Fjord Focus

The financial crash of 2008 haunts the remote tundra east of Reykjavik.

In a bar in Búðir, eastern Iceland, the regular afternoon crowd looks on as the supersize TV relays a litany of bad news about the country's economy. An update on the struggling krona. Financial results from a Reykjavik bank that almost collapsed in the turmoil of 2008. More reflections on the Icesave debacle, and the rights and wrongs of the British government's tough demands for compensation from Iceland. The drinkers react like the chorus of a Greek tragedy. In this part of Iceland, it seems, there is no good news.

Fáskrúðsfjörður, the fjord where Búðir is the sole remaining village, is tantalisingly beautiful. But great views do not fill hungry stomachs, and on either side of the firth stand houses and entire villages that have been abandoned - a sorry tale repeated in many of Iceland's eastern fjords. This is not the Iceland depicted in the media. Unlike pre-recession Reykjavik, there was never anything showy about Fáskrúðsfjörður. No one ever drove a Porsche. And nobody here weeps for the Reykjavik financiers who lost their jobs and smart cars when Iceland's economy collapsed a year and a half ago.

Today Iceland has a centre-left government led by Jóhanna Sigurðardóttir, who became the country's first woman prime minister a year ago. To her fans, she is Saint Jóhanna; even critics concede that she is canny, sharp on economic issues and with a strong social conscience. Only time will tell whether Saint Jóhanna really can work a miracle with the Icelandic economy.

Handling the Icesave aftermath is central to Iceland's recovery. When the online bank collapsed in 2008, it took £3.3bn of British and Dutch savings with it; those countries' governments repaid savers, but are now seeking compensation. Icelandic taxpayers will decide what happens next in a referendum on 6 March. Polls show they are not keen to pay for the bankers' mistakes, but if compensation is vetoed, much-needed funding from the International Monetary Fund could be at risk. The prize for finding a solution may be a fast-track route into the EU and, eventually, the eurozone.
But in the bars and cafés of the eastern townships, the talk is not of long-term economic strategies, but of finding a way to survive the months ahead. Negative equity and fears for the future of jobs haunt the tundra as local communities wonder if Reykjavik's elite remember Iceland's distant east.

The early Norse settlers made landfall in this corner of Iceland in the 9th century, securing the country's starring role in the Old Norse sagas. Even now, history is everywhere, especially in the east. At Café Nielsen in Egilsstaðir, I meet Anna Baldursdóttir, a would-be poet. "Round here, we tried too hard to keep faith with the past," she says. "Every hillside, every valley evokes memories of that heroic past which was documented in the sagas."

Visitors have long been beguiled by this romantic view. Two centuries ago, the Scottish preacher Ebenezer Henderson was amazed by Iceland's "great multiplicity of boiling springs and steaming apertures". He wrote the script for millions of subsequent visitors, among them William Morris, Louis MacNeice and W H Auden, who felt that there is "not much that can be said for Reykjavik", preferring the far-flung farmsteads of the east. "I think even we believed all those notions," Baldursdóttir says. "Iceland was somehow pristine, virginal, untouched by the affairs of the modern world. We swallowed the whole tale. Much of Europe believed it. And then we discovered in 2008 that the bankers in Reykjavik were mixed up in a business so murky that a very different Iceland was revealed to all the world."

One way forward

Halfway between Búðir and Egilsstaðir stands Reyðarfjörður, the aluminium capital of eastern Iceland. This once-sleepy town now serves the interests of Alcoa - the Aluminum Company of America. Alcoa's new smelter is up and running, bringing jobs to an isolated community and a boost to the Pittsburgh-based multinational's profits.

Alcoa's engagement in Iceland comes at a hefty environmental price: the Kyoto Protocol's "Iceland Provision" is a concession allowing greenhouse-gas emissions from the plant to be discounted from Iceland's total. There are other issues, too. Government funding for the hydro scheme that powers the smelter comes to £2,500 for every Icelander. But now that the plant is complete and the migrant workers who built it have left, there are jobs for local people.

Reyðarfjörður has the air of a town enjoying a minor boom, and locals are understandably tight-lipped when outsiders suggest it has sold out. Glaciers and geysers cannot fuel a national economy, and Reyðarfjörður offers an example of one way forward. But it is a model viewed with great suspicion by many Icelanders.

The rural roads north of Egilsstaðir traverse a landscape of stark beauty. Here, the clear, cold waters that drain down from the Vatnajökull ice cap run into the sea. The rough road climbs slowly over the fells, then drops down to the very end of Iceland, a wild and rocky headland called Landsendi. In 1306, early settlers erected a crucifix here overlooking the ocean. The cross has a simple inscription, urging the traveller to pause and reflect. It is a petition that Saint Jóhanna would do well to observe as she plans a future for Iceland's troubled economy.


This article first appeared in the 08 March 2010 issue of the New Statesman, Game on

Picture: David Parkin
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The humbling of Theresa May

The Prime Minister has lost all authority. The Tories will remove her as soon as they feel the time is right.

Being politicians of unsentimental, ruthless realism, the Conservatives did not linger in the grief stage of their collective disaster after the general election. Disbelief, too, was commendably brief.

Currently, their priority is to impose some sort of order on themselves. This is the necessary prelude to the wholesale change that most see as the next phase in their attempt at recovery, which they all know is essential to their career prospects – and believe is vital to a country whose alternative prime minister is Jeremy Corbyn.

For that reason, talk of Theresa May enduring as Prime Minister until the end of the Brexit negotiations in two years’ time is the preserve of just a few wishful thinkers. Some sort of calm is being established but the party is far from settled or united; there is a widespread conviction that it cannot be so under the present leader.

Elements of the great change have been executed, as Nick Timothy and Fiona Hill, May’s former advisers, will testify.

However, this is only beginning, as shown by the debate in the media about how long May can survive in Downing Street. There is dissatisfaction about elements of her recent reshuffle, but it is quieted because few believe that some of the more contentious appointments or reappointments will last more than a matter of months. Her colleagues are also alarmed by the meal she has made of doing what was supposed to be a straightforward deal with the DUP.

The climate in the party at the moment is one in which everything – jobs, policies and, of course, the leadership – will soon be up for grabs. Debate over “hard” and “soft” Brexits is illusory: anyone who wants to be Conservative leader will need to respect the view of the party in the country, which is that Britain must leave the single market and the customs union to regain control of trade policy and borders. That is one reason why the prospects of David Davis, the Brexit Secretary, are being talked up.

Some of May’s MPs, for all their hard-mindedness about the future, speak of feeling “poleaxed” since the general election. Even before the result changed everything, there was dismay about the bad national campaign; but that, it was felt, could be discussed in a leisurely post-mortem.

Now, instead, it has undermined faith in May’s leadership and credibility. “The social care disaster was key to our defeat,” an MP told me. “It wasn’t just that the policy damaged our core vote, it was the amateurishness of the U-turn.” A more seasoned colleague noted that “it was the first election I’ve fought where we succeeded in pissing off every section of our core vote”.

The limited ministerial reshuffle was inevitable given May’s lack of authority, and summed up her untenability beyond the short term. Most of her few important changes were deeply ill judged: notably the sacking of the skills and apprenticeships minister Robert Halfon, the MP for Harlow in Essex, and a rare Tory with a direct line to the working class; and the Brexit minister David Jones, whose job had hardly begun and whose boss, Davis, was not consulted.

George Bridges, another Brexit minister, who resigned, apparently did so because he felt May had undermined the government’s position in the negotiations so badly, by failing to win the election comprehensively, that he could not face going on.

Much has been made of how Philip Hammond, the Chancellor, was marginalised and briefed against, yet reappointed. Patrick McLoughlin, the party chairman, suffered similarly. Conservative Central Office was largely shut out from the catastrophic campaign, though no one got round to briefing against McLoughlin, who kept his head down – unheard-of conduct by a party chairman in an election.

As a political force, Central Office is for now more or less impotent. It has lost the knack of arguing the case for Conservatism. MPs are increasingly worried that their party is so introspective that it just can’t deal with the way Corbyn is spinning his defeat. “An ugly mood is growing,” one said, “because militant leftism is going unchallenged.” That cannot change until May has gone and the party machine is revived and re-inspired.


Nobody in the party wants a general election: but most want a leadership election, and minds are concentrated on how to achieve the latter without precipitating the former. One angry and disillusioned ex-minister told me that “if there were an obvious candidate she’d be shitting herself. But most of us have realised Boris is a wanker, DD isn’t a great communicator and is a bit up himself, Hammond has no charisma, and Amber [Rudd] has a majority of 346.”

On Monday a group of senior ex-ministers met at Westminster to discuss next steps. It was agreed that, with the Brexit talks under way, the most important thing in the interests of restoring order was securing the vote on the Queen’s Speech. Then, May having done her duty and steadied the proverbial ship, the party would manage her dignified and calm evacuation from Downing Street.

Those who agree on this do not always agree on the timing. However, few can make the leap of imagination required to see her addressing the party conference in October, unless to say “Thank you and goodnight” and to initiate a leadership contest. Many would like her out long before then. The only reason they don’t want it this side of securing the Queen’s Speech is that the result, as one put it, would be “chaos”, with a leadership contest resembling “a circular firing squad”.

That metaphor is popular among Tories these days. Others use it to describe the ­apportioning of blame after the election. As well as Timothy and Hill, Lynton Crosby has sustained severe wounds that may prevent the Tories from automatically requesting his services again.

Following the Brexit referendum and Zac Goldsmith’s nasty campaign for the London mayoralty, Crosby has acquired the habit of losing. And then there was Ben Gummer, blamed not only for the social care debacle, but also for upsetting fishermen with a vaguely couched fisheries policy. These failings are becoming ancient history – and the future, not the past, is now the urgent matter – yet some Conservatives still seethe about them despite trying to move on.

“I haven’t heard anyone say she should stay – except Damian Green,” a former minister observed, referring to the new First Secretary of State. Green was at Oxford with May and seems to have earned his job because he is one of her rare friends in high politics. He is regarded as sharing her general lack of conviction.

Older activists recall how the party, in 1974, clung loyally to Ted Heath after he lost one election, and even after he lost a second. Now, deference is over. Most Tory activists, appalled by the handling of the campaign, want change. They would, however, like a contest: annoyed at not having been consulted last time, they intend not to be left silent again.

That view is largely reflected at Westminster, though a few MPs believe a coronation wouldn’t be a problem, “as we don’t want a public examination of the entrails for weeks on end when we need to be shown to be running the country effectively”. Most MPs disagree with that, seeing where a coronation got them last time.

With the summer recess coming up, at least the public’s attention would not be on Westminster if the contest took place mostly during that time: hence the feeling that, once the Queen’s Speech is dealt with, May should announce her intention to leave, in order to have a successor in place before the conference season. It is then up to the party to design a timetable that compresses the hustings between the final two candidates into as short a time as compatible with the democratic process, to get the new leader in place swiftly.

Some letters requesting a contest are said to have reached Graham Brady, the chairman of the 1922 Committee of backbenchers. One MP told me with great authority that there were eight; another, with equal certainty, said 12. Forty-eight are needed to trigger the procedure. However, engineering such a contest is not how most Tories would like to proceed. “She has had an international humiliation,” a former cabinet minister said, “and it is transparently ghastly for her. Then came the [Grenfell Tower] fire. There is no sense our rubbing it in. I suspect she knows she has to go. We admire her for staying around and clearing up the mess in a way Cameron didn’t. But she is a stopgap.”

MPs believe, with some justification, that the last thing most voters want is another general election, so caution is paramount. None doubts that the best outcome for all concerned would be for May to leave without being pushed.

Her tin-eared response to the Grenfell disaster shocked colleagues with its amateurishness and disconnection. “I’m sure she’s very upset by Grenfell,” someone who has known her since Oxford said. “But she is incapable of showing empathy. She has no bridge to the rest of the world other than Philip.” Another, referring to the controversial remark that torpedoed Andrea Leadsom’s leadership ambitions last year, said: “You would get shot for saying it, but not having had children hasn’t helped her when it comes to relating to people. Leadsom was right.”


May was quicker off the mark on Monday, issuing a statement condemning the appalling attack at Finsbury Park Mosque swiftly after it occurred, and going there shortly afterwards to meet community leaders. No one could fault her assurance that Muslims must enjoy the same protection under the law as everyone else, or the speed and sincerity with which it was made. She is learning what leadership entails, but too late.

Her administration has become unlucky. This happened to John Major, but, as in his case, the bad luck is partly down to bad decisions; and the bad luck that comes out of the blue simply piles in on top of everything else. Grenfell Tower, lethal and heartbreaking for its victims and their families, was merely more bad luck for the Prime Minister because of her slow-witted response and failure – presumably because shorn of her closest advisers – to do the right thing, and to do it quickly.

But then it turned out that her new chief of staff, Gavin Barwell, had in his previous incarnation as a housing minister received a report on improving fire safety in tower blocks and done nothing about it. That is either more bad luck, or it shows May has dismal judgement in the quality of people she appoints to her close circle. Form suggests the latter.

The idea aired last weekend, that May had “ten days to prove herself”, was a minority view. For most of her colleagues it is too late. It was typical of Boris Johnson’s dwindling band of cheerleaders that they should broadcast a story supporting Davis as an “interim” leader: “interim” until Johnson’s credibility has recovered sufficiently for him to have another pop at the job he covets so much.

They also sought to create the impression that Davis is on manoeuvres, which he resolutely is not. Davis has been around long enough to know that if he wants to succeed May – and his friends believe he does – he cannot be seen to do anything to destabilise her further. It is a lesson lost on Johnson’s camp, whose tactics have damaged their man even more than he was already.

Andrew Mitchell, the former international development secretary and a close ally of Davis, told the Guardian: “. . . it is simply untrue that he is doing anything other
than focusing on his incredibly important brief and giving loyal support to the Prime Minister. Anyone suggesting otherwise is freelancing.” That summed up the contempt Davis’s camp has for Johnson, and it will last long beyond any leadership race.

There is a sense that, in the present febrile climate, whoever is the next leader must be highly experienced. Davis qualifies; so does Hammond, who before his present job was foreign secretary and defence secretary, and who has belatedly displayed a mind of his own since May was hobbled. Hugo Swire, a minister of state under Hammond in the Foreign Office, said of him: “He’s got bottom. He was very good to work for. He is an homme sérieux. I liked him very much and he would calm things down.”

But, as yet, there is no contest. Calls for calm have prevailed, not least thanks to Graham Brady’s steady stewardship of the 1922 Committee, and his success in convincing the more hot-headed of his colleagues to hold their fire. Yet MPs say the 1922 is not what it was 20 years ago: ministers have become used to taking it less seriously.

However, many MPs expect Brady, at a time of their choosing, to go to Downing Street and deliver the poison pill to Theresa May if she is slow to go. Some who know her fear she might take no notice. If she were to play it that way, her end would be unpleasant. As the old saying goes, there is the easy way, and there is the hard way. Remarkably few of her colleagues want to go the hard way but, like everything else in the Tory party at the moment, that could change.

Simon Heffer is a journalist, author and political commentator, who has worked for long stretches at the Daily Telegraph and the Daily Mail. He has written biographies of Thomas Carlyle, Ralph Vaughan Williams and Enoch Powell, and reviews and writes on politics for the New Statesman

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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