For the Record

Both these views are, in my view, wrong.

The pro-Europeans miss the real point. Of course it might have been better if Britain had joined the ERM at a different time or at a lower rate, but in the end what did so much damage to the British economy was not the precise exchange rate, but the high interest rates, and therefore high mortgage rates, required by the ERM because of what was happening in Germany. No country ever managed for any sustained period to have interest rates below those prevailing in Germany. So even if we had joined at a lower exchange rate, those high interest rates would still have been necessary.

The argument that a ‘middle way’, with a more general currency realignment, was possible simply doesn’t stand up to scrutiny. All that was effectively on offer was a substantial British devaluation. Economists will continue to argue about whether that could have prevented our forced exit from the ERM. I would simply point out that several other countries had devalued more than once. The problem was interest rates.

The anti-European argument was equally bogus. The ERM did not cause the recession in Britain. It was caused by a rise in inflation at the end of Lawson’s period as chancellor, and the need to raise interest rates to bring it under control. It is true that the ERM resulted in high interest rates for longer than was necessary, but most economists agree that that was for a matter of months, not years. The ERM made the recession longer and deeper; it didn’t cause it in the first place.

The clear conclusion from all this was that fixed exchange rate systems can put huge pressures on the economies of different countries when their economies have different needs. The real lesson was that what was true for the ERM would be doubly true for a European single currency. It would be the ERM without an emergency exit route. My mantra became ‘We cannot join the single currency, because it requires a single interest rate, and sometimes that will not suit us.’

The truth turned out to be even worse. During the Eurozone crisis, effective interest rates in the struggling economies like Spain, Greece and Portugal were far higher than in Germany because, in spite of the lack of a formal exit route from the euro, markets still thought departure was possible, and demanded a premium for funding governments, in the form of much higher rates in the most stricken countries.

William Hague’s phrase describing the euro as a ‘burning building with no exits’ would prove doubly prescient.

By the time of the 1997 election I broke with the official policy that we would ‘wait and see’ on the euro, and joined the many who took a stronger position. My time in the Treasury had made me a Eurorealist, or a Eurosceptic. That did not, however, mean being anti-European. Norman Lamont and I drafted a pamphlet, ‘Europe: A Community not a Superstate’, to explain the consequences of what had happened, and the broader lessons for Britain’s European policy. Membership of the EU was necessary for trade and cooperation, but Britain had never welcomed, and would never welcome, the political aspects of the Union. We wrote: ‘No one would die for the European Union.’ No. 10 asked us to take it out. We kept it in.

By this time Norman was in deep trouble. And politicians in trouble need everything to go right for them. They cannot afford any slip-ups, whether self-imposed or externally generated. Unfortunately, the campaign to save Norman’s ministerial career got off to a bad start at the party conference in October.

We had spent too long crafting our pamphlet, and not enough time on his crucial conference speech. Getting the balance right, between a degree of contrition about the past and excitement about a future in which we could cut interest rates and generate growth, was a big challenge, which we failed. While the speech’s reception in the hall seemed all right, the reaction of even quite friendly colleagues was that it was ‘workmanlike’.

Whenever I’ve heard that word since to describe a performance, I know that what’s really meant is ‘bad’. And there’s a rule with these things: if something is seen as quite bad on day one, it’s a disaster on day two, and a career-shortening catastrophe by the end of the week.

The next task for Norman was to formulate an economic framework that would deliver the recovery the British economy so badly needed. Here he was in his element. Because he had seen that our ERM membership might well fail, he was ready to put a new policy in place. A cred­ible domestic monetary policy to support the economy and deliver stable inflation. A tough, long-term fiscal policy to get the budget deficit under control. And supply-side reform to make our economy competitive.

This was pretty much the same medicine my government prescribed twenty years later. It worked well both times. But the right strategy needs the right implementation plan. And that is where we went wrong in 1992.

When you have to take lots of difficult and potentially unpopular decisions – including raising taxes – the trick is to separate those that are painful but deliverable from those that are potentially explosive. Step forward the proposal to put VAT on domestic heating bills. This was a mistake; and in many ways it was my mistake. We took the view then, just as we would in 2010, that we could not fairly and credibly reduce the budget deficit by cutting spending alone. Some tax increases would be needed. I looked carefully at all of the options, and came to the view that some of the zero rates on VAT were ripe for change. Energy prices were low, environmental concerns were growing, and we could protect the vulnerable from price increases through the benefits system.

Not for the last time in my political career, I had failed to spot the essential political equation: rational case versus emotional argument equals political disaster. And it was a disaster. We were defeated in the Commons, and had to revert to the much simpler (and less politically toxic) move of a small across-the-board increase in VAT. That taught me a lesson for the future – but it was another nail in Norman’s coffin.

Meanwhile, the economic medicine was working. Cheap money, fiscal discipline and competitiveness ushered in a period of growth that would continue throughout the decade.

And so yet another lesson was learned: while, all things being equal, reductions in public spending can have an effect on the overall level of demand in an economy, in practice other things are not equal. Controlling public spending, in an open economy like the UK, helps to lower the exchange rate and support exports, and even more importantly it frees up monetary policy to support the economy.

The most powerful memory of my time in the Treasury is of course watching – and failing to prevent – the end of the chancellor’s career.

I liked Norman Lamont immensely, and I still do. He was a thoughtful, intelligent, decent man. But he was also deeply sensitive, with a skin too thin for this sort of politics. We subsequently fell out over Brexit, of course. When I heard that he was coming out for the Leave campaign, I pleaded with him that while I had stayed true to the pamphlet we had written together all those years ago, knowing it was in the national interest to stay and fight, he – outside the responsibilities of office – was now arguing a more populist and easy case.

After the disasters of what became known as Black Wednesday and our departure from the ERM, Norman had travelled to America. When he returned he asked William Hague and me what we thought he should do. One of the reasons he was so against resigning was that he felt – rightly in some regards – that he had seen what was coming, and was warning others about it. And, more than anyone else, once we had left the ERM, he knew what needed to be done.

Could he have recovered his position without the other slips that took place: the reports of singing in the bath, the ‘Je ne regrette rien’ remark at the Newbury by-election and the other controversies? Frankly, I doubt it. The truth, as we were all to learn, was that ERM membership may not have been a policy Norman invented, but he was responsible for it – and it failed. And above all, when the ‘narrative’ in the press changes so fundamentally, it is hard to fight against it.

I tended to be the bearer of the bad news. Indeed, I had to call Norman late one night to tell him about a call I had received from a deputy editor at the Sun: ‘The good news is that your boss’s picture is on the front page of tomorrow’s newspaper. The bad news is that his head is in the middle of a cut-out-and-keep dartboard.’

Without going into all the horrors of the months that followed our ERM exit, one story stands out in my memory which demonstrates just how bad things had got. The suffix ‘-gate’ is now appended to almost every so-called ‘political crisis’, no matter how minor or short-lived. My first serious ‘gate’ was the so-called ‘Threshergate’ affair, when the chancellor of the exchequer was basically accused of consorting with prostitutes and lying.

In November 1992 the Sun managed to get the details of Norman’s credit card. It had – big deal – an outstanding balance. Along with whatever negative coverage could be squeezed out of such an unremarkable fact, one other thing caught the interest of the press: he had spent a small amount of money at a Threshers off-licence in Paddington. The hacks descended on what they assumed was the right shop in Praed Street, where an assistant, a Mr Onanugu, happily told them that the chancellor had popped in to buy some cheap champagne and Raffles cigarettes before heading out into the night in what was then, in part, a red-light district. The newspapers had a field day, with innuendos galore and cartoons featuring champagne bottles and ladies of the night.

After a day of stonewalling we decided we had to get to the truth. Norman told us he had been shopping in Paddington, but had only bought two bottles of wine for his family to drink at home. All Treasury business came to a complete halt as Norman hunted through his wallet in search of the receipt, while his wife Rosemary tried to find the bottles of wine in the No. 11 flat. All this time the shop was sticking rigidly to its story. And then came the moment of truth: Norman told us that the Threshers he went to wasn’t in Praed Street. The only trouble was that he couldn’t remember where it was.

By this stage he was at a European Council meeting in Edinburgh. I recall the absurdity of telephoning to pull him out of important discussions so he could describe the route he had taken that night, and where he had gone into the shop. I followed his directions with my finger on an A–Z, and we both concluded that it must have been in Connaught Street. I despatched an official in a taxi, and hallelujah – there was a Threshers in Connaught Street.

After the full pressure of the government was applied – I think it even took a call from the permanent secretary to the Treasury, Sir Terence Burns, to the head of the company that owned Threshers – finally the receipts were found and the puzzle solved. Norman was telling the truth. No cheap champagne. No cigarettes. And no prostitutes.

But even with all this evidence, the press didn’t want to believe it. My final memory of the saga is wandering into the press gallery with a colleague and saying, ‘For heaven’s sake, who do you believe – the Chancellor of the Exchequer of the United Kingdom of Great Britain and Northern Ireland, or Mr Onanugu?’ The unanimous cry came back: ‘Mr Onanugu!’ Today we would call it ‘post-truth politics’. Back then it was the moment I should have known we were sunk.

Eventually the summons for Norman did come. In May 1993, John Major said he was having a reshuffle, and wanted to move Norman to be secretary of state for the environment. Norman was livid. I briefly tried to persuade him to stay on and rebuild, but it was no use. He would rather let it be known that he had been sacked by Major.

The end of Norman Lamont meant the end of my time as a special adviser at the Treasury. Terry Burns and Jeremy Heywood put in a good word for me with the new chancellor, Ken Clarke, and I joined his meetings on his first day, and even wrote part of his speech in the House of Commons debate that Labour had called following Norman’s defenestration. But Ken’s two special advisers, Tessa Keswick and David Ruffley, were keen to have complete control of the political side of the Treasury. So I was summoned to Ken’s office and politely fired.

Ken was thoughtful about my future career, and had called up his old friend Michael Howard, now the new home secretary, and secured me a job as one of his advisers.

Michael was a man on a mission to reform the criminal justice system. His analysis, which I came to share, was pretty simple. More work was needed to prevent crime. The police needed to be freed from red tape to catch more criminals. The courts needed reform, so that there were more convictions. And sentences needed to be tougher, to send a clear message of deterrence. So he set us to work.

Patrick Rock was the senior special adviser, and we held meeting after meeting with experts and officials looking through every area where we could change the country’s approach to crime. What came out of this was a package of measures that Michael announced in his party conference speech. It was a radical departure. Juvenile detention centres. Reforms to the right to silence. Proper use of DNA evidence. Restrictions on bail. Longer sentencing options. And far greater use of closed-circuit television cameras. These ideas led to an effective period of change which future home secretaries, Labour and Conservative, have generally stuck to. It ushered in a prolonged period of falling crime rates.

It’s undoubtedly true that some of the motivation for this frenetic activity was the arrival of a new political figure as the Labour Party’s shadow home secretary: Tony Blair.

I remember my first meeting with him. He had proposed an amendment to our criminal justice Bill on so-called ‘video nasties’. He clearly cared about the issue, but also recognised that it was a brilliant ‘wedge’ issue: a Labour politician grabbing a small ‘c’ conservative theme and using it against a big ‘C’ Conservative government.

Meeting Tony Blair for the first time, I instantly realised that we were dealing with a different sort of politician. It wasn’t just his mixture of charm, intelligence and a touch of star quality; he also struck me as a man with the common touch, full of common sense. This was to prove a lethal combination for the Conservative Party.

I remember exactly where I was on the evening of the day Blair’s predecessor as Labour leader John Smith died. I was having an after-work pint outside the Two Chairmen pub in Westminster with Patrick Rock. The news had been shocking and tragic, but the political implications were clear. We looked at each other and said almost simultaneously, ‘That’s it. Tony Blair will become leader and we’re stuffed.’

5

Samantha

Something else happened while I was a special adviser: properly meeting the love of my life – and my wife for the past twenty-three years – Samantha.

I say ‘properly’ because Samantha was a friend of my younger sister Clare, and we first met when she was just seventeen. I remember being struck by this laid-back, almost silent, waif-like thing lying on my parents’ sofa, smoking rolled-up cigarettes and sniggering gently as my sister took the piss out of me.

We met properly on a holiday organised by my father four years later. Dad, who was always incredibly generous, decided to celebrate his and Mum’s thirtieth wedding anniversary by inviting some of his best friends to a hotel in southern Italy, and he allowed each of us children to ask three friends along. Samantha was invited by Clare, who warned her in advance, ‘Watch out – I think my brother fancies you.’

I did. And it was a blissful week.

I realise that what is meant to follow is a story about love at first sight. Neither of us being in any doubt. An instant recognition that we were partners for life. The truth is that neither of us felt like that. We had a lovely, romantic holiday amidst sunshine, friends, laughter and free-flowing cocktails. But when we got home neither of us was quite sure what would happen next.

Of course we were similar in some ways: brought up only twenty miles apart, with parents who, while of slightly different ages, moved in similar social circles. But our friends on both sides couldn’t really understand what we were up to. I was the ambitious Tory apparatchik. She was the hippie-like art student. I was working in the Treasury for Norman Lamont. She was living in a Bristol flat with people who would have happily wrung his neck. I was trying to get invited to highbrow political dinner parties in Westminster. She was playing pool with the rapper Tricky in the trendiest part of Bristol.

Norman would frequently ring up early on a Saturday morning wanting to know what was in the papers. On more than one occasion Samantha, used to a student-style lie-in, would shout from under her pillow, ‘If that’s Norman asking about the newspapers, tell him to fuck off and buy them himself.’ I would call him back, cramming 20p pieces into the student payphone to avoid being cut off.

Our courtship was a long one. Our first New Year was spent driving around Morocco in a battered Renault 5. The first night in Marrakesh was so cold and damp we slept with our clothes on. While there was a bit of an age gap, as well as the contrasts in our friends and our politics, there was something that kept bringing us together and helping us get to know and love each other more.

Part of that something was food. We are both greedy and somewhat obsessive. Restaurants, cooking, shopping, growing: all are part of that obsessiveness, as long as they end in eating.

It was in those early years that I first witnessed the ‘Sam food panic’ which has since become something of a family joke. When she is hungry she has an irrational fear that the restaurant, pub or shop we are heading to is about to close or run out of food. The panic won’t end until I have called ahead to check that the kitchens are still open or the shelves aren’t empty. Now at least I have the children on my side: as Sam shouts at us to check that the ice cream shop hasn’t run out of ice cream, or the fish and chip shop hasn’t run out of chips (both genuine recent ‘food panic’ examples) we all fall about laughing.

So we fell in love – and it was the deepest love I will ever know. But the falling took months and years, not days and nights; and I suspect it was longer for Sam than it was for me. But I believe the result has been something much stronger than either of us could ever have believed when we first got together under that powerful Italian sun. And it wouldn’t just survive everything political life would throw at us, but also the worst fear of any parent, losing our beloved first-born child.

It wasn’t until 1994 that I summoned the courage to propose. While Sam said yes, we decided to keep it secret for almost a year. I think she wanted some time to get used to the idea. She was still only twenty-three, so I thought it was only fair.

As our relationship developed, I decided to leave the Home Office and to go and work for the media company Carlton Communications plc. By this point I had applied to be on the Conservative Party’s candidates’ list, and after passing the assessment weekend – of interviews, practice speeches and written tests at a rather bleak hotel in Buckinghamshire – I was able to apply for parliamentary seats. For some time I had thought that getting more experience outside politics, specifically in business, would be good for me. I also needed to make some money, so my chosen career of politics would be more manageable.

Carlton fitted the bill perfectly. It was a FTSE 100 company, with all the corporate responsibilities that involved. Michael Green, its founder and chairman, was a swashbuckling entrepreneur from whom I would learn about business. The company was a part owner of ITV, and was involved in regulated industries, where my knowledge of government and Parliament would help.

I had always been clear to Samantha that my life would involve polit­ics. I had found my calling – it was what I wanted to do. It wasn’t just an option, or a possibility: as far as I was concerned, it was a near-certainty. She was very understanding.

Did we ever argue about politics? Yes, of course. My friends would say she helped to turn a pretty traditional Home Counties Tory boy into someone a bit more rounded, more questioning and more open-minded. But many of the arguments we had about politics were actually about logistics, rather than issues. Samantha worried hugely about how it would affect our life. Where would we live? How would we stay together? How much would we see of each other? She was right to ask all these questions: politics has been a destroyer of many strong marriages. For one person in the relationship it can become an obsession; for the other a duty, or even a burden. As much as you can try to choose your constituency, in the end it chooses you. And so much follows from that choice.

My first attempt at getting selected as a Conservative candidate was in Ashford in Kent, while I was still a special adviser at the Home Office. It was my first experience of a big selection audience of four hundred people or more. Today, nerves help me speak well. Back then, I think they didn’t. In the event I was beaten by the far more experienced Damian Green. In third place – and it was the first time I had met her – was a shy yet assertive candidate called Theresa May.

I was torn between taking the traditional route of fighting a safe Labour seat first, and trying to jump straight into a Conservative one. I pursued both strategies, even applying for Doncaster North, the rock-solid Labour seat that would later select Ed Miliband as its Member of Parliament.

In the end the choice was made for me, when in January 1996 I was called up as a reserve for the selection in Stafford, whose Conservative MP Bill Cash was moving to the newly created neighbouring constituency of Stone. It was a part of the world that I didn’t really know, but something clicked. In the second round I would give my speech and take questions last. While we were waiting Samantha and I sat in the Castle Tavern opposite the constituency HQ. I fretted – and she drank. After two pints of cider we were summoned, and Samantha tripped on the way up the steps onto the stage. There was a gasp from the audience, but far from it being a disaster, it meant that everyone remembered at least something from my performance.

I was selected to be the candidate, and over the next year we worked as hard as we could, canvassing and campaigning, including Samantha’s eccentric father, Sir Reginald Sheffield, who rather spoiled his hard work by loudly shouting into a mobile phone in a pub on polling day, ‘We’re about to lose.’ But in the face of a nationwide Labour landslide, all our efforts weren’t enough. By the end of the campaign, the result – a Labour majority of 4,314 – wasn’t a surprise. While I did not have a previous election campaign to compare it with, I knew from the unanswered doors and the looks people gave me in the streets that the British people had had enough of the Conservatives.

6

Into Parliament

1997 was the start of the wilderness years for the Conservative Party. Just like Labour in 1979, we were set for a long period of opposition.

In the British system the blow of losing a general election is partly softened by becoming ‘Her Majesty’s Official Opposition’, with a privileged status in Parliament and ‘shadow’ jobs to be handed out to ambitious MPs. Pretty soon you learn what a false comfort this is. You’ve lost. You’re out of power. You don’t make the decisions or achieve any of the things that made you want to get into politics in the first place. It is difficult to set the agenda, and hard to regain power after just one Parliament. What matters is not how well you oppose, but what you learn – and how fast.