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The bugger, bugged

After a chance meeting with a former News of the World executive who told him his phone had been hacked, Hugh Grant couldn’t resist going back to him – with a hidden tape recorder – to find out if there was more to the story. . .

When I broke down in my midlife crisis car in remotest Kent just before Christmas, a battered white van pulled up on the far carriageway. To help, I thought. But when the driver got out he started taking pictures with a long-lens camera. He came closer to get better shots and I swore at him. Then he offered me a lift the last few miles to my destination. I suspected his motives and swore at him some more. (I'm not entirely sympathetic towards paparazzi.) Then I realised I couldn't get a taxi and was late. So I had to accept the lift.

He turned out to be an ex-News of the World investigative journalist and paparazzo, now running a pub in Dover. He still kept his camera in the car's glove box for just this kind of happy accident.

More than that, he was Paul McMullan, one of two ex-NoW hacks who had blown the whistle (in the Guardian and on Channel 4's Dispatches) on the full extent of phone-hacking at the paper, particularly under its former editor Andy Coulson. This was interesting, as I had been a victim - a fact he confirmed as we drove along. He also had an unusual defence of the practice: that phone-hacking was a price you had to pay for living in a free society. I asked how that worked exactly, but we ran out of time, and next thing we had arrived and he was asking me if I would pose for a photo with him, "not for publication, just for the wall of the pub".

I agreed and the picture duly appeared in the Mail on Sunday that weekend with his creative version of the encounter. He had asked me to drop into his pub some time. So when, some months later, Jemima asked me to write a piece for this paper, it occurred to me it might be interesting to take him up on his invitation.

I wanted to hear more about phone-hacking and the whole business of tabloid journalism. It occurred to me just to interview him straight, as he has, after all, been a whistleblower. But then I thought I might possibly get more, and it might be more fun, if I secretly taped him, The bugger bugged, as it were. Here are some excerpts from our conversation.

Me So, how's the whistleblowing going?
Him I'm trying to get a book published. I sent it off to a publisher who immediately accepted it and then it got legal and they said, "This is never going to get published."
Me Why? Because it accuses too many people of crime?
Him Yes, as I said to the parliamentary commission, Coulson knew all about it and regularly ordered it . . . He [Coulson] rose quickly to the top; he wanted to cover his tracks all the time. So he wouldn't just write a story about a celeb who'd done something. He'd want to make sure they could never sue, so he wanted us to hear the celeb like you on tape saying, "Hello, darling, we had lovely sex last night." So that's on tape - OK, we've got that and so we can publish . . . Historically, the way it went was, in the early days of mobiles, we all had analogue mobiles and that was an absolute joy. You know, you just . . . sat outside Buckingham Palace with a £59 scanner you bought at Argos and get Prince Charles and everything he said.
Me Is that how the Squidgy tapes [of Diana's phone conversations] came out? Which was put down to radio hams, but was in fact . . .
Him Paps in the back of a van, yes . . . I mean, politicians were dropping like flies in the Nineties because it was so easy to get stuff on them. And, obviously, less easy to justify is celebrities. But yes.
Me And . . . it wasn't just the News of the World. It was , you know - the Mail?
Him Oh absolutely, yeah. When I went freelance in 2004 the biggest payers - you'd have thought it would be the NoW, but actually it was the Daily Mail. If I take a good picture, the first person I go to is - such as in your case - the Mail on Sunday. Did you see that story? The picture of you, breaking down . . . I ought to thank you for that. I got £3,000. Whooo!
Me But would they [the Mail] buy a phone-hacked story?
Him For about four or five years they've absolutely been cleaner than clean. And before that they weren't. They were as dirty as anyone . . . They had the most money.
Me So everyone knew? I mean, would Rebekah Wade have known all this stuff was going on?
Him Good question. You're not taping, are you?
Me [slightly shrill voice] No.
Him Well, yeah. Clearly she . . . took over the job of [a journalist] who had a scanner who was trying to sell it to members of his own department. But it wasn't a big crime. [NB: Rebekah Brooks has always denied any knowledge of phone-hacking. The current police investigation is into events that took place after her editorship of the News of the World.]
It started off as fun - you know, it wasn't against the law, so why wouldn't you? And it was only because the MPs who were fiddling their expenses and being generally corrupt kept getting caught so much they changed the law in 2001 to make it illegal to buy and sell a digital scanner. So all we were left with was - you know - finding a blag to get your mobile [records] out of someone at Vodafone. Or, when someone's got it, other people swap things for it.
Me So they all knew? Wade probably knew all about it all?
Him [...] Cameron must have known - that's the bigger scandal. He had to jump into bed with Murdoch as everyone had, starting with Thatcher in the Seventies . . . Tony Blair . . . [tape is hard to hear here] Maggie openly courted Murdoch, saying, you know, "Please support me." So when Cameron, when it came his turn to go to Murdoch via Rebekah Wade . . . Cameron went horse riding regularly with Rebekah. I know, because as well as doorstepping celebrities, I've also doorstepped my ex-boss by hiding in the bushes, waiting for her to come past with Cameron on a horse . . . before the election to show that - you know - Murdoch was backing Cameron.
Me What happened to that story?
Him The Guardian paid for me to do it and I stepped in it and missed them, basically. They'd gone past - not as good as having a picture.
Me Do you think Murdoch knew about phone-hacking?
Him Errr, possibly not. He's a funny bloke given that he owns the Sun and the Screws . . . quite puritanical. Sorry to talk about Divine Brown, but when that came out . . . Murdoch was furious: "What are you putting that on our front page for? You're bringing down the tone of our papers." [Indicating himself] That's what we do over here.
Me Well, it's also because it was his film I was about to come out in.
Him Oh. I see.
Me Yeah. It was a Fox film.
[A pause here while we chat to other customers, and then - ]
Him So anyway, let me finish my story.
Me Murdoch, yes . . .
Him So I was sent to do a feature on Moulin Rouge! at Cannes, which was a great send anyway. Basically my brief was to see who Nicole Kidman was shagging - what she was doing, poking through her bins and get some stuff on her. So Murdoch's paying her five million quid to big up the French and at the same time paying me £5.50 to fuck her up . . . So all hail the master. We're just pawns in his game. How perverse is that?
Me Wow. You reckon he never knew about it?
Him [pause] I don't even think he really worried himself too much about it.
Me What's his son called?
Him James. They're all mates together. They all go horse riding. You've got Jeremy Clarkson lives here [in Oxfordshire]. Cameron lives here, and Rebekah Wade is married to Brooks's son [the former racehorse trainer Charlie Brooks]. Cameron gets dressed up as the Stig to go to Clarkson's 50th birthday party [NB: it was actually to record a video message for the party]. Is that demeaning for a prime minister? It should be the other way round, shouldn't it? So basically, Cameron is very much in debt to Rebekah Wade for helping him not quite win the election . . . So that was my submission to parliament - that Cameron's either a liar or an idiot.
Me But don't you think that all these prime ministers deliberately try to get the police to drag their feet about investigating the whole [phone-hacking] thing because they don't want to upset Murdoch?
Him Yeah. There's that . . . You also work a lot with policemen as well . . . One of the early stories was [and here he names a much-loved TV actress in her sixties] used to be a street walker - whether or not she was, but that's the tip.
Me and Chum MLTVA?!
Me I can't believe it. Oh no!
Chum Really??
Him Yeah. Well, not now . . .
Chum Oh, it'd be so much better if it was now.
Him So I asked a copper to get his hands on the phone files, but because it's only a caution it's not there any more. So that's the tip . . . it's a policeman ringing up a tabloid reporter and asking him for ten grand because this girl had been cautioned right at the start of his career. And then I ask another policemen to go and check the records . . . So that's happening regularly. So the police don't particularly want to investigate.
Me But do you think they're going to have to now?
Him I mean - 20 per cent of the Met has taken backhanders from tabloid hacks. So why would they want to open up that can of worms? . . . And what's wrong with that, anyway? It doesn't hurt anyone particularly. I mean, it could hurt someone's career - but isn't that the dance with the devil you have to play?
Me Well, I suppose the fact that they're dragging their feet while investigating a mass of phone-hacking - which is a crime - some people would think is a bit depressing about the police.
Him But then - should it be a crime? I mean, scanning never used to be a crime. Why should it be? You're transmitting your thoughts and your voice over the airwaves. How can you not expect someone to just stick up an aerial and listen in?
Me So if someone was on a landline and you had a way of tapping in . . .
Him Much harder to do.
Me But if you could, would you think that was illegal? Do you think that should be illegal?
Him I'd have to say quite possibly, yeah. I'd say that should be illegal.
Me But a mobile phone - a digital phone . . . you'd say it'd be all right to tap that?
Him I'm not sure about that. So we went from a point where anyone could listen in to anything. Like you, me, journalists could listen in to corrupt politicians, and this is why we have a reasonably fair society and a not particularly corrupt or criminal prime minister, whereas other countries have Gaddafi. Do you think it's right the only person with a decent digital scanner these days is the government? Whereas 20 years ago we all had a go? Are you comfortable that the only people who can listen in to you now are - is it MI5 or MI6?
Me I'd rather no one listened in, to be honest. And I might not be alone there. You probably wouldn't want people listening to your conversations.
Him I'm not interesting enough for anyone to want to listen in.
Me Ah . . . I think that was one of the questions asked last week at one of the parliamentary committees. They asked Yates [John Yates, acting deputy commissioner of the Metropolitan Police] if it was true that he thought that the NoW had been hacking the phones of friends and family of those girls who were murdered . . . the Soham murder and the Milly girl [Milly Dowler].
Him Yeah. Yeah. It's more than likely. Yeah . . . It was quite routine. Yeah - friends and family is something that's not as easy to justify as the other things.
Me But celebrities you would justify because they're rich?
Him Yeah. I mean, if you don't like it, you've just got to get off the stage. It'll do wonders.
Me So I should have given up acting?
Him If you live off your image, you can't really complain about someone . . .
Me I live off my acting. Which is different to living off your image.
Him Yeah, but you're still presenting yourself to the public. And if the public didn't know you -
Me They don't give a shit. I got arrested with a hooker and they still came to my films. They don't give a fuck about your public image. They just care about whether you're in an entertaining film or not.
Him That's true . . . I have terrible difficulty with him [points to pap shot of Johnny Depp]. He's really difficult. You know, I was in Venice and he was a nightmare to do because he walks around looking like Michael Jackson. And the punchline was . . . after leading everyone a merry dance the film was shot on an open balcony - I mean, it was like - he was standing there in public.
Me And you don't see the difference between the two situations?
Chum He was actually working at this time? As opposed to having his own private time?
Him You can't hide all the time.
Me So you're saying, if you're Johnny Depp or me, you don't deserve to have a private life?
Him You make so much more money. You know, most people in Dover take home about £200 and struggle.
Me So how much do you think the families of the Milly and Soham girls make?
Him OK, so there are examples that are poor and you can't justify - and that's clearly one of them.
Me I tell you the thing I still don't get - if you think it was all right to do all that stuff, why blow the whistle on it?
Him Errm . . . Right. That's interesting. I actually blew the whistle when a friend of mine at the Guardian kept hassling me for an interview. I said, "Well if you put the name of the Castle [his pub] on the front page of the Guardian, I'll do anything you like." So that's how it started.
Me So, have you been leant on by the NoW, News International, since you blew the whistle?
Him No, they've kept their distance. I mean, there's people who have much better records - my records are non-existent. There are people who actually have tapes and transcripts they did for Andy Coulson.
Me And where are these tapes and transcripts? Do you think they've been destroyed?
Him No, I'm sure they're saving them till they retire.
Me So did you personally ever listen to my voice messages?
Him No, I didn't personally ever listen to your voice messages. I did quite a lot of stories on you, though. You were a very good earner at times.

Those are the highlights. As I drove home past the white cliffs, I thought it was interesting - apart from the fact that Paul hates people like me, and I hate people like him, we got on quite well. And, absurdly, I felt a bit guilty for recording him.

And he does have a very nice pub. The Castle Inn, Dover, for the record. There are rooms available, too. He asked me if I'd like to sample the honeymoon suite some time: "I can guarantee your privacy."

-- Listen to the audio now --

This article first appeared in the 11 April 2011 issue of the New Statesman, Jemima Khan guest edit

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt