Standing back from my own role, I could see that what made this such a crisis so damaging was that the public had concluded that a whole generation of parliamentarians, Lords as well as Commoners, had been so corrupted by a culture of greed that it had lost its conscience and any sense of public service it might have had. We were not above but part of, the self-serving, self-interested, greedy world of the City brokers and bankers. Worse, we were the image that the country could see when it looked in the mirror: the ravaged face of a society dominated by the pursuit of money and property at any cost.
Rebuilding a sense of public service and trust in politics and politicians promises to be a Herculean task. My natural optimism that it is achievable is kept well in check by the fact that the main political beneficiaries appear to have been the Conservative leadership. They are steeped in the values that have led to the scandal but they have exploited it with great media skill and total, uncompromising cynicism.
The crisis shone a merciless light not only on the moral inadequacies of many MPs but on the hollowness of British parliamentary democracy. I have already described the way in which Parliament has become a decorative rather than a useful institution. MPs were not abusing their power: MPs (as opposed to ministers) didn’t have any power to abuse. What we saw was the indignity of impotence. Where I, and others, failed was in not noticing, or caring enough about, this decline. The symptoms were all too apparent: the routine absence of MPs from the chamber; the guillotining of debates; the contemptuous leaks of parliamentary statements by ministers to the media; the futility of attempts to amend primary or secondary legislation (in the Commons, if not the Lords); the packing of select committees with government loyalists.
It is clear that simply cleaning up the expenses scandal will not be enough. Honest eunuchs are preferable to dishonest eunuchs, but they are still eunuchs. Parliament will only rediscover its virility and acquire a fresh supply of testosterone if it is radically reformed. That is unlikely to happen without a big shift in the balance of power between executive and legislature, and that is unlikely to occur while under our current voting system unrepresentative governments are elected with large parliamentary majorities. Once governments have reason to be afraid of the power and independence of MPs, then it becomes possible to effect meaningful reforms to procedure. My own particular obsession is that public spending decisions should require parliamentary scrutiny and approval. At present, Westminster is one of the few legislatures in the Western world with no powers in this absolutely crucial area.
One of the more bizarre personal outcomes of the drama was the ousting of the Speaker. I had known Michael Martin a little when we were both Glasgow city councillors. Then he was quiet and uncontroversial, and he stuck very closely to the line of his union and of his mentor, the MP for Springburn, Dick Buchanan, whom in due course he replaced. I always found him perfectly affable and easy to deal with. After Betty Boothroyd, however, he was generally seen as a disappointing Speaker, with a poor grasp of procedure and somewhat slow to react to sudden changes of mood in the House. But he seemed adequate and he built up a sympathetic following because of his being mercilessly patronized by posh public schoolboys on account of his Glasgow accent (he was nicknamed ‘Gorbals Mick’, which is the equivalent of confusing Lambeth with Leyton). What gradually emerged, however, was that he had tried to block reforms to the expenses system and, when the crisis broke, he publicly rounded on several MPs who were identified with reform. At this point some of us finally gave up on him and suggested his removal. The day when he defied the growing clamour to go and was shouted down in the House ranks as perhaps the most excruciatingly embarrassing in my memory of the place. He resigned the next day.
I was asked by a large number of MPs to stand and there was a press campaign for me to take on the job. The Times’s leader column on 20 May 2009 was entitled ‘A Cable to Cable’, suggesting that it was my patriotic duty to step into the post. I was assured that there was all-party support and I think it was probably true that I had a reputation for being non-partisan, reformist and honest. The attention was enormously flattering, but all my instincts, and my friends, told me to say no. I had no great interest in parliamentary procedure and process and absolutely no ambition to switch from being a player to a referee. I had no great difficulty in declining the invitations. I am sure John Bercow will do the job perfectly well.
I can make a bigger contribution by sticking with my important role in the Lib Dems. I also believe that the expenses scandal has been a sideshow and, regrettably, has distracted attention away from the much bigger scandal and crisis in the banking system and the economy, on which there is still much to do.
Chapter 15
Stormy Waters and Unfinished Business
Such celebrity status as I have enjoyed does not rest on just a few good one-liners or personal anecdotes but also on the way in which the financial and wider economic crisis has thrown a spotlight on party economic spokesmen. This crisis is far from having run its course; there is much pain to come and there could yet be some surprising or shocking outcomes. My own analysis of how the crisis arose and my broad views on the remedies currently being applied are contained in my book The Storm and in newspaper columns over the last two years, so they do not require detailed repetition here. It is, however, fair, I think, to claim that my colleagues and I have made the running in the UK in interpreting the growing economic problems and pointing to the most sensible policy responses in a world characterized by new, unfamiliar threats and great uncertainty. My party has yet to harvest the full political credit, but we have, as over the Iraq war, been the effective opposition and if there is any justice in politics we shall emerge significantly stronger.
Unlike the Conservatives, we were not uncritical admirers of the free interplay of financial markets and advocates of owner-occupation for all at any cost, and we were critical of the extremes of income and wealth thrown up by the City, in particular by the bonus culture of the banks. Unlike Gordon Brown and his team, we were not overawed by the bankers and locked into an embrace of mutual dependence and complicity with them.
On the strength of having spotted a few crucially important trends, I am now credited in some commentaries with gifts of foresight that Nostradamus might have envied. In the simple, Manichaean world in which public debate is conducted what matters is to be right rather than wrong. What I had done was to have laboured for a decade and developed some expertise in a field that other politicians had judged to be too complicated, boring and potentially unrewarding.
The journey started shortly after the 1997 election, at the autumn party conference, when my agent Dee Doocey organized a group of friends to help me brainstorm on what issues to pursue in Parliament. I wanted to use my time well and to operate strategically instead of constantly chasing the issue of the day. My professional background meant that I could, and did, contribute confidently to debates about economic policy. But these were somewhat rarefied and removed from the economics of everyday life. The set of issues to pursue, we agreed, was the politics of personal finance. Millions of people cared passionately about their savings and investments (or debts); many, including many of my constituents, were angry about being ripped off by banks, insurance companies and other institutions; journalists had acres of personal finance pages to fill; and few politicians seemed to be interested in or to understand these issues and to articulate consumers’ concerns (there were several Tory MPs who had a real understanding, but they mainly saw the issues from the perspective of the institutions they owned or worked in). That hour of conversation was one of the most productive I have ever spent.
I followed my friends’ advice and my nose soon started to pick up some unsavoury smells. One case left a lasting impression. An elderly, and rather poor, blind lady in Twickenham had become dependent on a carer who did her shopping and carried out her banking transactions, with the knowledge of the local Halifax branch staff. The bank, however, decided that the arrangement had to be formalize
d and for a few minutes’ work and a signature they charged the customer £100. I protested to the local manager, who passed the problem up the chain of command, where it eventually reached the chief executive, who dismissed my complaint in terms that were so condescending and arrogant that I escalated the issue to the national press. After several more rounds of rather acrimonious correspondence – and bad publicity for the Halifax – the bank eventually agreed to back down, though with very bad grace.
There was a wider issue involving banking, too. Under Conservative legislation, mutually owned building societies were seeking to convert into commercial banks, PLCs. Such conversion promised a cash windfall for depositors should the society demutualize, and offered managers the chance to escape the restraints of mutuality and, in some cases, the opportunity to enrich themselves. I was invited to act as spokesman for a group called Save Our Building Societies, led by a Lib Dem activist called Bob Goodall. We campaigned hard in the media to stop the demutualization of Northern Rock, Birmingham Midshires and Bradford & Bingley. But the long-term financial benefits of mutuality (and the appeal to idealism) proved a hopelessly inadequate inducement alongside the promise of immediate cash windfalls. We were also up against professional ‘carpetbaggers’: investors who joined building societies specifically in order to profit from the windfalls. The campaigns failed, but there was success in the political field. I helped persuade the Treasury select committee to carry out an investigation and this, together with pressure from an influential group of Labour backbenchers, led ministers to place restrictions on further demutualization. A fuse had, however, been lit, which detonated a decade later when the demutualized building societies, which were at the forefront of expansive and irresponsible lending, imploded in the banking crisis.
I acquired some credibility with consumer groups when I took up cudgels on behalf of Equitable Life policyholders who had lost substantial sums in the collapse of the society following serious failures of both management and regulation. A decade later, the campaign to compensate them continues: the doggedness of the campaigners matched only by the obdurate delaying tactics of the Treasury. I then waded into the controversy over life insurance orphan assets, on the side of policyholders who were being disadvantaged as against shareholders, and had the unusual experience when introducing a debate of being silenced in mid-sentence by the Speaker for trespassing on a court case. Such issues were complex and by mastering them I began to appreciate the force of the old adage that ‘in the kingdom of the blind, the one-eyed man is king’.
This useful one eye was particularly helpful with the publication in 2000 of the Cruickshank Report on the banking system. Don Cruickshank was the chairman of the London Stock Exchange. Gordon Brown had commissioned the study following complaints about the cost of business lending by banks Cruickshank argued, in essence, that in pursuit of shareholder value the banks were earning ‘excess profits’ despite their ‘regulatory privileges’ (that is, in a crisis the taxpayer would be expected to bale them out as ‘lender of last resort’). His conclusion was that the banks should either lose their privileges and be made to compete like other companies (and sometimes go bust), or else keep them but be more closely regulated to curb their profits and protect consumers. I was excited by the force and political significance of this conclusion. Gordon Brown, however, saw little merit in picking a quarrel with the banks. I determined to go where he feared to tread. No one else seemed inclined to follow. I was energized, too, by being able at last to see the wood for the trees, as represented by innumerable consumer complaints about excessive charges, poor service, the aggressive promotion of lending, and the mis-selling of financial services. I was, I think, regarded by the banks as a minor irritant, but I merited a steady flow of visitors from the British Bankers’ Association and individual banks explaining to me why I – and Cruickshank – were wrong.
These early skirmishes with the banks brought me to the attention of the financial editors of the daily papers and the correspondents of specialist financial magazines, because few, if any, other politicians seemed interested in these issues. None of the acres of high-profile publicity I have since enjoyed gave me more satisfaction than a headline in the money section of the Observer in 2000: ‘A lone hero stands up to the big banks’, and a similar warm endorsement in the Mail on Sunday.
These tentative forays into the politics of finance also taught me about time management. Olympia was very ill at this stage and I had to economize on time elsewhere. I realized that it was possible to make an impact as a member of the Treasury select committee and also as a campaigner on behalf of consumers, using Parliament to amplify press initiatives. What did not make any impact was legislative scrutiny in Parliament, debating the minutiae of legislation rendered largely incomprehensible by the recondite language of parliamentary draftsmen, and in any case unamendable because of the government’s in-built majority. At this time an enormously long piece of legislation setting up the Financial Services Authority was winding its way through Parliament. I went to one or two of the meetings of the committee in charge of scrutinizing it. I sat through hours of speeches by Tories filling out time but essentially representing City interests, and by a nice but hopeless minister who clearly did not understand the notes passed to her by officials, which she dutifully read out. Many amendments were put forward to improve the legislation but were routinely rejected. I made a few points about the principles of regulation on consumer-related issues, but then abandoned the committee, never to return. My absence attracted critical resolutions in Parliament, but I felt that my time was better spent elsewhere. We now know that the model of regulation and supervision encapsulated in that legislation was dangerously flawed, but nowhere in the interminable, rambling discussions about clause X and sub-clause Y was there ever a satisfactory discussion of the real nature of systemic risk and how a banking collapse might be averted or managed. I confess to being absent without leave while this opportunity passed Parliament by.
Following the 2001 election were the boom years of big government spending increases and debt-driven consumer binge. Both, but especially the latter, incubated the seeds of future disaster. Bodies like the Citizens Advice Bureau began to pick up signs of extreme indebtedness among, at that stage, relatively small numbers of businesses, and I publicized some very questionable lending practices by the banks, which were aggressively promoting overdrafts and credit cards and mortgages at impossible multiples of income. Early in 2003 the Daily Express published a full-page feature on a ‘ ten-point’ plan that I had drawn up to provide practical solutions to a growing debt problem. When Charles Kennedy promoted me to be our shadow Chancellor in autumn 2003 I decided to focus on this set of issues, leading shortly afterwards to my much-quoted exchange with Gordon Brown in which he swatted aside my concerns about debt and the linked issue of the ‘bubble’ in house prices.
More and more worrying signs appeared of dangerous or questionable practices in the banking sector and I started to be inundated with requests to take up consumer issues: dodgy equity release products; biased financial advice; expensive payments protection; non-verified mortgages; credit card charges. At this stage the personal debt issue had not penetrated the mainstream political debate and my small team and I tried to invent gimmicks to capture the public imagination. We had a demonstration outside the Treasury when personal debt reached £1 trillion, and my first televised response to the 2004 budget featured a graphical representation of billions of McDonald’s beefburgers stretching to the moon and back to illustrate the vast sums involved.
How much of all this got through to the public I do not know, but the UK financial establishment was sufficiently concerned, or irritated, to invest resources in trying to neutralize and re-educate me. There were good lunches in the leading banks’ boardrooms. After I had been especially rude about HBOS, I was invited to a one-to-one with James (later Sir James) Crosby, who, unlike the other bankers I met, clearly understood the issues and the dangers of systemic risk and th
e volatility of the housing market. He was a highly intelligent mathematician and the first banker I had met who grasped (and sympathized with) the need for counter-cyclical capital requirements for banks in order to counter boom and bust cycles. But he explained that he was obliged by his board and shareholders to pursue an aggressive lending strategy to build up the bank’s market share. My former Shell colleague, Maarten van den Bergh, chairman of Lloyds, explained separately how Lloyds had once been conservative and responsible in its lending policies but was in danger of being left behind without a major acquisition: thinking that led in due course to the disastrous marriage with HBOS under his successor.
I felt I had scaled a small peak of recognition when I was invited to lunch with Mervyn King and several of his colleagues from the Bank of England’s Monetary Policy Committee to debate the issues around debt and the housing market. There was a certain defensiveness over the issue around the table and I was assured that there wasn’t really a problem because household assets well exceeded household debt (though the assets consisted overwhelmingly of inflated house prices). It was also clear that, under the surface, there was a worry. The Governor himself warned of housing inflation in 2004 but, mystifyingly, didn’t return to the subject as the problem subsequently grew. The Bank had no direct responsibility for house price inflation and he was perhaps nervous about being accused of exceeding his mandate. Fortunately, I had no such inhibitions.
There were other signs, too, that the boom in economic growth, which was global and not just Britain’s alone, was heading into dangerous territory. One was the surge in oil prices that started to become apparent in 2004, as rising demand met fixed supply and dwindling spare capacity. I was considered to be an ‘expert’, having worked for an oil company, and was frequently interviewed. Rachel will never allow me to forget my Today programme interview on oil prices from the marital bed on the second day of our honeymoon in Wales. But much of the next year was given over to general election preparations in which the debate centred on taxation and public spending. Before and after the election I continued to pump out a relentless barrage of press releases on banks, bank lending and the housing market. But nobody appeared to be listening. I was the little boy who had cried wolf too often, and there were no wolves in sight. In particular, I made myself seriously unpopular whenever I was quoted in the papers as saying that the housing market was overvalued and that banks like Northern Rock which were lending at 100 per cent or more of the value of property were being especially reckless.
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