To their credit, and much more closely than Blair and his policy-making allies, the Brownites were concerned with the issue of accountability: which institution was accountable to whom?
It was the source of many rows between Prime Minister and Chancellor and is at the heart of virtually every debate in relation to the delivery of public services. To take an example from Cameron’s preparations for power, in the build-up to the 2010 election the Conservatives held a series of energetic seminars on their plans for what they called a post-bureaucratic age. But they hit upon a problem: if the state withdraws and allows smaller groups such as co-operatives or housing estates to run their affairs, to whom are the smaller groups accountable? There was no clear answer, and quite often by the end of their seminars the Conservatives had appointed ten thousand new bureaucrats to run their post-bureaucratic age.
In the case of the Bank, free to act on his own in the luxurious space of opposition when few were following what he was up to, Balls addressed the issue of accountability in relation to independence with considerable skill, giving away power but ensuring that ultimately the elected Chancellor pulled the strings in terms of appointments and setting the overall objectives of the Bank.
Although Balls had been advocating the radical move since at least 1995, it was only on the final Monday of the 1997 election campaign that Brown confirmed he would implement the policy. He returned to London from his constituency and headed straight for the comfort of Geoffrey Robinson’s suite at the Grosvenor House Hotel. Apparently speaking as if he had a thousand other thoughts on his mind, he told Balls he had decided to make the Bank independent as his first big policy announcement. Balls and Robinson assumed, probably accurately, that his diverted air was more to do with the fact that he could not quite believe what he was saying. The two of them sought out Balls’s 1995 paper and got down to work in the remaining few days of opposition.
The speedy, ruthless manner in which the deed was done was part of the political bravery. There was no one else in the 1997 cabinet, including Blair, who would have been qualified to make such a sweeping change in relation to the Bank, or would have dared to do so. The new Prime Minister was wholly supportive of the move, but that is slightly different from making it.
Brown decided in the final weekend of the campaign not only to go ahead with the move, but to do so straight away. He realized that there would be only one real opportunity to act from a position of perceived strength, and that was at the very beginning. Any time after that and critics would detect the move as a sign of weakness, a sense that a Labour government was failing again.
In order to prevail on this and other matters, Brown and Balls were ready to take on the mighty mandarins if they had to. Balls met the Permanent Secretary, Sir Terry Burns, once a week for six months before the election, an assiduous cultivation. But he and Brown were suspicious of Burns, regarding him as someone who had been too ‘cliquey’ with Nigel Lawson and Ken Clarke, two long-serving Conservative chancellors. They were ready to form their own allies within the Treasury against the Permanent Secretary.
Balls sensed that Burns in particular felt a personal investment in the previous Tory strategy for the economy, but moved quickly to assert his – and therefore Brown’s – authority. Quickly Balls acquired other allies in the Treasury. There was Steve Robson, the architect of railway privatization, who was according to Brown’s allies ‘at daggers drawn’ with Burns because of various battles in the past. Another senior official, Nigel Wickes, had fallen out with Burns. Soon Gus O’Donnell joined them at the Treasury. O’Donnell had been John Major’s press secretary, but such was his unthreatening demeanour and calm authority that he moved effortlessly to serving the Labour government. His love of sport helped too. O’Donnell talked football and cricket with Major when the Prime Minister was in the depths of gloom. He calmed down Brown sometimes with a talk about football of which Brown had an encyclopedic knowledge and could recite team sheets from decades ago.
There was a pattern forming. Wherever Brown and his inner court went they formed a faction, making alliances with a few trusted figures. The factions were partly defined by a perception that enemies lurked all around. In terms of the Labour party the Blairites were their main enemy. The Brownites extended political friendship to those who shared their grievances, worries and desire to prevail. In the Treasury Burns was seen as an obstacle to progress, along with a few other senior officials who appeared to form an allegiance with the long-serving Permanent Secretary. So the Brownites became closer to those officials who shared their doubts about Burns.
At times they had an exaggerated, destructive sense of the barriers placed in front of them, the enemies that had to be addressed, and the alliances they needed against common enemies. Once more the criticism was often made of Brown and Balls, in the media and beyond, that their politics were fuelled by an insecure paranoia.
There was something in the charge, but like the other criticisms about Brown’s caution and cowardice it tended to ignore the wider context. In this case they were entering the Treasury with a series of radical plans, unsure whether they would have the support of the Prime Minister and for different reasons the Permanent Secretary. They were in a critical position, one that needed to be reinforced by ruthless politics and an acute awareness over who they could trust. Brown’s reliance on a few close allies and the lack of people-management skills that accompanied such introverted dependency became a much bigger and less excusable flaw when he was Prime Minister. As a Chancellor determined to impose an agenda on a doubtful Prime Minister, he needed a faction and would have found one forming even had he sought – as he did not – to avoid such divisiveness.
In 1997 Brown was determined to break through resistance from the Treasury and to some extent transform its role. In the run-up to the election he published in draft form a new mission statement for the Treasury. As well as low inflation and sustainable growth he made the reduction of poverty an explicit objective for the department. According to one of Brown’s allies the impact inside the Treasury was ‘massive’.
Senior officials took mission statements seriously. The inclusion of poverty as an issue meant they had to make room for new dimensions, analysing more closely the consequences of their policies on the least well off. The same applied to Brown’s focus on public services. Treasury officials did not have to only decide the sums for each department, but had to focus relentlessly also on agreed outcomes, on how the money was going to be spent, and over longer timescales, in an attempt to avoid the short-term frenzy of the annual public spending round. This was quite a leap for officials brought up on the need to balance books or adapt to an imbalance in the books. Brown wanted the Treasury to be more creative. He was pioneering a cultural revolution in the department while giving away conventional powers such as the setting of interest rates.
Brown was perceived as anti-reform when he had reformed the Treasury, a department intimidating in its determined conservatism. The debate should have been about what constituted appropriate reforms. But from 2001 Blair framed another apolitical debate: ‘Reform or anti-reform’.
On the Sunday after the election Brown gave Burns the shock of his career when he handed over a letter in which he outlined on what terms he was giving away the power to set interest rates. The letter reflected Balls’s interwoven layers of accountability, stating that ‘the monetary policy of the Bank of England will be to deliver price stability (as defined by the government’s inflation target) and without prejudice to this objective to support the government’s economic policy including its objectives for growth’. Brown retained the powers to appoint the Governor and members of the monetary policy committee, obviously an extremely important form of patronage, although limited in the sense that Brown could not be seen disturbing the natural order of things too greatly in terms of appointing close allies. Brown set the inflation target at 2.5 per cent, with explanations demanded if the figure was significantly above or below that limit.
As part of their factionalized thinking, Brown and Balls also had doubts about Eddie George, the Governor of the Bank, whom they were empowering with