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The bankers cannot believe their luck

The disgrace of the political class has been the salvation of the bankers. And lax regulation has le

Until the drama over MPs’ expenses, workers in the financial services had been reeling from a succession of blows: collapsing banks, nationalisations, frozen bonuses, job losses and contemptuous, withering condemnation by the public and by opinion-formers in the media, church pulpits and parliament. An optimistic scenario was one of slow rehabilitation under a less permissive regime involving tougher regulation, partial public ownership of banks and a diminished, chastened City.

Now the bankers can’t believe their luck. A couple of days after the first revelations in the Daily Telegraph, the headline in the City’s free newspaper City AM was a shout of orgasmic release: “Now THEY can’t lecture US.” It said it all. Collapse of moral authority and politicians’ will. Back to business as usual.

The dangers of drift were highlighted in the speech given at Mansion House on 17 June by Mervyn King, governor of the Bank of England. He publicly expressed discomfort at the idea of banks that are “too big to fail”: he has concluded that such banks are simply too big. But the government is reluctant to tackle these banks, as the conduct of Lord Myners and the institutionalised passivity of UK Financial Investments Ltd (UKFI) – the Treasury-backed bank shareholder body – indicates. Instead, there seems to be a yearning to disengage government from the financial sector as quickly as possible. Political developments have made that disengagement easier to achieve, now that parliamentarians, including members of the Treasury select committee, have been collectively discredited, and power within the Labour government has shifted from a wounded Prime Minister to a revitalised Chancellor articulating the Treasury line.

It is deeply worrying that some of the most important policy questions for a generation are now being decided by default and in a political vacuum. How can a semi-nationalised banking system best serve the different but overlapping interests of UK bank borrowers, depositors and taxpayers, as well as private shareholders and bank executives? How should the systemic risks of banking – and the City generally – be managed through regulation, in order to safeguard the wider UK economy? Most important, is it actually possible for the UK to play host to a major financial service sector?

The response to all these questions is a lazy, uncritical, self-serving one: that, bar a few regulatory tweaks that will need to be made, the previous regime was essentially fine. The bankers’ view is that UK politicians need to get off their backs as quickly as possible and get the banks back into the private sector; to reverse “penal” (ie, 50 per cent) marginal tax rates; and to stop the European Commission, or more self-confident UK regulators, from “undermining the City’s competitiveness”. These arguments are winning.

Indeed, there is a danger that the counter-revolution could soon become a rout.

Yet it is only a matter of months since half of the British banking system collapsed and had to be rescued by the state through total or partial nationalisation. Thanks to that intervention, the banks have stabilised (if nothing more). Several small banks are now fully nationalised; RBS and the Lloyds Banking Group are partly nationalised; the two remaining global banks (HSBC and Barclays), along with the remainder of the sector, depend on a variety of implicit or explicit guarantees.

How we got to that point has been discussed elsewhere (including in my book The Storm): I am now concerned with the future. There is a bifurcation of paths opening up. One route builds on the experience of recent bank crises in Scan­dinavia, Israel, Korea and elsewhere, including the US, whose so-called Resolution Trust model helped to limit the savings and loans crisis of the late 1980s and early 1990s. Following this route, the state leads and manages a clean-up and restructuring of banks, usually within a decade or so. Approaches have varied, but there are some common elements: the wiping clean of the slate, in respect of losses incurred by existing private shareholders and the removal of failed management; fresh, taxpayer equity capital; structures to ensure that lending can continue unhindered to good, solvent borrowers; the valuation and active management of “bad” assets, in order to retrieve whatever value is left; then, in due course, the selling off of some or all publicly owned banks to achieve maximum return to the taxpayer and leave a varied ecology of properly regulated national banking institutions.

Some of us thought that was where the government was originally heading. After the October rescue, there were some tough-sounding conditions on new lending and curbing bonuses and, for a while, as it basked in the glow of in­ternational approval, the government seemed to be on the right track.

But it has gradually become apparent that we are being taken down a different route, where government money and guarantees are used to facilitate a quick return to “business as usual”. UKFI has been populated by financiers rather than business people with experience as bank customers. The public-sector shareholders seem to have had no quarrel with bank management’s efforts to build profitability and deleverage as quickly as possible.

The Asset Protection Scheme introduced in January also provides insurance cover for “toxic assets”, which means the government has taken on an open-ended risk without a corresponding “upside” for the taxpayer. This route was chosen in preference to fresh government equity capital precisely because it makes a quick return to private-sector ownership easier. There is now a danger of premature reprivatisation, which would leave the taxpayer with a vast toxic dump of losses and a poor price for the share sale. There are already rumours that Northern Rock is being lined up for a rapid sale.

If banks are to return to “normal” commercial operation under private ownership, the issue arises of how they should be regulated. The Cruickshank report on banking, commissioned by Gordon Brown a decade ago, posed the central question: why should banks be allowed to pursue the maximisation of shareholder value – and management bonuses – when they are underwritten by the taxpayer? This question has never been answered properly. Banks should either surrender their protection and compete like other firms, or be protected and have their profit regulated like utilities. In the wake of a banking crisis, the logic is even starker. In the past few weeks we have seen leading executives at Barclays awarding themselves millions while the bank ultimately remains dependent on government guarantees, despite its precarious independence. It is not surprising that executives of the semi-nationalised banks want to follow suit.

What has brought the issue to a head is the judgement that the major UK-based banks are “too big to fail” and have to be rescued in a financial emergency. This concept is an economic and democratic outrage. Either they must be subject to tight state control or they should be broken up so that they are not “too big to fail”. The point has been grasped, improbably, by ministers in banker-friendly countries such as Switzerland, and by our own central bank’s governor. Yet ministers today seem no less terrified of confronting the banks than when Brown initially fled the battlefield a decade ago.

One solution would be to restrict protection, including deposit protection, to “narrow banks”, confined to lending out no more than they receive in deposits. Other banks would operate competitively but be stripped of any protection. I, for one, am attracted to the concept; but it would involve a revolutionary change, a discontinuation of fractional banking altogether, and in the short run it is unlikely to be adopted.

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­Who said what about
the banking crisis

The financial services sector in Britain, and the City of London at the centre of it, is a great example of a highly skilled, high-value-added, talent-driven industry that shows how we can win in a world of global competition.
Gordon Brown, June 2007

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.
Chuck Prince, Citigroup CEO, July 2007

We cannot have a situation where the banks are able to privatise their profits and nationalise their losses.
Vince Cable, April 2008

We can’t tell every bank what to do.
Alistair Darling, April 2008

Where there is excessive and irresponsible risk-taking, that has got to be punished. The day of big bonuses is over.
Gordon Brown, October 2008

We had ten years of record growth when I was prime minister. I have, unfortunately, come to the conclusion that it was luck.
Tony Blair, January 2009

The government is clearly playing for time in order to avoid doing anything to upset the bankers.
Vince Cable, February 2009

Royal Bank of Scotland has the largest balance sheet in world banking so it is critical that Stephen succeeds.
Sir Philip Hampton, RBS chairman, defends the pay deal for the new RBS CEO, Stephen Hester, worth up to £9.6m, June 2009

A less drastic way of dealing with overgrown banks would be to split off the investment banking arms of the main global banks – what Mervyn King calls the “casinos” – and to confine government protection to the remaining “traditional” banking wings. These would then operate as regulated utilities: the model that broadly prevailed in the United States before the repeal of the Glass-Steagall Act a decade ago. The urgent need to change our system is highlighted by the ambition of Barclays Capital to become “the premier global investment bank”: it is madness for the British taxpayer to be a last-resort guarantor for this kind of business. To be sure, the demarcation is not clear-cut: there is high-risk “traditional” banking and low-risk investment banking, and the separation of roles would not be straightforward. The big banks – HSBC and Barclays – argue that they would be stopped from tapping into the securitisation markets (which may, after recent disasters, not be quite the loss they believe it to be). There is also the implied threat that global banking operations will be withdrawn from the UK.

The government must face down this kind of blackmail. The British taxpayer simply should not be made responsible for the risks that global banks take outside our regulatory jurisdiction. There are undoubtedly technical difficulties in separating out those aspects of global banks that the government can guarantee and those it cannot, but these problems cannot be an excuse for bottling out completely.

One lesson of the financial crisis is that the “light-touch” regulatory approach was a failure. It may have failed in part because of the poor quality of bank supervision rather than the absence of regulation. And the rapid innovation of capital markets undoubtedly ran ahead of regulators’ capacity to monitor activity effectively. But the vast cost to the British taxpayer – and the wider economy – of the banks’ failure and the consequent bailout make it imperative that regulation be strengthened.

We are now at a crunch point. The need to strengthen and update the regulatory regime has collided with the financial institutions’ growing confidence that they can keep the state off their backs. Self-serving arguments are being employed, notably that regulation will suppress “innovation”. It will. It should. We need more financial “innovation” like a hole in the head.

The other argument is that regulation (and 50 per cent tax rates) will undermine the City’s “competitiveness” and “drive away” banking and non-bank financial institutions. This argument has to be met head-on; the idea of a regulatory race to the bottom does not square with political and economic reality. Co-operation rather than regulatory arbitrage between the main jurisdictions will always be best, but if that co-operation does not materialise, the UK should not chase business by offering low standards that create wider risks for the UK economy. The arguments about City “competitiveness” are bogus, self-serving and dangerous. It is profoundly to be hoped that Brown, Alistair Darling, Ed Balls and others who fell for them so haplessly in the past have now learned their lesson.

The new regulatory agenda espoused by Lord Turner, chairman of the Financial Services Authority, is sensible and not especially controversial. Indeed, many in the City see it as a minor irritation, followed by a green light to get back to business as “normal”. It contains sensible elements – such as “macro prudential regulation” that would focus on systemic risks, rather than regulation of individual banks – and more controversial but basically prudent ideas, such as limiting loan-to-value ratios and/or multiples of income for mortgage lending.

Lord Turner has also supported the argument that the most dangerous forms of risk-taking in banking institutions can be limited by paying bonuses not in cash but in stock, redeemable after a period of years. As stock prices are depressed and the capital gains tax payable is only 18 per cent, any half-sober City trader will have worked out he should be doing this in any event. But it is not a silver bullet – the bosses at both Lehman Brothers and Bear Stearns had huge equity-related incentives, and look where they are today. These issues require pause for thought: there are bigger regulatory battles shaping up.

One concerns the proposal to establish a clearing house for complex financial derivatives so that they can be traded, netted and regulated. Properly regulated, these activities can spread risk and, in a general sense, add to stability. What is much more dangerous, as the recent financial crisis has illustrated, is to have a vast pyramid of paper claims – as in the CDS/CDO (credit default swap/collateralised debt obligation) “markets” – which cannot be settled in an orderly way through a clearing house. Important lessons can be learned from the recent collapse of General Motors. CDS contracts with a value in excess of $35bn were netted down to $2.2bn, causing little more than a ripple in the overall CDS market. The danger is that nothing will be done, setting up a huge systemic risk – and the next big crash.

One practical remedy would be to establish a clearing-house system as soon as possible. Big banks that make a lot of money from OTC (“over-the-counter”) trading are not happy: if they were forced to use a regulated exchange they would lose this business. In practice, complex, structured derivatives would therefore be prevented. A second issue is whether the London Stock Exchange – and the Bank of England as the lender of last resort – are big and strong enough to support a clearing house dealing with transactions valued at many times the size of the world economy. Co-operation with the US is potentially important. And perhaps a European approach is required, in order to draw on the bigger firepower of the European Central Bank, but that may unleash some dangerous political demons.

Meanwhile, the European Union has precipitated another major regulatory battle by putting forward proposals, both for strengthening European co-operation over bank supervision – reluctantly conceded to by the UK – and for toughening the regulation of hedge funds and private equity. Britain’s financial community has a collective paranoia about Europe, and there is envy of London’s currently predominant role and a distaste for the freewheeling “Anglo-Saxon” model (not that German, Dutch or even French banks behaved very differently in the crisis).

However, it is surely eminently sensible to ask, as the European Commission is doing, whether these new forms of financial intermediation are healthy and adequately regulated. There are some critics who question the value of hedge funds altogether and would be happy to see them regulated out of existence. But a more relaxed view is that there is a role for specialist financiers who pursue high yield via high risk – provided they do not depend on taxpayers’ guarantees or indirectly contribute to the systemic risk that taxpayers underwrite. The former has not been a problem in the recent crisis (no hedge fund has asked for government help), but the latter undoubtedly is. There is a proper debate to be had as to how hedge funds should be regulated: to treat the tentative proposals of the European Commis­sion as akin to a Napoleonic invasion threat is simply idiotic.

There is a more fundamental argument about the scale of Britain’s financial services industry in relation to the UK economy. I wouldn’t expect the City to vote for contraction, or for curbs on its freedom to operate, any more than I would expect turkeys to vote for Christmas. But the poultry farmer – the Labour government – cannot just ask the turkeys what they want. He has to be willing to wield a knife and cut some throats. A combination of national, European and global regulation is necessary to ensure that the vast negative externalities associated with the City do not exceed the (genuine) benefits that the UK economy derives from a successful, internationally traded, financial services sector. In addition, there will have to be a major structural adjustment out of traded financial services into other services and manufacturing.

Unfortunately a weak, demoralised, delegitimised Labour government is in no shape to face this challenge, and a Tory government pumped up by City donations would have no need or inclination to take it on. The opportunity for reform and renewal is passing us by and, if it does, financial crises will return with even greater ferocity in years to come.

Vince Cable, economic spokesman for the Liberal Democrats, is the author of “The Storm: the World Economic Crisis and What It Means”, published by Atlantic Books (£14.99)

This article first appeared in the 29 June 2009 issue of the New Statesman, The Great Escape

PETER NICHOLLS/REUTERS
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David Cameron's fatal insouciance

Will future historians remember the former prime minister for anything more than his great Brexit bungle?

On 13 July 2016, after a premiership lasting six years and 63 days, David Cameron left Downing Street for the last time. On the tarmac outside the black door, with his wife and children at his side, he gave a characteristically cool and polished parting statement. Then he got in his car for the last journey to Buckingham Palace – the picture, as ever, of insouciant ease. As I was watching the television pictures of Cameron’s car gliding away, I remembered what he is supposed to have said some years earlier, when asked why he wanted to be prime minister. True or not, his answer perfectly captured the public image of the man: “Because I think I’d be rather good at it.”

A few moments later, a friend sent me a text message. It was just six words long: “He’s down there with Chamberlain now.”

At first I thought that was a bit harsh. People will probably always disagree about Cameron’s economic record, just as they do about Margaret Thatcher’s. But at the very least it was nowhere near as bad as some of his critics had predicted, and by some standards – jobs created, for instance – it was much better than many observers had expected. His government’s welfare and education policies have their critics, but it seems highly unlikely that people will still be talking about them in a few decades’ time. Similarly, although Britain’s intervention in Libya is unlikely to win high marks from historians, it never approached the disaster of Iraq in the public imagination.

Cameron will probably score highly for his introduction of gay marriage, and although there are many people who dislike him, polls suggested that most voters regarded him as a competent, cheerful and plausible occupant of the highest office in the land. To put it another way, from the day he entered 10 Downing Street until the moment he left, he always looked prime ministerial. It is true that he left office as a loser, humiliated by the EU referendum, and yet, on the day he departed, the polls had him comfortably ahead of his Labour opposite number. He was, in short, popular.
On the other hand, a lot of people liked Neville Chamberlain, too. Like Chamberlain, Cameron seems destined to be remembered for only one thing. When students answer exam questions about Chamberlain, it’s a safe bet that they aren’t writing about the Holidays with Pay Act 1938. And when students write about Cameron in the year 2066, they won’t be answering questions about intervention in Libya, or gay marriage. They will be writing about Brexit and the lost referendum.

It is, of course, conceivable, though surely very unlikely, that Brexit will be plain sailing. But it is very possible that it will be bitter, protracted and enormously expensive. Indeed, it is perfectly conceivable that by the tenth anniversary of the referendum, the United Kingdom could be reduced to an English and Welsh rump, struggling to come to terms with a punitive European trade deal and casting resentful glances at a newly independent Scotland. Of course the Brexiteers – Nigel Farage, Boris Johnson, Michael Gove, Daniel Hannan et al – would get most of the blame in the short run. But in the long run, would any of them really be remembered? Much more likely is that historians’ fingers would point at one man: Cameron, the leader of the Conservative and Unionist Party, the prime minister who gambled with his future and lost the Union. The book by “Cato” that destroyed Chamberlain’s reputation in July 1940 was entitled Guilty Men. How long would it be, I wonder, before somebody brought out a book about Cameron, entitled Guilty Man?

Naturally, all this may prove far too pessimistic. My own suspicion is that Brexit will turn out to be a typically European – or, if you prefer, a typically British – fudge. And if the past few weeks’ polls are anything to go by, Scottish independence remains far from certain. So, in a less apocalyptic scenario, how would posterity remember David Cameron? As a historic failure and “appalling bungler”, as one Guardian writer called him? Or as a “great prime minister”, as Theresa May claimed on the steps of No 10?

Neither. The answer, I think, is that it would not remember him at all.

***

The late Roy Jenkins, who – as Herbert Asquith’s biographer, Harold Wilson’s chancellor and Jim Callaghan’s rival – was passionately interested in such things, used to write of a “market” in prime ministerial futures. “Buy Attlee!” he might say. “Sell Macmillan!” But much of this strikes me as nonsense. For one thing, political reputations fluctuate much less than we think. Many people’s views of, say, Wilson, Thatcher and Blair have remained unchanged since the day they left office. Over time, reputations do not change so much as fade. Academics remember prime ministers; so do political anoraks and some politicians; but most people soon forget they ever existed. There are 53 past prime ministers of the United Kingdom, but who now remembers most of them? Outside the university common room, who cares about the Marquess of Rockingham, the Earl of Derby, Lord John Russell, or Arthur Balfour? For that matter, who cares about Asquith or Wilson? If you stopped people in the streets of Sunderland, how many of them would have heard of Stanley Baldwin or Harold Macmillan? And even if they had, how much would they ­really know about them?

In any case, what does it mean to be a success or a failure as prime minister? How on Earth can you measure Cameron’s achievements, or lack of them? We all have our favourites and our prejudices, but how do you turn that into something more dispassionate? To give a striking example, Margaret Thatcher never won more than 43.9 per cent of the vote, was roundly hated by much of the rest of the country and was burned in effigy when she died, long after her time in office had passed into history. Having come to power promising to revive the economy and get Britain working again, she contrived to send unemployment well over three million, presided over the collapse of much of British manufacturing and left office with the economy poised to plunge into yet another recession. So, in that sense, she looks a failure.

Yet at the same time she won three consecutive general elections, regained the Falklands from Argentina, pushed through bold reforms to Britain’s institutions and fundamentally recast the terms of political debate for a generation to come. In that sense, clearly she was a success. How do you reconcile those two positions? How can you possibly avoid yielding to personal prejudice? How, in fact, can you reach any vaguely objective verdict at all?

It is striking that, although we readily discuss politicians in terms of success and failure, we rarely think about what that means. In some walks of life, the standard for success seems obvious. Take the other “impossible job” that the tabloids love to compare with serving as prime minister: managing the England football team. You can measure a football manager’s success by trophies won, qualifications gained, even points accrued per game, just as you can judge a chief executive’s performance in terms of sales, profits and share values.

There is no equivalent for prime ministerial leadership. Election victories? That would make Clement Attlee a failure: he fought five elections and won only two. It would make Winston Churchill a failure, too: he fought three elections and won only one. Economic growth? Often that has very little to do with the man or woman at the top. Opinion polls? There’s more to success than popularity, surely. Wars? Really?

The ambiguity of the question has never stopped people trying. There is even a Wikipedia page devoted to “Historical rankings of Prime Ministers of the United Kingdom”, which incorporates two surveys of academics carried out by the University of Leeds, a BBC Radio 4 poll of Westminster commentators, a feature by BBC History Magazine and an online poll organised by Newsnight. By and large, there is a clear pattern. Among 20th-century leaders, there are four clear “successes” – Lloyd George, Churchill, Attlee and Thatcher – with the likes of Macmillan, Wilson and Heath scrapping for mid-table places. At the bottom, too, the same names come up again and again: Balfour, Chamberlain, Eden, Douglas-Home and Major. But some of these polls are quite old, dating back to the Blair years. My guess is that if they were conducted today, Major might rise a little, especially after the success of Team GB at the Olympics, and Gordon Brown might find himself becalmed somewhere towards the bottom.

***

So what makes the failures, well, failures? In two cases, the answer is simply electoral defeat. Both ­Arthur Balfour and John Major were doomed to failure from the moment they took office, precisely because they had been picked from within the governing party to replace strong, assertive and electorally successful leaders in Lord Salisbury and Margaret Thatcher, respectively. It’s true that Major unexpectedly won the 1992 election, but in both cases there was an atmosphere of fin de régime from the very beginning. Douglas-Home probably fits into this category, too, coming as he did at the fag end of 13 years of Conservative rule. Contrary to political mythology, he was in fact a perfectly competent prime minister, and came much closer to winning the 1964 election than many people had expected. But he wasn’t around for long and never really captured the public mood. It seems harsh merely to dismiss him as a failure, but politics is a harsh business.

That leaves two: Chamberlain and Eden. Undisputed failures, who presided over the greatest foreign policy calamities in our modern history. Nothing to say, then? Not so. Take Chamberlain first. More than any other individual in our modern history, he has become a byword for weakness, naivety and self-deluding folly.

Yet much of this picture is wrong. Chamberlain was not a weak or indecisive man. If anything, he was too strong: too stubborn, too self-confident. Today we remember him as a faintly ridiculous, backward-looking man, with his umbrella and wing collar. But many of his contemporaries saw him as a supremely modern administrator, a reforming minister of health and an authoritative chancellor who towered above his Conservative contemporaries. It was this impression of cool capability that secured Chamberlain the crown when Baldwin stepped down in 1937. Unfortunately, it was precisely his titanic self-belief, his unbreakable faith in his own competence, that also led him to overestimate his influence over Adolf Hitler. In other words, the very quality that people most admired – his stubborn confidence in his own ability – was precisely what doomed him.

In Chamberlain’s case, there is no doubt that he had lost much of his popular prestige by May 1940, when he stepped down as prime minister. Even though most of his own Conservative MPs still backed him – as most of Cameron’s MPs still backed him after the vote in favour of Brexit – the evidence of Mass Observation and other surveys suggests that he had lost support in the country at large, and his reputation soon dwindled to its present calamitous level.

The case of the other notable failure, Anthony Eden, is different. When he left office after the Suez crisis in January 1957, it was not because the public had deserted him, but because his health had collapsed. Surprising as it may seem, Eden was more popular after Suez than he had been before it. In other words, if the British people had had their way, Eden would probably have continued as prime minister. They did not see him as a failure at all.

Like Chamberlain, Eden is now generally regarded as a dud. Again, this may be a bit unfair. As his biographers have pointed out, he was a sick and exhausted man when he took office – the result of two disastrously botched operations on his gall bladder – and relied on a cocktail of painkillers and stimulants. Yet, to the voters who handed him a handsome general election victory in 1955, Eden seemed to have all the qualities to become an enormously successful prime minister: good looks, brains, charm and experience, like a slicker, cleverer and more seasoned version of Cameron. In particular, he was thought to have proved his courage in the late 1930s, when he had resigned as foreign secretary in protest at the appeasement of Benito Mussolini before becoming one of Churchill’s chief lieutenants.

Yet it was precisely Eden’s great asset – his reputation as a man who had opposed appeasement and stood up to the dictators – that became his weakness. In effect, he became trapped by his own legend. When the Egyptian dictator Gamal Abdel Nasser nationalised the Suez Canal in July 1956, Eden seemed unable to view it as anything other than a replay of the fascist land-grabs of the 1930s. Nasser was Mussolini; the canal was Abyssinia; ­failure to resist would be appeasement all over again. This was nonsense, really: Nasser was nothing like Mussolini. But Eden could not escape the shadow of his own political youth.

This phenomenon – a prime minister’s greatest strength gradually turning into his or her greatest weakness – is remarkably common. Harold Wilson’s nimble cleverness, Jim Callaghan’s cheerful unflappability, Margaret Thatcher’s restless urgency, John Major’s Pooterish normality, Tony Blair’s smooth charm, Gordon Brown’s rugged seriousness: all these things began as refreshing virtues but became big handicaps. So, in that sense, what happened to Chamberlain and Eden was merely an exaggerated version of what happens to every prime minister. Indeed, perhaps it is only pushing it a bit to suggest, echoing Enoch Powell, that all prime ministers, their human flaws inevitably amplified by the stresses of office, eventually end up as failures. In fact, it may not be too strong to suggest that in an age of 24-hour media scrutiny, surging populism and a general obsession with accountability, the very nature of the job invites failure.

***

In Cameron’s case, it would be easy to construct a narrative based on similar lines. Remember, after all, how he won the Tory leadership in the first place. He went into the 2005 party conference behind David Davis, the front-runner, but overhauled him after a smooth, fluent and funny speech, delivered without notes. That image of blithe nonchalance served him well at first, making for a stark contrast with the saturnine intensity and stumbling stiffness of his immediate predecessors, Michael Howard and Iain Duncan Smith. Yet in the end it was Cameron’s self-confidence that really did for him.

Future historians will probably be arguing for years to come whether he really needed to promise an In/Out referendum on the UK’s membership of the EU, as his defenders claim, to protect his flank against Ukip. What is not in doubt is that Cameron believed he could win it. It became a cliché to call him an “essay crisis” prime minister – a gibe that must have seemed meaningless to millions of people who never experienced the weekly rhythms of the Oxford tutorial system. And yet he never really managed to banish the impression of insouciance. The image of chillaxing Dave, the PM so cockily laidback that he left everything until the last minute, may be a caricature, but my guess is that it will stick.

As it happens, I think Cameron deserves more credit than his critics are prepared to give him. I think it would be easy to present him as a latter-day Baldwin – which I mean largely as a compliment. Like Baldwin, he was a rich provincial Tory who posed as an ordinary family man. Like Baldwin, he offered economic austerity during a period of extraordinary international financial turmoil. Like Baldwin, he governed in coalition while relentlessly squeezing the Liberal vote. Like Baldwin, he presented himself as the incarnation of solid, patriotic common sense; like Baldwin, he was cleverer than his critics thought; like Baldwin, he was often guilty of mind-boggling complacency. The difference is that when Baldwin gambled and lost – as when he called a rash general election in 1923 – he managed to save his career from the ruins. When Cameron gambled and lost, it was all over.

Although I voted Remain, I do not share many commentators’ view of Brexit as an apocalyptic disaster. In any case, given that a narrow majority of the electorate got the result it wanted, at least 17 million people presumably view Cameron’s gamble as a great success – for Britain, if not for him. Unfortunately for Cameron, however, most British academics are left-leaning Remainers, and it is they who will write the history books. What ought also to worry Cameron’s defenders – or his shareholders, to use Roy Jenkins’s metaphor – is that both Chamberlain and Eden ended up being defined by their handling of Britain’s foreign policy. There is a curious paradox here, ­because foreign affairs almost never matters at the ballot box. In 1959, barely three years after Suez, the Conservatives cruised to an easy re-election victory; in 2005, just two years after invading Iraq, when the extent of the disaster was already apparent, Blair won a similarly comfortable third term in office. Perhaps foreign affairs matters more to historians than it does to most voters. In any case, the lesson seems to be that, if you want to secure your historical reputation, you can get away with mishandling the economy and lengthening the dole queues, but you simply cannot afford to damage Britain’s international standing.

So, if Brexit does turn into a total disaster, Cameron can expect little quarter. Indeed, while historians have some sympathy for Chamberlain, who was, after all, motivated by a laudable desire to avoid war, and even for Eden, who was a sick and troubled man, they are unlikely to feel similar sympathy for an overconfident prime minister at the height of his powers, who seems to have brought his fate upon himself.

How much of this, I wonder, went through David Cameron’s mind in the small hours of that fateful morning of 24 June, as the results came through and his place in history began to take shape before his horrified eyes? He reportedly likes to read popular history for pleasure; he must occasionally have wondered how he would be remembered. But perhaps it meant less to him than we think. Most people give little thought to how they will be remembered after their death, except by their closest friends and family members. There is something insecure, something desperately needy, about people who dwell on their place in history.

Whatever you think about Cameron, he never struck me as somebody suffering from excessive insecurity. Indeed, his normality was one of the most likeable things about him.

He must have been deeply hurt by his failure. But my guess is that, even as his car rolled away from 10 Downing Street for the last time, his mind was already moving on to other things. Most prime ministers leave office bitter, obsessive and brooding. But, like Stanley Baldwin, Cameron strolled away from the job as calmly as he had strolled into it. It was that fatal insouciance that brought him down. 

Dominic Sandbrook is a historian, broadcaster and columnist for the Daily Mail. His book The Great British Dream Factory will be published in paperback by Penguin on 1 September

Dominic Sandbrook is a historian and author. His books include Never Had It So Good: A History of Britain from Suez to the Beatles and White Heat: A History of Britain in the Swinging Sixties. He writes the What If... column for the New Statesman.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser