It was said on Blair’s behalf that he was unsurprised, relaxed and even ‘pretty relieved that he didn’t get it in the end’.83 The media were briefed that he was very content being a Middle East envoy, running his foundations and making money.84 To old friends from the Cabinet who asked how he was, Blair would respond: ‘Busier than ever!’85 This was putting a brave face on the rejection. It had to be at least a little wounding to be passed over for an uncharismatic Belgian who would not stop the traffic even in his native Brussels.
The second new job created by the Lisbon Treaty was ‘High Representative’, essentially Europe’s foreign minister. Downing Street’s ‘Plan B’ was to secure this position for David Miliband.86 He had impressed his European peer group with his performance as Foreign Secretary. The role of High Representative was his for the taking.87 Blair told Brown that he would help him to persuade Miliband to go for it.88 The Foreign Secretary was torn between the allure of becoming a large figure in Europe and not wanting to abandon British politics. The evening before the Brussels summit to allocate the posts, he told Brown that he wanted to ‘sleep on it’.89
While Miliband agonised, Peter Mandelson suddenly thrust himself forward for what he regarded as a dream job. ‘Peter clearly wanted it. He started to campaign for it. He got very upset when Gordon wouldn’t let him go for it.’90 Mandelson unilaterally phoned round European capitals to push his own candidacy.91 This soon got back to Number 10, where there was astonishment at his behaviour. ‘All the political staff thought this was absolutely mad,’ says a Number 10 official.92
This was Mandelson at his most capricious, selfish and narcissistic. One very senior figure at Number 10, in many other respects an admirer, comments: ‘Peter had been deeply engaged, seemingly happy, occasionally discontented with Gordon, but basically onside. Over this, he was totally unreasonable.’93 It was highly doubtful that Europe would have him. An ambassador from another member state observes: ‘Mandelson had been a powerful performer as Trade Commissioner, but he put up the backs of a lot of people.’94 In the view of Jonathan Powell: ‘He did not leave a warm and cuddly feeling around Brussels. He was never a serious candidate.’95 Mandelson’s behaviour made Brown ‘utterly exasperated’. The Prime Minister could not understand ‘why the hell he wanted the job’.96 Brown had every reason to object. This was hardly keeping faith with the ‘full, undivided loyalty’ that Mandelson had promised his party in his conference speech just two months previously. Bailing out to Brussels would be universally interpreted as Mandelson ratting on a sinking Brown. Brown told Mandelson that it would be ‘terrible’ and warned that the Labour Party, which had just started to love him at last, would hate him all over again.97
Yet the Prime Minister was also fearful of how Mandelson might react to being thwarted. So Brown felt that he had to pretend to the other man that he would not stand in his way if he insisted on pursuing the post. More than one civil service witness heard Brown tell Mandelson: ‘If you really want this job, Peter, I will try and get it for you.’98
The Prime Minister flew out to Brussels on Thursday, 19 November. Miliband had ruled himself out. Even if Brown had really tried, it was not possible to win it for Mandelson. Stewart Wood, who had been canvassing opinion among the socialist group, received ‘clear messages’ that ‘Peter was a hate figure with many of them.’99 When he landed in Brussels, Brown said to his team that he would propose Geoff Hoon. Simon Lewis, the Prime Minister’s official spokesman, expressed surprise: ‘Doesn’t that mean we’ll have to have a by-election?’ ‘Oh, God,’ responded Brown, who genuinely seemed to have forgotten that.100
The post ended up dropping into the lap of Cathy Ashton, a result as astonishing to her as it was to the media. The Labour peeress was not even close to being the Prime Minister’s first choice. She had been sent out to Brussels just thirteen months earlier as a stop-gap appointment to eke out the remainder of Mandelson’s term as a commissioner when he returned to Britain. Ashton was a successful networker who had made herself popular with the socialist group, but she was not a big name. The day before her appointment, she would not have stopped the traffic in Basingstoke. Not thinking that she was even a serious candidate, she had been planning to leave Brussels on the 8 p.m. Eurostar when word came that she had better hold on.101 She had no speech prepared when she appeared alongside Van Rompuy at a news conference to announce their appointments as the EU’s two most senior officials.102 Many felt that these timid choices were a missed opportunity for Europe to translate its economic strength into global clout. The Financial Times groaned that this ‘exercise in Euro-minimalism’ was ‘a colossal failure of ambition’.103
Brown had pursued the High Representative post because the Foreign Office, along with most of his officials, thought it was a ‘prestige job’ and he was ‘desperate to claim a win’ at the summit.104 Britain’s interests probably would have been better served by holding back to secure one of the key economic portfolios on the Commission. Nicolas Sarkozy openly gloated that he had got the better of the horse-trading by scooping those positions for the French and their allies. Brown blew up into one of his rages, ‘shouting and screaming at Cathy Ashton that she should have stopped the French’.105 Mandelson, who hated to see a woman he didn’t rate in the job that he had coveted, furiously complained to colleagues that Brown had made a hash of the negotiations.106 A member of the Cabinet, speaking off the record to The Times, derided Ashton and Van Rompuy: ‘We have ended up with two garden gnomes.’107 That comment had the unmistakably waspish tone of Mandelson himself speaking.
The First Secretary’s pique over the European job, along with his despair with Brown, began to open a rift between the two men. Mandelson was also becoming a firm ally of the Chancellor in his struggles with the Prime Minister. Alistair Darling nursed a profound sense of personal betrayal about Brown’s attempt in June to remove him from the Treasury. The Prime Minister seethed with frustration that he had been too weak to replace Darling with Ed Balls. Onlookers to meetings between the two men were shocked by how abominably Brown behaved towards Darling. The Chancellor would start to speak only for the Prime Minister to brutally cut him off mid-sentence. He treated Darling in this contemptuous fashion even in the presence of Gus O’Donnell and Jeremy Heywood. Witnesses would ‘cringe in sympathy. Alistair was a very placid person. He took it. He tolerated things that 99 per cent of people wouldn’t have done.’108 After one unpleasant encounter at Number 10, Darling walked back to the Treasury in the company of Paul Myners. The City Minister asked: ‘Why do you put up with this?’ The Chancellor gave a stoical shrug. ‘That’s how Gordon is. We’ll have a whisky together this evening and sort it out when he’s calmer.’109
The fault line between the two men was about the appropriate response to the deficit. This was soaring because spending was still rising at a time of collapsing tax revenues. ‘This was the big battle through the summer, the autumn and into the winter,’ comments one senior official. ‘At its heart, there was a total disagreement about how bad the fiscal position was.’110 This fight had been flaring since the Budget, the negative reaction to which sent Brown ‘apoplectic’. It was one of the reasons he had tried to sack his Chancellor. On the account of Mandelson, which is supported by other witnesses: ‘Gordon repeatedly, and often angrily, rejected Alistair’s forecasts, saying they were too conservative. Alistair told Gordon he was being ludicrously optimistic, not only about growth prospects but about Britain’s ability to support such a large, and expanding, deficit.’ Mandelson thought Darling ‘was right about the need for us to show that we had a long-range plan for getting spending and debt under control’. In the absence of such a plan, it looked like they were ‘simply in denial about the scale of the financial hole’. This was very damaging politically. ‘As long as no-one believed us about the public finances, they wouldn’t believe us on anything else.’111
Everyone could see that the spending bonanza of the New Labour years was drawing to a close. A severe squeeze was i
n prospect: sooner, if the Tories came to power, or a little later in the event that Labour won again. Brown had wasted vital months over the summer and undermined his credibility by trying to pretend otherwise. At the first ‘political Cabinet’ of that autumn, senior ministers contended that they couldn’t carry on dissimulating. Jack Straw pointed out that he was already in a row with lawyers about reductions to legal aid and ‘I’m having to close down courts.’112 Senior advisers to the Prime Minister also thought he was in the wrong place. While they had some good lines of attack on Tory economic policy, Labour would not get a hearing until the Government had a more plausible story about the fiscal position.113 Even Ed Balls, for a while at least, joined the effort to drag the Prime Minister towards more defensible ground and persuade him that ‘he had to signal publicly that he understood people’s concerns about the deficit, and acknowledge that spending cuts would be necessary once growth was underway.’114
In a speech to the TUC in September, Brown finally used the word ‘cut’. When he met Balls and Mandelson later in the day, he said testily: ‘Well, are you satisfied, all of you?’ He had only made the speech grudgingly and was already regretting it. He began to rant: ‘We should not be in this place! Don’t give me all this about spending cuts! We should not have gone down this It’s got to be about growth, not deficit. Cuts versus cuts will just kill us.’115 He wanted to fight the next election on ‘Labour investment versus Tory cuts’, the dividing line which had been so electorally lethal to the Conservatives in 2001 and 2005. The political and economic context was utterly transformed by the recession, but Brown still wanted to wage the last war, perhaps because he was incapable of fighting any other.
A fortnight later, when he made his party conference speech, he barely mentioned the deficit and could not resist the temptation to throw out a confetti of new promises. The Chancellor was ‘annoyed’, says one of Darling’s colleagues at the Treasury. ‘We thought we’d moved Gordon and then the old recidivist started making spending pledges that didn’t add up.’116
The battle reached its climax over the Pre-Budget Report in December. Darling believed he could make this financial statement ‘the game-changing moment’ for Labour by unveiling bold announcements on the deficit that would impress their critics and wrongfoot the Tories. He wanted to balance protection for front-line services from cuts with the identification of specific savings in a number of major projects to demonstrate the Government’s seriousness about bringing down debt in the longer term. Brown dragged his feet. The Chancellor would leave meetings at Number 10 thinking that he had finally won the Prime Minister’s agreement to be more stringent and precise about future departmental spending totals. In the six minutes it took for Darling and his team to return to their offices in the Treasury, Brown was already changing his mind. ‘We’d get back to the Treasury to find a message from Number 10 saying that the Prime Minister wanted another paper on this.’117
The Treasury was now forecasting that the deficit would approach £180 billion, a peacetime record and double the share of national income in many comparable countries. Senior officials were increasingly nervous that they were ‘skating on thin ice’ with the bond and currency markets.118 Paul Myners said to the Chancellor: ‘We have to be careful, Alistair. If the markets refuse to buy sterling paper, we’ll really be in big trouble.’119 International credit agencies were threatening to strip Britain of its AAA rating. If that happened, there would be a massive sell-off of gilts and sterling. This would make the debt more expensive to service as well as dealing a potential death blow to what remained of the Government’s reputation on the economy. Jeremy Heywood also sought to persuade Brown that they had to look more credible. ‘No-one will believe our numbers,’ his Permanent Secretary warned the Prime Minister. ‘The IFS will publish its numbers and everyone will believe the IFS not us.’120 Brown didn’t want to hear these arguments and was encouraged to fight Darling by Balls, who was derisive of the Treasury, which he considered to be over-cautious. One senior official thought ‘both Gordon and Ed were totally in denial about how bad things were.’121 Nick Butler, a former executive at BP, had joined Number 10 as the chief policy adviser on business. He had a series of discussions with Brown about ‘what you’d need to say to business audiences to be convincing’. In response, ‘He’d grunt.’ Butler concluded: ‘Gordon could sometimes be persuaded to use the words, but he deeply didn’t believe it. Gordon’s core conviction was that we needed to spend our way through the recession and the way to beat the Tories was to argue that we were on the right side of spending versus cuts.’122 Brown also viewed the PBR as a major pre-election opportunity, but in a different way to his Chancellor. The Prime Minister wanted to carve out his favourite dividing line with the Tories by making spending commitments that he thought the Conservatives could not match.
The Chancellor’s resistance to his demands led to an extraordinary explosion in the Prime Minister’s study. Darling had not been in the room long before Brown began to yell and curse. Then the Prime Minister totally lost control of himself and started to throw things around. Pens went flying. So did a sheaf of papers. Then a hole punch. In his blind fury, Brown was grabbing random objects off the desk. He hurled a box of paper clips. The box broke open and a silver cloud-burst of paper clips showered the room.
Darling confided in his wife and a few very close colleagues about Brown’s berserk behaviour. The Chancellor’s adviser, Catherine Macleod, asked: ‘Did he hit you?’ ‘No,’ replied Darling. ‘I ducked.’123
Brown prevailed. Darling was forced to agree to an increase in spending compared with previous plans of almost £15 billion in 2011 and 2012. This was designed to allow Labour to boast that it was protecting education, health and policing. Brown was urged on by Balls, who shared the Prime Minister’s attachment to the old dividing line and was his usual aggressive self in extracting additional resources for his schools budget.
Darling argued that they could not pay for this by borrowing even more. That would look incredible to both the public and the markets. So the spending rises had to be balanced by more tax increases. The argument about which tax should rise was still raging just a week before the PBR. The Chancellor and his officials, backed by Jeremy Heywood at Number 10, wanted to announce a deferred increase in VAT. The negative impact on people with low incomes would be offset with a compensation package. The Treasury liked VAT because it was ‘simple, clear and pretty much guaranteed to bring money through the door’.124 Brown, egged on by Balls, vetoed that. This was partly on the grounds that it was ‘the least fair option for raising tax’ and partly because of how he planned to campaign against the Tories. David Muir had presented focus group research which suggested that voters were very hostile to VAT rises. Brown wanted to accuse the Tories of secretly planning a VAT hike, an attack which could not be launched during the election campaign if Labour had itself raised the tax. Mandelson was ‘very supportive of Alistair’ in this argument, but the Chancellor and First Secretary were again defeated by Brown and Balls.125 They successfully insisted that the extra revenue should come from a 1 per cent rise in National Insurance contributions. ‘Gordon thought it was a do-able tax, a tax that people would tolerate,’ says Nick Butler.126
So lengthy and intense were these disputes that significant elements of the PBR were still not settled the weekend before it was due to be announced. ‘It was very, very hard going,’ says a minister at the centre of it.127 The Chancellor and the Chief Treasury Secretary, Liam Byrne, were still locked in negotiations with Cabinet members right up to the eleventh hour – and beyond it. One Treasury official called it ‘a mad way of doing business’. Another says: ‘It was a total shambles because everything was done so late.’128 Darling and Byrne found it ‘incredibly difficult’ to persuade spending ministers to agree to future cuts to their budgets when ‘we didn’t have the full force of Number 10 behind us’ because the Prime Minister was pulling in the opposite direction.129
On the Tuesday night, thin
king the exhausting process was finally concluded and with the documents printed, Darling left the Treasury for his flat above Downing Street and was in bed by midnight in order to get some rest before he presented the PBR the next day. The Chancellor had simply refused to negotiate directly with Ed Balls or with Yvette Cooper, his wife, because ‘Alistair thought they were out to get him.’130
While Darling slept, Balls was still hustling for additional money. The Schools Secretary rang the Chancellor’s Principal Private Secretary in the small hours to demand that Darling be woken up. Balls also wrangled directly with Treasury officials. That was a flagrant breach of convention. ‘The protocol is clear: you don’t speak to the civil servants of another minister.’131 The same tactic was employed by his wife, who was trying to protect spending projects at her Department of Work and Pensions. ‘It went on all night.’132 Jeremy Heywood snatched just four hours of sleep. When he rose at five in the morning, the Permanent Secretary found sixteen messages on his voicemail either from or about Balls and Cooper.133 Liam Byrne was even more sleep-deprived as a result of this all-nighter. He groaned: ‘It was horrendous.’134
There was a tense atmosphere when the Cabinet met on Wednesday morning so that Darling could brief them on what he was about to announce to MPs. Ministers who had learnt of the overnight antics thought it was outrageous brinkmanship by Balls and Cooper, and they blamed Brown for allowing the pair to play by different rules to everyone else because they were members of the Prime Minister’s clique. That didn’t mean the couple were content. There was an ‘electric’ intervention by Cooper.135 She was smarting from headlines that morning which suggested that her department had lost out and she was additionally aggrieved because the Chancellor had refused to talk to her. When Brown invited her to speak, she angrily rounded on Darling, saying: ‘We cannot continue with this macho behaviour.’ Everyone was startled. Some were also amused by the irony of such an attack on the mild-mannered Chancellor when colleagues regarded her husband as the most belligerent member of the Cabinet.136
The End of the Party Page 98
