The Third Man: Life at the Heart of New Labour

In fact, as even his closest aides made clear to me, Gordon himself was a big part of the problem. At the Treasury he’d had a well-oiled machine, a group of experienced and gifted civil servants under the direction of a unique political ally, Ed Balls. Ed was so close to Gordon – so seamlessly identified not only with his thinking, but his ambitions – that he was Deputy Chancellor in everything but name. Now Ed was Children, Schools and Families Secretary. He was still very much part of the inner circle, but he was not based in Downing Street. He had a day job, and legitimate ambitions of his own. Running the government and the country was simply harder than running the Treasury. Shorn of Ed, Gordon lacked, or at least had not yet acquired, the new set of skills and staff members he needed. One of his closest advisers put it best: ‘Gordon is a hub-and-spoke operator. He’s the hub, and he works through lots of separate spokes, rather than an integrated machine.’ Another member of the team said: ‘He only trusts people in boxes, silos. He listens to them in that particular context, like he would use an electrician or bring in a plumber. He’s not geared to run a group that interacts, communicates with one another.’ They all agreed that there was no one – no Ed Balls – to pull things together for him, and that was the chief loss.

The more I spoke to Gordon, and to those around him, the more convinced I became that the key to any recovery was Gordon himself. With all his ideas, with all his passion, he seemed so distracted, so distressed, that I wondered whether he would be able to rise to the occasion at the party conference. It wasn’t just the politics he had to get right, I told him. Not even just the speech, though that would obviously be crucial. He had to look revived as well. I kept urging him to rest, spend time in the sun, exercise, eat well. ‘You’ve got to take care of yourself so that people get a different picture of you, as on top of the job rather than struggling with it,’ I said on one occasion. ‘If you look better on the outside, people will feel you’re more in control of things.’ I think he realised I was right.

Very quietly, he said: ‘It was all so wretched between us all – you, me, Tony. It was so wasteful! We could have achieved so much more. We still did a lot, though. Perhaps surprisingly.’

‘I agree,’ I replied. ‘What on earth were we doing? We doubted each other. We read everything into each other’s motives and actions.’

He was right, I said. ‘You saw everything we did through the prism of “We want to destroy you.” We saw everything you did through the prism of “You want to get Tony out.” It was a sort of mutually assured destruction.’

For my part, I couldn’t help but reflect on how different, and how much more fulfilling, my life had become since I had left front-line British politics. For a long time after my second defenestration, I had felt angry and resentful. Before I finally accepted that a third return to government was impossible, I had been fixated on finding a way back. I felt unfairly exiled. I felt incomplete without a seat at the cabinet table. That was no longer true. The new job had transformed me. On an unfamiliar and much wider stage, I had found myself bartering, bargaining and seeking common cause across over two dozen European states, and, in my role in the world trade talks, across the globe. I was still doing politics, but not politics as I’d known it. In the formative years of New Labour, ‘concession’ and ‘compromise’ had been almost dirty words. Rather than shying away from confrontation, we had sought it out, even orchestrated it. We were convinced that head-on battle was the only way the Labour Party would really change – and be seen to have changed. Our time in government should have altered that. In some ways, it did. Yet almost everything we accomplished in government, and the great deal we failed to achieve, was forged in combat – this time, between Gordon and Tony. My job in Brussels, in contrast, revolved around building relationships, alliances, coalitions. That was what had made it initially so challenging, and now so satisfying.

But the main reason I had come to enjoy my European ‘exile’ was personal. For the first time I could remember, I was out of the Westminster spotlight. For the best part of two decades, I had been defined by an increasingly malign media image. I was Machiavelli with a red rose. The Prince of Darkness. I had managed over time to come to terms with Mandelson the Media Caricature. I also realised that I had played a part in its creation. What had hurt most was the unbridled aggression with which the media sought out ‘stories’ to burnish the caricature, and to propel their narrative of what kind of politician and person I was. This had had a real and damaging effect on my career. It was certainly a central factor in my second resignation. Still, the media storm that had hastened my departure, however inaccurate or misleading, could at least have been seen as the press doing its job. The reporters and headline-writers were sinking their teeth into an issue relating to a public figure performing public duties. That was not the case with intrusion into my personal life, or the licence that reporters and photographers felt they had to stalk my every step, pick away at my every social engagement, home in on my every friendship and – as I could hardly help but recall on Capri – every holiday. I reflected, with a relief that would have been unimaginable in my higher-octane years in Westminster, that I was no longer news.

For equally unimaginable reasons, by the time my holiday was over, that assumption would turn out to be wrong. Three days remained before I was due back in Brussels. On the way, I was making a stopover on the Greek island of Corfu. Two months earlier I had received a phone call from Matthew Freud, the PR supremo married to Rupert Murdoch’s daughter Elisabeth. Matthew had been one of the key advisers during my challenging stewardship of the Millennium Dome, and had become a good friend. I had also got to know Elisabeth well. Matthew was calling because he wanted me to come to Corfu for Elisabeth’s fortieth birthday party, which was being organised at the house there of my friends Jacob and Serena Rothschild. I imagined that it would be fun, and looked forward to spending a few days on the waterside estate, which I recalled with fondness and gratitude from the time I had spent there with Jacob and Serena after my first ejection from government. I looked forward too to seeing their son Nat, with whom I had also become close.

By the time I arrived it was Friday evening, just before the party was due to begin. The other guests – an array of yacht-borne Murdochs, and friends of both generations of Rothschilds – were already there. There was not a bed to sleep in at the Rothschild home. In part, as Nat explained to me with a smile, this was because one of his old Oxford friends was staying there: George Osborne, David Cameron’s closest political ally and Shadow Chancellor. Nat arranged for me to be billeted on a yacht belonging to another of his friends, the Russian industrialist Oleg Deripaska. I also knew Oleg, though not well, having met him previously through Nat. I was intrigued by his rags-to-riches story. Having begun life in a poor corner of rural Russia, he trained as a physicist, and had become a major businessman during the entrepreneurial free-for-all that followed the collapse of the Soviet Union. Not only had he become wealthy, he was also well-read, and voraciously interested in a constellation of social and economic ideas, as well as Russia’s future, which dominated his conversation. Despite later media suggestions that I had gone to Corfu to join Oleg for a holiday on his yacht, I barely saw him, except for an amusing episode in which, during an early-morning wander around his boat, I stumbled across a yoga session he and his wife were taking, and I happily joined in under the instruction of their teacher.

I knew George Osborne, too. We had never exchanged much beyond social pleasantries and that is all we did at the birthday party. It was not until the following evening, with repercussions that would emerge only later, that this changed. The remaining guests, about thirty of us in all, had arranged to assemble at a seaside taverna down the road from the Rothschilds’ house. I had fallen asleep in the evening sun, and arrived late. When I showed up, there were two vacant seats, one at each end of the table, and two simultaneous shouts of welcome. One was from Rebekah Wade, then editor of Rupert Murdoch’s Sun. The other was from George. I planted myself next to him, as he’d seemed the more insistent. For the next fifty minutes or so, we talked. By the time our remarks, or a skewed version of them, surfaced in the press a couple of months later, a central point would be lost.

Yes, we talked frankly, on both sides. But it was the kind of conversation political colleagues on opposite sides of the party fence have far more often than is sometimes realised. I had been one of the creators of New Labour, and the repositioning David Cameron and George were attempting with the Conservatives was in many ways being modelled on that. I was sceptical that they had learned the real lesson of New Labour: that it was not just about creating a new image, but required making tough policy changes and bringing the party behind them. But it was a fascinating and not unenjoyable chat, a bit like two golf pros comparing their swings. In fact, George did most of the talking. He spoke animatedly, initially about the Prime Minister. It was not just that he disliked Gordon Brown; he seemed consumed by his interest in what the Observer had once famously called Gordon’s ‘psychological flaws’. George recited a litany of slights he said he had suffered at Gordon’s hands in the months while he was shadowing him as Chancellor: Gordon had blanked him whenever they met; he had denied him the courtesy of advance copies of Treasury statements; on one occasion, George had phoned him only for Gordon to put the receiver down, or so he said. He was especially fascinated by the tensions between Gordon and Tony, saying that the ‘TB-GBs’ had made both him and David Cameron aware of the importance of sustaining their own relationship.

I listened. On occasion, I nodded. And yes, I added a brush-stroke or two to the psychological portrait George had obviously spent many months assembling. But I said nothing I hadn’t said to others at one time or another before. Nothing, in fact, I hadn’t said to Gordon. So it was difficult not to smile when, in George’s leaked version of our discussion which subsequently appeared in the press, I was said to have poured ‘pure poison’ about Gordon into his ear.

If anyone’s ear was scorched that evening, it was mine, as George expounded on what he saw as his and Cameron’s Conservative equivalent of our New Labour project. They had drained the Thatcherera ideology from the Tories, detoxified the party, he said, to make it electable. I said it had always been my understanding that the rising generation of Tory MPs and the current activists had grown up under Thatcher, and their thinking had been formed under her leadership. George said this was true only up to a point. The party was mainly made up of old people, not young people, most of whom were involved more for social than political reasons. In his own constituency, there were lots of divorcees, widows and widowers whose interest in the party was as a place to find companionship, or a partner. ‘They’re not interested in ideology,’ George said. ‘They’re interested in a Conservative Party that wins.’ His, and David Cameron’s, interest was also in a Tory Party that won.

When I returned to Brussels, I spoke to Tony on the telephone again. We both wondered whether Gordon had it in him to turn things round. My view was that neither of us could tell but that he had to be given the chance to try. Tony reflected on the messy way his own time in office had ended and Gordon’s had begun. It was not just the absence of the long-advertised ‘orderly transition’; what most upset him was that one result of Gordon’s final coup had been to short-circuit the ambitious policy review Tony had put in train to give a post-Blair government a fresh, but still New Labour, agenda. ‘It wasn’t my fault, the way he behaved,’ Tony grumbled. ‘I would have gone in 2004 if he’d worked with me, and if I didn’t believe the whole thing would be pulled apart by him and his people.’ He said he still felt Gordon had a great brain and energy. But, he added, ‘These have got to be directed at the right things. He’s got to go back to being New Labour.’

I don’t think either of us had any doubt that Gordon would return to London after the summer recess with a new determination to turn things round, but at the beginning, events did not help him. The trouble began, at least in Gordon’s mind, with the closest thing he had to an old friend, except for Ed Balls, in the cabinet. Alistair Darling – a Scot, a long-time admirer of Gordon, and his Chief Secretary at the Treasury after the 1997 election – was evidently feeling increasingly pessimistic about where the country was heading, from an already obvious economic downturn to something far worse, and, it seemed, frustrated at being constantly second-guessed by Number 10. He gave a long, and extraordinarily frank, interview to the Guardian writer Decca Aitkenhead at his holiday cottage in the Outer Hebrides. His remarks were not personally unkind towards Gordon, but he felt the country was ‘pissed off’ with the government: ‘We patently have not been able to get across what we are for, and what we are about.’ And he said he believed the recession would be ‘more profound and more long-lasting than people thought’. The economic straits Britain found itself in were ‘arguably the worst they’ve been in sixty years’.

The word ‘arguably’ disappeared from the quotes picked up by other newspapers and broadcasters when Alistair’s interview appeared. George Osborne had a field day, launching an assault on Gordon’s legacy as Chancellor and his ‘truthfulness’ as Prime Minister. Gordon was furious, because he felt Alistair’s comments were yet one more distraction from his hoped-for September recovery. When he called me, he was seething. I probably didn’t help things by questioning how he had allowed his media briefers to leak his plans to ‘go personal’ at the party conference – a bizarre theft of his own headlines that risked detracting from the impact of his speech when he made it. ‘I didn’t do that!’ he protested. ‘Well, somebody did,’ I said calmly, to which he replied: ‘OK. But we’re going from one improvisation to another. It’s ridiculous. I’ve got all these things to do, all this policy in my mind, but no means of communicating it.’ Then he got to what was really upsetting him. ‘That fucking Darling interview! It fucked up everything, absolutely everything, I wanted to do last week.’

None of us reckoned, however, on a series of events about to erupt five time zones away from Downing Street. They were hugely significant, an economic shock so seismic that they made Alistair’s interview seem understated. They began with the news that one of America’s most venerable investment banks, Lehman Brothers, might be going to the wall. Over the weekend, the US authorities scrambled to find a buyer. On Monday, Lehmans filed for so-called Chapter Eleven protection. It was the biggest bankruptcy in American history. World stock markets tumbled. Another British bank, HBOS, was soon showing signs of being in serious trouble. This was staved off by Gordon, who with a word in the ear of the Lloyds chairman Victor Blank encouraged a mega-merger between Lloyds and HBOS. By the end of the week, with the Labour conference convening in Manchester on Sunday, the economic news was becoming ever more worrying.

Gordon phoned me on Friday night. He said he had been trying to get me for two days – I had been at a climate change conference in Oslo, and had not been returning messages. He started by talking about his conference speech. It was clear the political ground had shifted. ‘Now,’ I told him, ‘you actually have something big to talk about in your speech. It really is the global economy, stupid.’

This was what we had been talking about since the summer. But now it was well and truly dramatised. The terrible crisis meant it was not just a theoretical and not just a political argument, but a real, immediate challenge. If Gordon got his message right, he had an opportunity to break through in a way he simply would not have been able to do before.

He agreed. ‘It’s not just about individuals and society. It must be markets as well,’ he said. His only doubt, one Tony would have found reassuringly New Labour, was how far he could go in attacking the markets. I reassured him that it wasn’t about attacking the markets, but individuals within them who had been acting irresponsibly, and that he should have no compunction about attacking them. But mostly what I told him was to put all his extraneous worries to one side: the so-called coups, Alistair’s interview. ‘Don’t, for God’s sake, let yourself get sidetracked,’ I said. ‘And don’t stop being prime ministerial.’

I was fairly certain now that, given the economic turmoil, Gordon had every chance of turning in a performance sufficient to save his job. Only a frontal assault from David Miliband was likely to spur rebellion, and that was not going to happen. For the media, however, the conference was shaping up as a tale of two speeches: David’s on the Monday, and Gordon’s on the Wednesday. David spoke eloquently, and ranged far beyond his brief as Foreign Secretary. In parts, he sounded very much like a leader-in-waiting. He echoed his July call for the party to choose hope, energy and new ideas over ‘fatalism’. But even without his unfortunate ambush by a photographer outside the conference hall, who snapped him grinning and holding a banana, David was not pushing for the leadership. Besides, there was no vacancy. Unless, of course, Gordon unravelled when he strode onto the stage.

He did the opposite. By some distance, it was the most powerful performance, the most effective message, he had delivered since his descent had begun a year earlier. It was personal. It connected. It had touches of self-deprecating humour. It played to his strengths. Galvanised by the magnitude of the new economic and financial crisis, he managed to produce what he had so far been failing to do. He offered a coherent reply to questions left unanswered for so long: What were the challenges Britain faced? What were the policies, vision and leadership needed to rise above them? And why was he the man to provide them? His most effective line, aimed at David Cameron, was: ‘I’m all in favour of apprenticeships. But let me tell you that this is no time for a novice.’ It was clever, it was simple, and it was what people wanted to hear.

I was back in Brussels when Gordon gave his speech, and was preoccupied with preparing for a trip to China and a speech of my own when I got there. Especially with the economic crisis deepening, I was keen to encourage expanding business and trade ties between the EU and the Chinese. But I was determined to press Beijing on our concerns about protectionist barriers, and China’s lacklustre attitude to enforcing intellectual-property rights. I watched Gordon’s address on television, however, and saw that it had gone well. I got two text messages that evening. The first was from one of the team at Number 10, saying very kindly that I’d made a ‘profound difference’ to Gordon’s performance. The second was from Sue Nye. ‘Gordon,’ it read, ‘says “thank you” for your help.’ As always with big set-piece speeches, especially Gordon’s, I was just one of many who had contributed. But it had been worth the effort. I told Gordon I felt it had been a good speech, the right message, effectively delivered, at the right time. What I didn’t say, in part because I was sure Gordon already knew and feared it, was that he had cleared only the first hurdle on the road to recovery.

By the time we next spoke, I was in Singapore, on my way home from Beijing. The call came in the early hours of the morning. He was upset by continued signs of discontent among an assortment of backbenchers, echoed by several former Blair cabinet ministers. There was a ‘plot’ to drive him out, he insisted: ‘The plotters are the problem.’ He singled out three former ministers as the alleged culprits: Stephen Byers, Alan Milburn and John Reid. ‘They are steering it,’ he said. ‘They had a plan, it misfired, and they failed. They wanted to wreck the conference, and they didn’t succeed.’

In fact, as far as I could tell, neither they nor anyone else had had some grand plan for conference Armageddon. At least for now, Gordon was safe. ‘You’re getting this out of proportion,’ I told him. ‘I don’t know why you’re so wound up.’ He was not wound up, he replied. But he was obviously distracted, and if he stayed that way, his conference escape could turn out to be no more than a very brief respite. ‘What you have to focus on now is the fact that we don’t have a strategy to win the next election,’ I told him. ‘The other stuff doesn’t matter. New Labour 1997 is not going to win it for us in 2010. It has to be renewed, reinvented. Nobody is doing that, and you have to focus on it.’

‘Can’t you do that?’ he asked, returning to a theme I thought we had finally got beyond in the summer. ‘I’ve got it intellectually,’ he said. ‘I’ve got the policies. I accept it’s different from 1997, and that now we’ve got to say what we’re doing next. But I just can’t turn it into a strategy.’

I put it to him directly: ‘You need a government team to do this. Perhaps you should wonder whether you may have contributed to making people feel less of a team. You have to rebuild it.’

‘I realise some in the cabinet feel ambivalent about me,’ he replied. ‘But others have got to show a lot more maturity.’

Sensing that we had taken this as far as we could for now, I said: ‘I have to show some maturity, and go to sleep.’

‘Why? Where on earth are you?’ asked Gordon, genuinely surprised.

‘Singapore,’ I said. ‘And it’s after 2 a.m.’ Gordon, profusely apologetic, and I, very tired, agreed to talk the following day.

When he phoned he was, at least briefly, in a brighter mood. ‘If it’s not after midnight, I guess I’m calling too early,’ he joked. But he remained unsettled. He was some distance from getting a hold on the team effort I’d been urging him to make his priority.

‘You get wound up about the wrong things and the wrong people,’ I said. I advised him not to make a big mistake in the cabinet reshuffle the press was now anticipating. I was worried about reports that he was planning to replace Alistair Darling with Ed Balls, which in the gathering economic crisis struck me as perverse. No matter how upset Gordon had been over his Chancellor’s interview, a vote of no-confidence in the Treasury was hardly going to help. ‘Some may think it odd,’ I said.

‘We’ll have to talk on a landline,’ Gordon replied, with a sudden air of mystery. ‘But I have a bigger plan than that – one which everyone will eventually say is good.’

‘A tactical nuclear explosion?’ I asked. At which, for the first time in ages, he laughed. He would say nothing more, beyond a suggestion that we talk again.

I was worried. From my experience, Gordon’s ‘big plans’ had a habit of creating as many problems as they solved. His conference speech would not in itself ensure that he and the government could recover, but it was a start. He had had one last chance at survival, and he had taken it. One more ‘big plan’ gone wrong would risk not just ending his short and unhappy premiership, it could leave the government, and the party, in even deeper crisis.

The next call from Downing Street came two days later. It was not from Gordon, but Jeremy Heywood. It began encouragingly enough, with an assurance that I would have an opportunity to weigh in with my views before the reshuffle warheads were launched. ‘I think Gordon will want to see you to discuss the reshuffle,’ he said. But then he too added, ‘He wants to do something quite big.’

‘In what way big?’ I pressed. He said that was something I would have to discuss with the Prime Minister. Apparently, Gordon wanted to do something that would affect me. This was getting more puzzling, and more worrying. I took it to be a suggestion of some root-and-branch reworking of the cabinet, with my job in Brussels offered as consolation prize to one of the victims. The prospect of my entering a truly final political exile came as a shock. It also seemed an odd way for Gordon to recognise the help I had tried to give him in his darkest hours. I did take comfort from the fact that I was better equipped to deal with being cast into the wilderness this time round. With my EU term ending in barely a year, I had begun to adjust to the notion of life beyond politics. But it was unsettling, and I said so. ‘He’d better not muck around with my job,’ I told Jeremy. ‘If this “big plan” involves getting rid of someone with a promise of my job, you should know I’ll be furious.’