings, meaning we had none of his in the book. The day of publication in May coincided with Wilson’s death. It made sense to retreat and cancel our press launch.

  Even after setting out a new direction in economic policy – and our victory on VAT – we still had to offer repeated reassurances that showed we would be fiscally prudent. A few months later, I outlined the tax principles of a future Labour government – including a starting rate of income tax at 10p. Now I was being helped by Conservative mistakes: I could contrast their newly restated but costly ambitions to abolish capital gains tax and inheritance tax for the very wealthy with our measures to help low- and middle-income Britain. If the Tories could spend money on helping high-income Britain, why could we not use the same money, I challenged them, to help low-income Britain?

  Moreover, the outrageous behaviour in the boardrooms of the privatised utilities allowed us to put the windfall tax I had first proposed a few years earlier right at the centre of public debate. ‘Fat cats’ became a popular byword for such excesses, and I saw the errors of judgement of these privatised company boardrooms as both an outrage for the country and manna from heaven for Labour. For example, Cedric Brown, chief executive of British Gas, had awarded himself a 900 per cent pay increase during the ten years British Gas had been in private hands. Just as we were cranking up our campaign, he unwisely doubled his salary at the same time that he was cutting 25,000 jobs. I thought to myself that no announcement could be more persuasive than that. To be fair to him, there were many executives who had taken even bigger rises, but he had allowed himself to become the poster boy for their excesses. Millions who were paying high utility charges to British Gas could not fail to see the connection between his pay package and their monthly bills. I knew then that the tide that had turned away from the Tories over the exchange-rate fiasco was now turning even more sharply towards us on the economy.

  Even more damaging for the government, several former Conservative Cabinet ministers had joined the boards of the very companies they had privatised. At the Labour conference, I only had to read out the names. Norman Tebbit, who privatised British Teleco
m as Trade and Industry Secretary, now sat on the board of British Telecom. Peter Walker, who oversaw the privatisation of British Gas when Energy Secretary, then went on the board of British Gas. David Young, who privatised Cable & Wireless as Trade and Industry Secretary, was now chairman of Cable & Wireless. Norman Fowler, who privatised National Freight as Transport Secretary, was on the board of National Freight. In total, there were sixteen Conservative ministers and MPs with well-paid directorships or consultancies linked to the utilities. It was clearly a milder form of what was going on in post-Soviet Russia.

  What would a Labour government do with the proceeds of a windfall tax? We would meet the unmet needs of the unemployed by financing a New Deal that would offer qualifications and work. And the issue here wasn’t just economic; it was also legal. The windfall tax would be liable to judicial challenge if it were justified simply on the grounds of corporate excess. I knew that we had to develop a watertight rationale: that the utilities had been underpriced when sold off; that regulation by the Tories had been too lax; and that the companies were now exploiting their quasi-monopoly power.

  The work was led by Geoffrey Robinson, the MP for Coventry North, who would later be appointed Paymaster General in the Treasury. His help and advice was invaluable. Knowledgeable about industry from his time as chief executive of Jaguar Cars, and with contacts across business, Geoffrey was also willing to make bold and radical decisions. He never boasted of it but he put up £1 million of his own money to finance the research, the legal advice and the complex preparations needed for the parliamentary legislation. As it was market sensitive, the research was carried out in the strictest secrecy. The effort was given a code name, ‘Project Autumn’ – because we thought the Tories would call an election later in 1996 and we had to be ready to introduce the legislation as soon as we were in government.