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Cameron's Achilles' heel

Can the Conservatives handle the economy? The current opposition front bench is the least financiall

Every few months an invitation arrives on my desk to a meet a member of the shadow cabinet at an event organised by the "Conservative City Circle". These events, held in distinctive City locations such as the Mansion House, are designed to introduce movers and shakers in the Square Mile to David Cameron, George Osborne and other senior Conservatives.

The "cocktail parties", as they are engagingly described on the group's website, are a direct descendent of the "prawn cocktail offensive" conducted by Tony Blair and Gordon Brown in the run-up to the 1997 election. The Blair-Brown approach was designed to demonstrate to the world of finance that Labour had changed. Not only had new Labour taken on the trade unions and faced them down, but a new Labour government would recognise the importance of finance to Britain's economy. The free-market reforms and privatisations of the Thatcher era, which had been so bitterly opposed, would be left intact.

What is curious about the Conservative City Circle's 1950s-style cocktail parties and working groups is that they are needed at all. Historically, the idea of the Tories having to reach out to business and the City would have been risible. Business flocked to the party's doors and few self- respecting FTSE 100 companies would have omitted their hefty donations to the Conservative Party or think tanks with Tory connections.

Conservative frontbenchers didn't need to reach out to the City to be known and trusted, because they were of the City. The old merchant banks, such as N M Rothschild, were hothouses of Conservative talent. Not because they were inherently political, but because a City training in bids and deals, trading, privatisations and the like was considered an excellent education for future politicians. The idea was to establish a career, make enough money if possible and then put those talents to use in the House of Commons and government.

How much things have changed. When Peter Buckley, chairman of the publicly quoted Cayzer family vehicle Caledonian Investments (which owns a big stake in the investment bank Close Brothers), chose earlier this year to attack Labour and support the Tories, he attracted a torrent of criticism from corporate governance mavens.

In a note to shareholders, Buckley wrote: "Shorn of integrity and economic competence, rooster Brown has even less feathers than rooster Blair and lacks the latter's knack of preening himself." He backed up his words with the promise of a £75,000 corporate contribution to the Conservatives.

In fact, one of new Labour's greatest achievements - or betrayals - has been its seduction of business and the City grandees. In the Blair-Brown era, the succession of top business leaders willing to serve as policy advisers was stunning. And it hasn't stopped under Brown and Darling,

It was no coincidence that the rescue of Halifax Bank of Scotland (HBOS) by Lloyds TSB was partly cooked up a City grandee - Sir Victor Blank, chairman of Lloyds - in a "chance meeting" with the Prime Minister at a reception hosted by Citigroup, one of the world's largest banks. Nor that the top figures at both banks - Blank and Lord Stevenson, chairman of HBOS - are both regarded as business pals of Labour.

Indeed, the former chief executive of Halifax, Sir James Crosby, is the person Labour is counting on to deliver groundbreaking reforms to Britain's creaking mortgage market.

The remarkable fact is that the current Tory front bench, which within 18 months could be assuming the reins of political power at a moment of unprecedented economic turbulence, is among the least City-savvy in a generation. This is why it needs to go out and look for financial and business experience through the "City Circle".

"The problem for the Conservatives is that the front bench is largely made up by a new breed of professional politicians who know very little about anything except PR and politics," remarks Dr Andrew Hilton, director of the independent think-tank, Centre for the Study of Financial Innovation (CSFI).

Hands-on experience

Hilton is scathing about the current Conservative leadership. "The lack of financial experience is a big lacuna. The route now is straight out of Oxford and Cambridge, into PR or political research and, before you know it, they've made it on to the front bench," he says. Asked to name a prominent Tory with the requisite financial experience, he could only suggest David Gauke, MP for South West Hertfordshire, who worked for a leading City law firm, but hardly registers among the top-ranking Conservatives.

Among the new Tory frontbenchers, David Cameron, the son of a stockbroker, is one of the few who can claim that knowledge of the financial world courses through his veins. His hands-on business experience stems from his short period as communications director of the tele v ision franchise Carlton, now part of ITV.

His time at Carlton stored up troubles for Cameron among the notoriously hard-to-please financial press. The BBC's influential former business editor Jeff Randall, now an editor-at-large for the Daily Telegraph, is among his sternest critics. "In my experience," he noted in the paper, "Cameron never gave a straight answer when dissemblance was a plausible alternative."

The shadow chancellor, George Osborne, also has a "trade" background. The quoted family firm Osborne & Little is a favourite among interior designers for its catholic collection of wallpaper and soft furnishing designs. Osborne is thus familiar with the travails of medium-sized firms in a globalised world and, to his credit, he has surrounded himself with informed thinkers such as Matthew Hancock, formerly of the Bank of England.

When the Northern Rock crisis first broke a year ago, Osborne was quick to embrace the idea of an old-fashioned Bank of England-organised rescue, where City banks would offer a lifeboat to a failing bank. This is precisely what has happened with Alliance & Leicester, Bradford & Bingley and, most recently, HBOS. Osborne was also supportive of Mervyn King's proposals for a strengthened deposit insurance scheme at a time when Labour has dithered and delayed.

But there is no hiding the fact that, unlike previous Tory shadow and real chancellors, his experience and knowledge of finance is negligible. Oliver Letwin, shadow chancellor under Mich ael Howard, may have lacked political gravitas, but he came with the stamp of N M Rothschild. Ken Clarke was a heavyweight political operator with commercial experience gained as a lawyer, and John Major had climbed through the ranks at Standard Chartered, one of the nation's most successful banking concerns. Even Norman Lam ont could boast a career at N M Rothschild from 1968 to 1979.

As PM, Margaret Thatcher was surrounded with people with serious City and business experience. Peter Walker was a junior partner in the asset-stripping bank Slater Walker, William Waldegrave was a Dres dner Kleinwort Benson veteran, Michael Heseltine an entrepreneur who founded one of the UK's most successful private companies, Hay- market Publishing, and so on. Thatcher also had her late husband Denis, a former senior executive of his family business Burmah Oil (since swallowed up by BP), to whisper in her ear.

David Davis, a senior executive at Tate & Lyle, was one of the few business heavyweights in Cameron's shadow cabinet, but he now adorns the back benches after his decision to seek re-election on an erosion of freedoms platform. The shadow trade secretary Alan Duncan boasts a period as an "oil trader" on his CV. But one would been hard-pressed to judge, from his performance on the BBC's Question Time a week ago, what his understanding is of the scale of the financial crisis facing Britain.

Among the leading City figures now at Cameron's elbow is Michael Spencer, the extrovert chief executive of Icap, an electronic broker and City derivatives trading firm which has been suggested as a potential merger partner for the London Stock Exchange. As treasurer for the Tories, Spencer has been in perpetual motion in recent times.

When I visited him at his offices in the months after the credit crunch hit, he was entertaining an exclusive group of high-street bank chairmen whom he was seeking to persuade of the wisdom of supporting Cameron and his team. His success in the City, in one of the most volatile periods of recent times, has won him credibility among his fellow financiers. He is also one of the City's most accomplished philanthropists, with a particular devotion to Africa. But because of recent personal problems, it is unlikely that he will play a very prominent role at conference.

At a time of unprecedented financial turmoil, almost certainly the greatest banking crisis since the Great Depression, Tory expertise in the increasingly complex and globalised world of finance seems thin on the ground. Vince Cable, the Liberal Democrat economic spokesman, demonstrated throughout the current crisis that it is possible constructively to oppose and come up with credible ideas without talking the economy down. But Cable has hands-on knowledge of business from his period as chief economist of Shell.

The Conservatives' failure to say anything significant about the current catastrophe is unsurprising, when it falls so far outside the comfort zone of their present front bench.

This article first appeared in the 29 September 2008 issue of the New Statesman, The crash of 2008

Photo: ANDREW TESTA/THE NEW YORK TIMES/ EYEVINE
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Interview: Nicola Sturgeon's Scottish referendum dilemma

In a candid interview, the First Minister discusses Theresa May’s coldness, Brexit and tax rises – and why she doesn't know when a second referendum will be held. 

Nicola Sturgeon – along with her aides, who I gather weren’t given much choice – has taken up jogging in the verdant country­side that lies to the east of the Scottish Parliament. “The first time was last week,” she says, when we meet in her large, bright Holyrood office. “Loads of people were out running, which made me a bit self-conscious. But it was fine for ages because everybody’s so focused. Then, suddenly, what must have been a running group came towards me. I saw one of them look and as they ran past I turned round and all of them were looking.” She winces. “I will eventually get to the point where I can run for more than 100 yards at a time, but I’m not at the stage yet where I can go very far. So I’m thinking, God, they’re going to see me stop. I don’t know if I can do this.”

This is a very Nicola Sturgeon story – a touch of the ordinary amid the extraordinary. She may have been a frontbencher for almost two decades, a cabinet minister for half of that and the First Minister since 2014, but she retains that particularly Scottish trait of wry self-mockery. She is also exceptionally steely, evident in her willed transformation over her adult life from a shy, awkward party member to the charismatic leader sitting in front of me. Don’t be surprised if she is doing competitive ten-kilometre runs before the year is out.

I arrived at the parliament wondering what frame of mind the First Minister would be in. The past year has not been especially kind to her or the SNP. While the party is still Scotland’s most popular by a significant margin, and Sturgeon continues to be its dominant politician, the warning lights are flashing. In the 2015 general election, the SNP went from six seats out of 59 to 56, a remarkable result. However, in Theresa May’s snap election in June this year, it lost 21 of those seats (including those of Angus Robertson, the SNP leader at Westminster, and Alex Salmond), as well as half a million votes. Much of the blame has been placed on Sturgeon and her call for a second independence referendum following the vote for Brexit. For critics, it confirmed a suspicion that the SNP only cares about one thing and will manipulate any situation to that end. Her decision also seemed a little rushed and desperate, the act of a woman all too aware of the clock ticking.

But if I expect Sturgeon to be on the defensive, maybe even a little downbeat, I’m wrong. Having just come from a feisty session of First Minister’s Questions, where she had the usual barney with her Tory opposite number, Ruth Davidson, she is impressively candid. “When you come out [of FMQs], your adrenaline levels are through the roof,” she says, waggling a fist in my direction. “It’s never a good idea to come straight out and do an interview, for example.” Adrenalised or not, for the next hour, she is thoughtful, frank, funny and perhaps even a little bitchy.

Sturgeon’s office is on the fourth floor, looking out over – and down on – Holyrood Palace, the Queen’s official residence in Edinburgh. As we talk, a large artistic rendering of a saltire adorns the wall behind her. She is similarly in blue and white, and there are books about Burns on the shelves. This is an SNP first minister’s office.

She tells me that she and her husband, Peter Murrell, the party’s chief executive, took a summer break in Portugal, where his parents have a share in an apartment. “We came home and Peter went back to work and I spent a week at home, just basically doing housework…” I raise an eyebrow and an aide, sitting nearby, snorts. She catches herself. “Not really… I periodically – and by periodically I mean once a year or once every two years – decide I’m going to dust and hoover and things like that. So I did that for a morning. It’s quite therapeutic when you get into it. And then I spent a week at home, reading and chilling out.”

In a recent Guardian interview, Martin Amis had a dig at Jeremy Corbyn for having “no autodidact streak”. Amis said: “I mean, is he a reader?… It does matter if leaders have some sort of backing.” One of Sturgeon’s great strengths is that she is a committed bibliophile. She consumes books, especially novels, at a tremendous rate and raves to me about Gabriel Tallent’s astonishing debut, My Absolute Darling, as well as Bernard MacLaverty’s Midwinter Break. She has just ploughed through Paul Auster’s daunting, 880-page 4 3 2 1 (“It was OK. I don’t think it should be on the Booker shortlist.”) She also reread the works of Chimamanda Ngozi Adichie before interviewing her onstage at the Edinburgh International Book Festival in August.

The First Minister is now reading What Happened, Hillary Clinton’s book about her defeat by Donald Trump. “I’ve never been able to read any of her [previous] books because literally every word is focus-grouped to the nth degree,” Sturgeon says. “This one, there are moments of frankness and raw honesty and passages where it’s victimhood and self-pity, but that’s kind of understandable and very human. The thing that fascinates me about Hillary, apart from the politics, is just her sheer bloody resilience.  Given what she’s gone through and everything that’s been chucked at her, I genuinely don’t know how she keeps coming back.”

***

Speaking of resilience, does she have any fellow feeling for Theresa May, humiliated by the electorate and, for now, kept in No 10 like a racoon in a trap by colleagues who are both power-hungry and biding their time? “At a human level, of course,” she says. “When you’ve got an insight into how rough and tough and, at times, downright unpleasant the trade of politics can be, it’s hard not to feel some personal sympathy. Her position must be pretty intolerable. It’s tempered, though, by the fact that nobody made her call an election and she did it for purely party-political interest.”

How does she get on with May – who is formal and restrained, even off-camera – in their semi-regular meetings? Sturgeon starts laughing. “The Theresa May that the country ended up seeing in the election was the one I’ve been dealing with for however long she’s been Prime Minister. This is a woman who sits in meetings where it’s just the two of you and reads from a script. I found it very frustrating because David Cameron, whose politics and mine are very far apart, always managed to have a personal rapport. You could sit with David and have a fairly frank discussion, agree the things you could agree on and accept you disagree on everything else, and have a bit of banter as well.

“I remember just after May came back from America [in January], when she’d held Trump’s hand [Sturgeon starts laughing again], she’d also been to Turkey and somewhere else. This was the Monday morning. We sit down, it’s literally just the two of us, and I say, ‘You must be knackered.’ She said, ‘No! I’m fine!’ And it was as if I’d insulted her. It was just impossible to get any human connection.”

Given this, and the weaknesses exposed during the election, Sturgeon is scathing about how the Conservatives fought the campaign, putting May’s character and competence front and centre. “The people around her must have known that vulnerability,” she says. “God, we all make mistakes and we all miscalculate things, so this is not me sitting on high, passing judgement on others, but don’t build a campaign entirely around your own personality when you know your personality’s not capable of carrying a campaign… Even if you can’t see that yourself, somebody somewhere around you should have.”

Sturgeon might not be in May’s beleaguered position but she has problems. Her demand in March, at a press conference at Bute House, Edinburgh, for a second independence referendum by spring 2019 was a serious mistake and it has left a dent in what had seemed her impermeable personal popularity. Polls show support for the SNP and independence now share a similar downward trajectory. Over the next three years, the First Minister must persuade a sceptical electorate that her party deserves a fourth consecutive term in government.

Does she regret demanding another vote on separation?

Here she gets as close as she will go to a mea culpa. “Obviously I’m thinking pretty deeply about it. I think Brexit is a complete and utter car crash – an unfolding disaster. I haven’t changed my views on that, and I think it’s deeply wrong for [Scotland] to be taken down that path without the ability to decide whether that’s right or not.

“I recognise, as well – and it’s obviously something I have reflected on – that understandably people feel very uncertain about everything just now, partly because the past few years have been one big decision after another. That’s why I said before recess that I will not consider any further the question of a second referendum at this stage. I’m saying, OK, people are not ready to decide we will do that, so we have to come back when things are clearer and decide whether we want to do it and in what timescale.”

Will she attempt to hold a second referendum? Could it be off?

“The honest answer to that is: I don’t know,” she says. Her expression of doubt is revealing.

Would she, however, support a second EU referendum, perhaps on the final separation package? “I think it probably gets more and more difficult to resist it,” she tells me. “I know people try to draw lots of analogies [between the EU and independence referendums], and there are some, but whatever you thought of the [Scottish] white paper, it was there and it was a fairly detailed proposition.

“One of the beautiful things about the independence referendum was the extent to which ordinary folk became experts on really technical, big, macro­economic positions. Standing on a street corner on a Friday morning, an ordinary working-class elderly gentleman was talking to me in great detail about lender of last resort and how that would work. You can say the white paper was crap, or whatever, but it was there, people were informed and they knew what they were voting for.

“That was not the case in the EU referendum. People did not know what they were voting for. There was no proposition put forward by anyone that could then be tested and that they could be held to account on. The very fact we have no idea what the final outcome might look like suggests there is a case for a second referendum that I think there wasn’t in 2014. It may become very hard to resist.”

Sturgeon hasn’t found the Brexit process “particularly easy”, especially when the government at Westminster is in the grip of what is becoming an increasingly vicious succession battle. The SNP administration has repeatedly clashed with the relevant ministers at Westminster, whom it says have given little care to Scotland’s particular needs. Sturgeon’s view of David Davis, Liam Fox and Boris Johnson is not rosy.

“Probably not a day goes by where I don’t look at them and think, ‘What the hell’s going on?’” she says. “That’s not meant as a personal comment on their abilities – although [with] some of them I would have personal question marks over their abilities. But they’re completely paralysed, and the election has left them in a position where you’ve got a Prime Minister who has no control over the direction of her government, and you have other senior ministers who are prepared to keep her there only because it’s in their short-term interests to do it. If you’re sitting on the European side of the table now, how can you have a negotiation with a government where you don’t actually know what their position is, or whether the position you’re being told across the table is one that can carry support back at home? It’s a shambles and it’s increasingly going to be the case that nothing other than Brexit gets any bandwidth at all. It’s really, really not in the interests of the country as a whole.”

***

This is an accusation that is directed at the SNP, too – that the national interest takes second place to its constitutional imperative. It is undoubtedly something that Sturgeon considered over the summer as she sought to rebalance her administration. As a result, the programme for government unveiled earlier this month was impressively long-term in places: for example, its promise to create a Scottish national investment bank, the setting of some ambitious goals on climate change and the commitment to fund research into a basic income.

Most striking, however, was Sturgeon’s decision to “open a discussion about… responsible and progressive use of our tax powers”. With the Scotland Act 2016, Westminster passed control over income tax to Holyrood, and Sturgeon intends to use this new power.

“For ten years,” she says, “we have done a pretty good job of protecting public services as best we can in a period of austerity, while keeping the taxes that we’ve been responsible for low. We’re now at a stage where austerity’s continued, we’re going to have economic consequences from Brexit, we all want good public services, we want the NHS to continue to have strong investment, we want our public-sector workers to be paid more, we want businesses to have the right infrastructure. How do we progressively and responsibly, with the interests of the economy taken strongly, fund our public services going forward? Most people would think right now that there is a case for those with the broadest shoulders paying a little bit more.”

I wonder whether the success of Jeremy Corbyn has influenced her thinking – many expect that a revival of Scottish Labour would force the SNP to veer left (it will also be interesting to see how Westminster reacts to Scotland raising the top rate of income tax). “It’s not particularly Corbyn that’s made me think that,” she insists, a little unconvincingly.

Isn’t Sturgeon concerned that making Scotland the highest-taxed part of the UK could undermine its competitiveness, its attraction as a place to live and as a destination for inward investment? “We should never be in a position where we don’t factor that kind of thing into our thinking, but you talk to businesses, and tax – yes, it’s important, but in terms of attracting investment to Scotland, the quality of your infrastructure matters. Businesses want good public services as well, so it’s the whole package that determines whether Scotland is an attractive place to live and invest in and work in,” she tells me. “It’s seeing it in the round. The competitiveness of your tax arrangements are part of what makes you attractive or not, but it’s not the only part.”

As for the immediate future, she is upbeat. She believes that Ruth Davidson, her main rival, is overrated. “I think Ruth, for all the many strengths people think she might have, often doesn’t do her homework very well,” she tells me. “From time to time, Ruth slips up on that… Quite a bit, actually. I know what I want to do over the next few years, and I’m in a very good place and feeling really up for it. After ten years in office, it’s inevitable you become a victim of your own success. What’s more remarkable is that, after ten years, the SNP still polls at least 10 and usually 10-15 points ahead of our nearest rivals.”

Author's note: Shortly after this interview went to print, the SNP got in touch to say that Nicola Sturgeon’s comment, ‘the honest answer to that is: I don’t know’, was about the timescale of the next independence referendum and not whether there would be one. The misinterpretation was mine.

Chris Deerin is the New Statesman's contributing editor (Scotland). 

This article first appeared in the 29 September 2008 issue of the New Statesman, The crash of 2008