The Third Man: Life at the Heart of New Labour

I had spent the early months of Gordon’s premiership trying to keep my head down. But I was goaded during a Today programme interview shortly before he took over to observe a bit mischievously that while this might ‘come as a disappointment to him’, the new Prime Minister couldn’t actually fire me from my Commission post, because I had been appointed by the government to a full, five-year term. Yet I hastened to add a note of reassurance. I said I did not intend to seek a second term once my time in Brussels ended in November 2009. I assumed the new guard in Number 10 would recognise that I was playing an important role in delicate negotiations for a world trade agreement. I also knew that my ability to do the job well, and to finesse the interests of individual EU states along the way, would suffer if I were seen to lack the confidence of my own government. The more I could stay off Gordon’s political radar, the better, and my Today interview was a maladroit first move in achieving this.

Privately, I was still upset over the way he had treated Tony, and me. I not only resented the personal pain caused to me by his behaviour, and that of his parliamentary foot-soldiers and media briefers; in addition to their part in ending my own cabinet career, I felt they had kept Tony from delivering on key areas of New Labour’s policy promise to Britain. They had acted to weaken his room for manoeuvre and his legacy in government, well beyond the huge damage caused by the aftermath of the war in Iraq. But Gordon was now leader. I did not want to become a sulking, resentful presence, desperately clinging on to past bad feelings and finding fault in everything he did. At his first party conference as Prime Minister, in Bournemouth at the end of September 2007, I used an address to the modernisers’ policy group Progress not just to praise him for his part in the transition from one New Labour government to another, but to extol him as the man incomparably qualified to tackle the new challenges facing our country in the twenty-first century.

I spoke with more certainty than I actually felt – though neither I nor anyone else could have anticipated the vertiginous decline in Gordon’s fortunes that would begin within days of the conference ending. Still, the message of support was genuine. It was rooted not only in political calculation, or a desire to ward off trouble for myself in Brussels. Though my earlier doubts about Gordon’s fitness as Prime Minister remained, I wanted to be proved wrong. Before our spectacular falling-out, he had been my closest friend and ally in politics. I was intimately familiar not only with Gordon’s weaknesses, personal and political. I knew his strengths: intelligence, iron determination, and above all a grasp of the economic challenges that were increasingly threatening our country and the world.

By the time Gordon arrived in Brussels, the seriousness of the world economic crisis for Britain was becoming clearer. Fully-fledged recession was some months ahead, but the American sub-prime banking meltdown had claimed its first UK victim. The previous autumn, a run on the Newcastle-based bank Northern Rock had brought it to the brink of collapse. It was saved only by financial support from the Treasury. In the months that followed, Gordon and his Chancellor, Alistair Darling, tried desperately to find a private buyer for the bank. Only days before Gordon came to Brussels, they had given up, and taken Northern Rock into public ownership. I happened to believe they were right both to have worked for a private deal as the better option, and to have chosen nationalisation when that proved impossible.

The immediate problem for the Prime Minister was that he was now mired in a political crisis as well as an economic one. It had begun at party conference. While I was publicly on my best behaviour, I had seen it coming. For days, Gordon’s inner circle had been stoking up speculation that he was about to call an early general election. His first three months in power had gone extraordinarily well. He was confronted with a cattle-disease scare, but the effects had been less severe than at first appeared likely. Two attempted terror bombings had mercifully resulted in only a single death, of one of the terrorists. A spate of summer flooding was of course bad for those affected, but turned out to be less serious than feared. He had dealt with these potential crises in an assured way, and his supporters were hailing his strength and statesmanship. Going into conference, he was riding high in the opinion polls. But he was also an unelected Prime Minister – not just because our 2005 general election campaign had been under Tony’s banner and not his, but because he had not even faced a challenge for the succession inside Labour. Now, here was a chance for a mandate of his own.

But from the moment I’d seen the first of the media hype, I was almost sure it wouldn’t happen. Gordon – the Gordon I had known so well and worked with so closely since the 1980s – was a risk-averse politician. In 1992, he had shied away from fighting John Smith for the party leadership. After John’s death – in fairness because Gordon had finally realised he couldn’t possibly win – he had stepped back from challenging Tony for the leadership. Most of all, Gordon was cautious when it came to Britain’s voters.

As the pre-conference election speculation intensified, a number of the old Blairite stalwarts had phoned me in Brussels. What did I think? Would there be a snap election? ‘I’ve known Gordon for more than twenty years,’ I replied. ‘I can tell you when the date of the election will be – May 2010.’ Yet, by the time I arrived in Bournemouth a snap election was being touted as a foregone conclusion. When a reporter asked me to comment, I said the minimum I felt I could get away with. ‘I can see no reason,’ I replied, ‘why he shouldn’t call an election.’

Within days, it all went horribly wrong. I was back in Brussels, and the Tories were holding their own conference in Blackpool, when I suddenly saw TV pictures of the Prime Minister pitching up in Iraq, where he let out news of plans to begin reducing British troop levels. It immediately worried me. I had no way of knowing – at least until later – of the thinking behind Gordon’s visit to the front line. I did, however, know what it would look like: a publicity stunt during David Cameron’s conference, with our troops used as pre-electoral wallpaper. Then things got worse. Cameron’s Shadow Chancellor, George Osborne, used the Tory conference to unveil a proposal to ease inheritance tax, trebling the threshold to £1 million. This was tailor-made to appeal to the aspirational voters of Middle England, who were not alone in feeling over-taxed as the signs of world recession intensified. They were the very voters who, by buying into Tony and New Labour, had helped give us three election victories. They were the voters Gordon needed, too. But they were the voters he understood least well, always a particular frustration for him because Tony connected with them so instinctively and so easily. To top it off, Cameron used his closing conference address to taunt the Prime Minister into action. Go on, he said. Call an election.

Gordon was torn. First, he ham-fistedly decided to steal Osborne’s inheritance-tax trick. Then, even before Alistair Darling had unveiled our version of it in the Pre-Budget Report – the series of government finance announcements made in the autumn prior to the spring budget – he announced that there would be no election after all. As if that were not damaging enough, he insisted that he had never been minded to call one in the first place. Having looked so assured as Prime Minister at the start of his time in office, Gordon was now portrayed – by Cameron, of course, but also by the media – as hapless and a ditherer. All the controversies and embarrassments that bedevil any government were fed into that narrative. Not only the serious issues that arose in the weeks after the party conference, like improperly declared Labour donations, or the loss of a set of computer disks containing millions of Revenue and Customs records, but even the frankly farcical. In December, European heads of state gathered in Lisbon to approve the amended EU constitutional treaty. Gordon, apparently fearing the political toxicity of the issue, at first feinted at staying away. He ended up managing not to have his cake or to eat it either. He went to the ceremony, but showed up only after the other heads of government had done their signing.

There was a further awkward moment when he arrived at Kim Darroch’s office some months later, at the end of February 2008, for what both of us must have feared could be a tense reunion. I was with Kim and a handful of aides when Gordon strode into the outer office. At first my old friend and more recent foe did not see me at all. After he had greeted everyone else in the room, I finally had to take the initiative. ‘Hello,’ I said. Gordon quickly replied: ‘Oh. Hi, Peter, hi. How are you doing?’ We made our way to Kim’s office, and settled into a pair of plush chairs in the centre of the room. I had expected that we would begin with trade, and we did. That was my job, after all. Our only real conversation since Gordon had moved into Number 10, a telephone call four months earlier, had been about the world trade talks. I was also fairly sure that both of us – by instinct, and from a sense of familiarity and partnership that went too far back to have disappeared entirely – would be unable to keep from talking about politics. Within barely a minute, we were not only discussing the big-picture issues Britain faced, we were talking about Gordon, about his government, and about the nose-dive in public support they were both suffering. It would be wrong to suggest that it was like the old days, as if the rift between us had not happened. But the conversation was easy, calm, and at times extraordinarily forthright – on both sides.

Gordon’s main concern, a theme to which he would return repeatedly in the months ahead, was that he was ‘not getting the communications right’ – not with the media, nor with the British people. My reply was that good communications required not just good, confident people and organisation, but clear, bold policy. ‘I’ve got all the policy, all the ideas,’ Gordon insisted. ‘I just can’t communicate it.’ I told him that was not always my impression. His policies had to be thought through. They had to be ‘prepared, bottomed out, agreed and owned by relevant ministers’. Instead, it seemed to me, he had been seduced by the idea that a constant stream of media announcements could take the place of hard policy. I told him he had to wean himself off these ‘announceables’. Policy was tough going, especially when it involved changing or reforming anything. You had to keep pushing uphill. Then people would start noticing that something serious was happening. That was where ‘communications success’ would come from. I was at pains to reassure him that there was still a real opportunity for him to regain the political initiative. The key, I said, was the economy. ‘You’ve got to present yourself as the guy with the experience, the big brain, to deal with the big problems,’ I told him. ‘That is your USP.’ The point I sought to make, as subtly as I could, was that David Cameron did have natural communications skills. Gordon’s task, one to which he ought to be genuinely well-suited, was to make it clear that his grasp and determination in dealing with the economic crisis stood in contrast to Cameron. He had to be able to portray the Tory leader as ‘the guy in short trousers, who’s good enough perhaps to lead a student protest, but certainly not to lead a country’.

Our talk had been scheduled to last for twenty minutes. By the time Gordon left for the Commission headquarters, behind schedule for his meeting with the Commission’s President, José Manuel Barroso, we had been talking for well over an hour. Gordon seemed more upbeat when we’d finished talking, and more focused on how to get a new hold on government. I felt oddly buoyed too. I realised that despite all that we had gone through, I still cared about him. I wanted him to succeed. And, if I’m honest, I was pleased he was seeking my views and advice on how to help rescue and repair the New Labour project that he and I and Tony had begun. It was also puzzling that he should start opening up to me in the way he had. Given all that had happened between us, he had reason to doubt whether he could trust me. Surely he had people around him in London he could rely on, without needing to talk to me?

Within days of Gordon’s return to London, leaving me in Brussels to wrestle with my trade negotiations, there were signs that our meeting had at least begun to repair our relationship – but also of how difficult it might be to break long habits of misunderstanding and mistrust. A first hint at reconciliation came just forty-eight hours later, when he phoned me from Number 10. It was ostensibly to say that he had enjoyed our talk, but mostly to discuss a speech he was giving a few days later, at Labour’s Spring Conference in Birmingham. I told him he needed to identify his strengths and play to them. People felt threatened by the economic storm clouds. He had had a decade’s experience as Chancellor. He was seen as having a command of economic policy. His task now, and his opportunity as well, was to explain what was really going on, and how he and his government would enable Britain to deal with the storm and to come to terms with the new economic order more widely, and indeed benefit from it. ‘People think GB is brainy, so he should turn it to his advantage,’ I scribbled on my notepad when we had finished speaking. ‘He should identify our national strengths and position, and set out an agenda to maximise these to our lasting gain.’ That, essentially, is what I said to him. It was also what he went on to say in Birmingham – sort of. The speech began well. Then it faded out. It started on the theme of ‘fulfilling our national ambitions’, then meandered, without any real emotional connection, into a patchwork of policy examples and occasionally catchy phrases. It lacked a central, driving political message, a coherent story of the difficulties Britain faced, how Gordon proposed to lead us past them, and why he was best-placed to do so. It would be several weeks before I next talked to Gordon. By that time, there would be a reminder of the old days, and the old mistrust as well.

After our meeting in Brussels, my press spokesman Peter Power, who had learned very adeptly to pick his way on my behalf between the shoals and currents of trade policy and UK domestic politics, was besieged by questions from the media. He fended them off with an admirably straight bat. The Prime Minister and Britain’s European Commissioner, he said, had had a ‘friendly’ discussion – about the world trade talks, about Britain’s place in Europe, and about domestic politics. When asked whether this meant I might now hope to stay on for a second EU term, Peter was understandably keen to find a way to dodge the issue. He opted not to be drawn, rather than reaffirming my Today programme pledge not to seek a further term. His reticence invited speculation that I was fishing for an invitation to stay on. When Gordon was asked to comment a few days later, he replied that I had done a good job in Brussels. His choice of tense unleashed a new spate of headlines. ‘Mandelson’s Hopes of Serving Second EU Term Crushed by Gordon Brown’, blared the Daily Mail. It seemed that old habits – mine, Gordon’s, the media’s – would die hard.

Gordon’s political problems were clearly on a downward spiral. Partly, as he had insisted to me, it was an image problem. Once the ‘iron’ Chancellor, and then briefly a breath of fresh air in Downing Street, he was now seen as a ‘dithering’ Prime Minister in political freefall. Worse, he had become not only a figure of disdain, but of ridicule. This sense was summed up by Vince Cable, then acting leader of the Liberal Democrats, standing up at Prime Minister’s Questions and deadpanning: ‘The House has noticed the Prime Minister’s remarkable transformation in the last few weeks – from Stalin … to Mr Bean.’

There were problems of policy substance, too. By far the most pressing was a legacy of Gordon’s final budget as Chancellor, three months before he had moved in next-door. As part of an eye-catching announcement reducing the standard tax rate to 20p, beginning in April 2008 – which meant now – he had axed the entry-rate 10p bracket. The unintended, and clearly unanticipated, effect was to damage those at the very bottom of the ladder just as the economic crisis was beginning to bite. The immediate result was the worst backbench rebellion Gordon had faced as Prime Minister. That subsided – only just – when he promised a package to compensate those who stood to lose out from the tax changes. This was the last thing we needed in the run-up to local elections across England and Wales on 1 May, and the results were disastrous. In the most high-profile contest, for Mayor of London, even Ken Livingstone could not stave off defeat to the Conservatives’ Boris Johnson. I won’t claim to have shed many tears for Ken. With an ego the size of the London Eye, and what I always felt was a facile populism, he had delighted in stirring up ‘real Labour’ opposition to Tony during our first years in government. Still, I recognised that his defeat was bad news. Even Ken’s image as a maverick, untainted by ordinary party constraints, had not saved him from falling victim to our declining fortunes. Nationally, we were not only outpolled by the Tories – by a margin of 44 per cent to 24 – we finished in third place, behind the Liberal Democrats.

I felt conflicted. Not about the results, of course. I was no less shaken than if Tony had still been in charge by our diminishing prospects of keeping David Cameron, short trousers or not, from ushering in a period of Conservative rule. Yet despite the renewed warmth I had felt for him in Brussels, I began to wonder whether even a more focused Gordon Brown, playing to his strengths, could really succeed in turning things round. I was by now intermittently back in touch with him by phone. Perhaps equally surprisingly, given Gordon’s role in hastening him out of Downing Street, so was Tony. Although now absorbed in his work on the Arab–Israeli conflict, his faith foundation and his business activities, Tony retained a train-spotter’s interest in British politics, however much, publicly, he wanted to keep out of it. He also cared about his own legacy, and how Labour was going to secure it and build on it. Like me, he wanted to offer support to Gordon, and I encouraged him to do so.

Tony phoned him in Downing Street the day after the local elections. He told him he had to push back, not to sound defeated, not to beat himself up. Yes, he said, he had to listen to what the public were saying. But what he really had to do – a message I was also conveying – was to reassert what government was doing, why it was doing it, and how it would improve Britain. He had to provide a clearer sense of direction, a strong reform programme. If he looked and sounded wounded, Tony told him, he would invite further attacks: ‘Be careful of what scent you give off.’ We both agreed, however, that Gordon was beginning to look bad, physically. Sleepless and grey. Fearful. On the ropes. No wonder everyone assumed that he was all of those things.

A few days after he had spoken to Gordon, Tony called me from the Middle East at my small, quirky Brussels flat, whose large windows I liked staring out of as I worked or talked on the telephone. He said he felt that while Gordon had the intelligence and the ideas, the drive and determination, to make a success of government, ‘none of that is the most important thing for a politician. It is intuition – what to do, when to do it, how to say it, how to bring people along.’ That, he felt, was Gordon’s problem. I agreed. Intuition, of course, was a political gift that Tony himself had in spades, and it had helped guide every step the three of us had taken in the long campaign to make Labour a party of government again.

After the local elections, Gordon scrambled to steady the wheel of what was beginning to look very much like a sinking ship. He brought forward his announcement of the government programme for the next Parliament. It proved to be a mishmash of the already known and the small-fry, and it was picked to pieces by the opposition, and even by some of the media pundits who at the height of Gordon’s war against Tony had cheered him on as Labour’s messiah-in-waiting. Nor was there any respite from Alistair Darling’s panicked ‘mini-budget’ in mid-May, in which he was forced to borrow £2.7 billion to cushion the effect of the 10p rate axe on at least some of the lowest-paid workers. In late May, Gordon faced a further electoral test, and a further body-blow. The death of one of my own early political allies, the indomitable Labour backbencher Gwyneth Dunwoody, forced a by-election in Crewe. The Tories cruised to victory in what should have been one of the safest of Labour seats, defeating Gwyneth’s own daughter by 8,000 votes. Gordon’s early contrast between his premiership and Tony’s was wearing perilously thin. The Brownite promise to an unsettled party had been that the Blair rollercoaster would be replaced by a calmer ride. Now it appeared we were going nowhere. Or very possibly off the rails.

In early June, Gordon called me again in Brussels. We agreed that I would come and see him at Downing Street when I was in London in the middle of the month. My role, if you could call it that, remained strictly informal. As far as I could tell, very few people knew I was back in touch with the Prime Minister. Sue Nye, Gordon’s office ‘gatekeeper’ and one of my oldest friends in politics, was in the loop. As for others in the inner circle, even those who knew Gordon and I were talking seemed puzzled about where this latest twist in our relationship was headed. That was understandable: so was I.

When I went to London, I arranged to have lunch with Jeremy Heywood the day before I was to meet Gordon. I wanted to bring myself up to date with how things were running in Number 10, and to see what I could do to help. Jeremy was now Permanent Secretary, Gordon’s top civil servant. In the early days of the Blair government he had been with Gordon at the Treasury, and before that, private secretary to Conservative chancellors. I had got to know him well when he moved to Number 10 and worked with Tony in 1999. When he arrived at the restaurant in the Royal Festival Hall, he was smiling. As he had been on his way out of Number 10, he said, Gordon had asked to see him. When he had explained that he was going to a lunch appointment, to meet me, Gordon had said he would join us – only to find that he couldn’t scramble his protection officers quickly enough. ‘The reason I made a point of mentioning you is that I’m still not sure just what your status is these days,’ Jeremy said. ‘I was afraid what Gordon might say if he found out. Now he says he wants to meet you this afternoon.’ I told him I had arranged to see Gordon the following day, but Jeremy replied: ‘He says he wants to meet you today, too.’ Looking back on it, I suppose that was when our real sense of reconnection began.

‘I’ve just been talking to Tony,’ Gordon said as I arrived in the upstairs study at Number 10 – Mrs Thatcher’s favourite room – from my lunch with Jeremy. I couldn’t help but chuckle. ‘Are things really that desperate?’ I asked.

‘Come on,’ Gordon replied with a broad smile. He told me he had read a speech I’d recently given in New York, on the need for new policies and institutions to address the challenges of the global economy, and said he wanted to find a time to talk further about what that meant not just for the EU, but for Britain. I felt flattered, which, I suspect, was his intention. Then, after only a short pause, he turned to a more immediate worry – his own political crisis. And he uttered four extraordinary words: ‘Can you help me?’

‘How?’ I asked, taken aback by his directness, and still feeling my way in this revived relationship.

‘By giving me your strategy,’ he said. ‘Only a few people in politics are strategists, and you are one of them. I need that. I need to know what you think of my situation.’

I had an instant in which to make up my mind how honest to be with him. I didn’t want to damage his confidence further, or put him off talking to me, but nor did I want to miss the chance to offer the kind of blunt advice I suspected he might not be getting from others. ‘Look, people have stopped listening to you,’ I said. ‘They’ve tuned out. They don’t know what you believe. They don’t know what your government is for. You have policies, but they don’t seem joined up.’ Gordon took this well, considering my directness, and replied by returning to his Brussels refrain. He did have ideas, he insisted. What he lacked was strategy. And he couldn’t communicate. ‘It seems,’ he sighed, ‘that you can be a good Prime Minister or a popular one, preferably both. But I’m neither.’