For the Record

4

Getting Started

It is one of the most famous moments in modern British politics. The chancellor of the exchequer is standing outside the Treasury, in front of the cameras, explaining that despite all his efforts and all his promises, Britain is suspending its membership of the Exchange Rate Mechanism of the European Monetary System.

It was a full-scale political disaster. And behind Norman Lamont’s right shoulder, there I am.

So how did I come to be there?

If you want to learn about Conservative politics at the national level, there is no better place to be than the CRD. Neville Chamberlain founded it in 1929, and put it under the directorship of a most unusual man: Joseph Ball, half politician, half secret agent. Ever since, it has been a strange mixture of political intelligence service, policy workshop and finishing school for future politicians. Iain Macleod, Reginald Maudling, Enoch Powell, Douglas Hurd, then later Chris Patten and Michael Portillo, were all graduates of this academy. So were three members of my first cabinet: Andrew Lansley, George Osborne and me.

I was hired in the autumn of 1988 to cover trade, industry and energy, which meant following two government departments: the DTI, which was led by David Young, and the Department of Energy, where Cecil Parkinson was making a comeback after resigning over his affair with Sara Keays in 1983.

I liked Cecil enormously. He was a true believer in what Margaret Thatcher was doing, but he also believed politics should be engaging and fun. He asked me to help with his speeches, including the 1988 conference speech that pledged the privatisation of the coal industry.

David Young invited me to his weekly ‘ministerial prayers’ meeting, where his team gathered without civil servants present to talk about the challenges ahead. This was a great introduction to the many faces of the Tory party. The aggressively Thatcherite (Eric Forth), the ambitious and mainstream (Francis Maude), as well as the unassuming (Tony Newton), the affable (Robert Atkins) and the downright eccentric (Alan Clark). The meetings were a riot of argument and entertainment. When anyone reported back on bad news from the part of the country they represented, Alan Clark would tell them it was their fault for visiting their constituencies and listening to ‘real people’ in the first place.

It was a great pleasure – and a good decision, given his extraordinary dynamism – to welcome David to No. 10 as an adviser on business and enterprise twenty-two years later when I became prime minister. He was instrumental in delivering the ‘Start-Up Loans’ proposal that has created thousands of successful new businesses.

While a CRD desk officer learns a great deal about specialised areas of policy, one of the advantages, and challenges, of working there is that before long you have to be an expert on everything the government is doing. And in the process you become professional. Indeed, the things I learned in those years are, I think, part of the answer to the charge that we have too many ‘professional politicians’ in British politics.

Yes, we need people in Parliament from all walks of life, and with many different life experiences. And the Conservative parliamentary party is far broader in its make-up today than it was ten or twenty years ago. And yes, I gained hugely from the seven years I spent in business, outside the political world. But while politics is a vocation, it is also a profession. There are tools and skills that you need to master. Not just the speech-making, press handling or campaigning, but how you get things done in a political system, how you make change happen.

In my case, it wasn’t long before I was briefing ministers for vital media appearances. It staggers me today to think of the access to senior cabinet ministers that I had when I was still in my twenties.

Most of the ‘big beasts’ lived up to their public images. Ken Clarke would spend most of the meeting telling you why the specific government policy you were pleading with him to defend was ‘absolutely bonkers’. He would challenge the entire concept of a government ‘line to take’, and say pretty much what he liked. Twenty years later, when I asked him to join the shadow cabinet, not much had changed.

Michael Portillo – something of a hero to many of us in the CRD, as an alumnus with an apparently glittering future ahead of him – was both ferociously bright and warmly encouraging, as he had done the same briefing job himself. He once told me his key to success on BBC radio’s Any Questions. Instead of being polite to your fellow guests at the dinner beforehand, and then fighting with them on the airwaves, do it the other way round. Be argumentative and objectionable in private, and then as soon as the microphones are switched on, be the voice of reason and consensus. Meanwhile, your fellow panellists are so steamed up and angry they come across on air as partisan and divisive.

I arrived at the CRD at the high-water mark of Thatcherism. The Conservative Party had won its third consecutive general election victory under her leadership, and she seemed to be at the height of her powers.

We viewed her with a mixture of admiration and terror. The first time I met her was at the CRD Christmas party, when she fixed me with a laser-like stare and asked what I did. After I had answered, she asked about the trade-deficit figures, which had come out that day. I hadn’t seen them. At that moment, instant death – or even a lingering painful one – would have been a merciful release.

At around this time Robin Harris, CRD’s staunchly Thatcherite director, told us that as there was so little effective opposition from Labour, we would have to provide it ourselves. He meant critique our own work, but it was a moment of supreme hubris. The party did provide opposition to itself, but not in quite the way Robin had envisaged. Within two years Margaret Thatcher was gone.

The history of this period has been written about extensively. An apparently cloudless sky in 1988 soon turned dark. It was the result of an overheated economy and the return of inflation, courtesy of shadowing the deutschmark, keeping interest rates too low for too long, and the encouragement of an unsustainable boom in house prices, partly through Nigel Lawson’s 1988 Budget.

Then followed rows over Europe, with Thatcher’s Bruges speech – which we in the CRD all applauded – the resignation of Lawson and the fateful decision to join the Exchange Rate Mechanism.

Then the dénouement. The resignation of Geoffrey Howe and the fall of Thatcher. In the middle of all this, there was the Poll Tax. And believe me, I was right in the middle of it all. Europe was the occasion of the Lady’s fall, but the Poll Tax was the reason she couldn’t get up again.

So many of the team that worked together at the CRD all those years ago ended up, twenty years later, in prominent positions in my government, including Ed Llewellyn, Kate Fall, Steve Hilton, Ed Vaizey and Jonathan Caine. All of us worked for Thatcher and then John Major. The late 1980s and early 1990s shaped us and our thinking. First we were labelled ‘the brat pack’, because of our age. Later ‘the Notting Hill set’, even though most of us didn’t live there. Inasmuch as there was a clique – and I would argue that every successful politician needs a team – it was a CRD clique.

The fall of the Berlin Wall in 1989 confirmed us in the view that, with our beliefs in democratic politics and market economics, we were on the right side of history. The fall of Thatcher showed us that even the most successful authors of that history were mortal. It was an early experience of profound political trauma. She was the reason most of us were there in the first place.

My own view of her and the situation was nuanced. I was a supporter, but I did feel that ‘late Thatcher’ began to believe her own propaganda and somewhat lost touch with reality. I was a tremendous admirer of Nigel Lawson, and wanted those two titans to get over their differences.

Most supporters of Thatcher couldn’t abide Michael Heseltine. Again, I took a different view. I didn’t agree with his views on Europe, but I admired the muscular action he took to back British industry and to transform Liverpool and the inner cities. I liked the One Nation approach on poverty. And frankly, it looked as if he was being proved right on local government and the hated Poll Tax. If we were going to lose the Great One, wouldn’t it be better if her replacement was someone with a plan, with passion and with election-winning charisma?

When I became prime minister twenty years later, few people were more helpful to me than Michael Heseltine. He backed the coalition. He gave strength to our regional policy, particularly through his unstinting support for elected mayors and the real devolution to our cities of both money and powers. He rolled up his sleeves, occupied an office in the Business Department, and, in his inimitable way, he got things done.

But back then, when Mrs Thatcher was on the brink, I felt that one of the reasons he didn’t make it was a peculiar lack of charm. Not that he doesn’t have any – he certainly does – but that he didn’t always take the trouble to show it.

When the leadership challenge began, we at party headquarters were all supposed to be neutral. This order was not taken very seriously: most were passionate supporters of Mrs T. But by the end, while I was still loyal, I was unenthusiastic. I could see that her position was becoming untenable. When the new leadership campaign began after her fall, I was content to stay out of it altogether. What mattered, I thought a little piously, was continuing to implement Conservative ideas.

Despite my view that the end would come, when it did, the fall of Mrs Thatcher was still a political tragedy, one that affected all of us. More profound than personal feelings was the political impact: the leader of our country had been treated in a shabby and disloyal way by the very people she had helped to get elected in the first place. The resentments and divisions that this act of regicide created would affect Conservative politics for the next two decades. In fact, they still resonate.

Some of the lessons we learned from her fall were obvious: the im­portance of loyalty and teamwork; that leaders – particularly in our party – can never take their positions for granted. But there was something more subtle. We revered the reality of Thatcher, not the mythology.

The reality was a brilliantly effective prime minister who changed her country for the better, but who lost touch towards the end and was, in part, the author of her own downfall.

The mythology that grew and grew, particularly after her fall, was that she alone was ideologically pure; that she was always right and everyone else wrong; that she never compromised or backed down; and that she only ever did what was right, and never calculated what was politically deliverable.

This, of course, was nonsense. She backed down over many issues, like university tuition fees. She knew when to back off, as when giving in to the miners’ demands in the early 1980s. She was a master of political calculation.

The subsequent problem for the Conservative Party in general, and for future Conservative leaders in particular, is simply put. Not only were we following a hugely successful, epoch-defining leader. Not only did we need to heal the divide between those who supported her to the end and those who brought about her fall. We were also being compared to the mythical Thatcher, rather than the real one.

At about this time, the ageing doyen of Fleet Street, Sir John Junor, asked me to supply him with political gossip for his Mail on Sunday column, and I duly obliged, seeing it as part of my efforts to expose splits in the Labour Party. He frequently took me to lunch, at which the exchange of information would all be in the other direction. I would sit back and listen to his stories of Beaverbrook, Churchill and Fleet Street before Murdoch, together with his personal obsessions with Princess Diana and Selina Scott.

The journalist Bruce Anderson would fill in for Sir John when he was away, and I continued the service for him, starting what would become a lifelong friendship. Bruce was close to John Major, and recommended to him that he bring me into No. 10 to help sharpen up his performances at Prime Minister’s Questions.

This was the big call I had been waiting for, and I can still remember the thrill of walking through the famous black door to join the team that briefed the prime minister for what was then a twice-weekly encounter.

My partner in this endeavour was a rising star in the whips’ office, the Boothferry MP David Davis. Fifteen years later we would become rivals for the leadership, but in 1990 he would come to my office very early on Tuesday and Thursday mornings, and we would discuss what bullets we could put into John Major’s gun. We worked together well.

Some people look at Prime Minister’s Questions, with all its noise, poor behaviour and often heavy-handed prepared jokes, and think it is somewhere between a national embarrassment and a complete waste of time. They miss the point. In our system, prime ministers have to be on top of their game and across every subject. PMQs exposes them if they are not. Weaknesses, failings, uncertainties, lack of knowledge – all these things and more are found out.

Not only does it help hold prime ministers to account; it gives them more power and control by enabling them to hold Whitehall to account. While serving in No. 10, I saw policy being either determined in double-quick time, or fundamentally changed, on many occasions because the spotlight was suddenly shining brightly on a particular area, and credible answers were urgently required. It is one of the mechanisms that makes our system so responsive. You can use it to change policy and override other ministers and departments. I did this a number of times when I became prime minister.

I got to know and like, and admire enormously, John Major. He was a passionate Conservative, but a practical one, not an ideologue. If he was unsure about how he should act on a particular issue, he seemed almost always to default to the decent thing. He had a temper, to be sure – and I was on the rough end of it once or twice – and parts of the job clearly weighed heavily on him. But he was a fundamentally good man.

He was also a very tactile one. I used to arrive early for the briefing sessions and sit at the bottom of the narrow flight of stairs that led to his No. 10 flat, just outside the door to the study where we held the briefing meeting. John had a habit of bounding down the stairs and, with a cheery hello, ruffling my hair.

My main job as leader of the political section of the CRD was taking apart the Labour opposition and preparing for the 1992 general election.

The tale of that election is extraordinary. The Conservative Party had ditched its most successful ever leader, caused inflation to rise, put up interest rates, seen the property market crash and the country tip headlong into recession. Meanwhile, the Labour Party under Neil Kinnock had scrapped some of its most unpopular policies, such as unilateral nuclear disarmament, and seemed hungry for, and perhaps even ready for, power.

Yet we won. And the scale of the victory should not be measured by the small parliamentary majority – twenty-one seats – that John Major achieved. The true scale of his victory was the fact that we were almost eight percentage points ahead of Labour, and he had attracted more votes than any other prime minister in British political history.

To be sure, we didn’t expect it. I had a strong sense then that the only person who really thought we would win was John Major himself. He seemed to have an innate confidence that when given the choice, the British people would stick with him.

No one should underestimate the personal triumph for John Major. In the head-to-head with Neil Kinnock, people knew who they wanted as prime minister. But allied to this was the most systematic destruction of opposition policy that I have ever seen in a campaign. The mantra that ‘Oppositions don’t win elections, governments lose them’ was turned on its head. The hubris of Labour’s pre-polling day Sheffield rally, and the self-inflicted wound of its shadow Budget, in which Labour promised to raise taxes on people who saw themselves as middle-earners, are well documented. But those of us who were in the campaign team would argue that the costing of Labour’s spending pledges, together with the blunderbuss of our advertising campaign, were what made the biggest difference. By polling day everyone knew that a Labour government meant higher taxes.

Norman Lamont’s pre-election Budget was a political masterstroke: by stealing Labour’s plan for a 20p starting rate of income tax he pushed them into making new tax proposals. So just at the moment they should have been talking about anything other than tax, they walked into our trap.

Election night, when predictions of Labour victory turned to the reality of a Conservative majority, was a moment of pure political joy. While I would experience the excitement of getting elected to Parliament in 2001, and the topsy-turvy night in 2010, the exhilaration of 1992 wouldn’t really be matched until May 2015, twenty-three years later.

Victory in the general election, and my relationship with Norman Lamont, provided me with the chance to take the next step in my political career – becoming a special adviser, or ‘spad’, at the Treasury.

The Treasury today retains much of the power and aura it had back then, but the place I worked in nevertheless seems a world away. Women in white coats would wheel tea trolleys around the so-called ‘magic circle’ on the principal floor of the Treasury building in Whitehall where the key officials and spads sat. The office I had then – all to myself – was substantially bigger than the one I would have as prime minister.

And many of the rooms – particularly the chancellor’s – were gen­uinely ‘smoke-filled’. Norman smoked an endless succession of small cigars. His principal private secretary, later to become my cabinet secretary, Jeremy Heywood was rarely without a cigarette between his fingers. Chief economist Alan Budd and specialist economic adviser Bill Robinson were constantly puffing away. When the deputy governor of the Bank of England, Eddie George, came to see the chancellor he would light up too. Back then I was smoking twenty Marlboro Lights a day, and would happily join in. There were times when you couldn’t see the other side of the room.

Going to the Treasury also introduced me properly to William Hague. Elected at a by-election in 1989, he was Lamont’s parliamentary private secretary, the first rung on the ladder for a new MP.

William immediately struck me as one of the brightest and most talented Members of Parliament I’d ever come across. He had a huge understanding of the economic and other policy challenges we faced, while knowing his parliamentary colleagues and the complexity of Conservative politics back to front. We formed a friendship that has lasted ever since.

Seismic events were ahead for all of us. The decision to join the ERM – a fixed exchange rate between European currencies – was made by John Major and Margaret Thatcher in October 1990, before Norman Lamont arrived at the Treasury. Our task was to try to make the policy work. We failed.

The story of the end of Britain’s membership of the ERM is simply told. Following reunification, the German economy required high interest rates. Following the Lawson boom, the United Kingdom economy was in recession and required low interest rates. It was Germany that drove the European economy, and the mighty Bundesbank had a critical say in the ERM. Naturally, they prioritised German domestic policy. In the end the ERM could not contain this fundamental structural imbalance. That, above all, is what lay behind Britain’s exit.

But the ERM wasn’t just a story about Britain’s economic circumstances. It became an essential proxy in the Conservative war over the burgeoning European Union. Pro-Europeans made the argument then – and some still do now – that Britain joined at the wrong time and at the wrong rate, and if only different decisions had been made,the ERM might have worked. They also argue that leaving it so dramatically was unnecessary, that there was some middle way by which Britain could have been part of a realignment of Europe’s currencies, thus avoiding the humiliation of either a very public devaluation of the pound, or the exit that eventually took place. Some anti-Europeans claimed then – and still claim now – that the ERM actually caused the British recession, and was therefore responsible for all the pain it would cause in terms of job losses and house repossessions.