Jim's lessons

If the Prime Minister is to survive, he has to crush the cabals and replace cabinet "goblins" with h

Commentators are today understandably drawing comparisons between Gordon Brown's current predicament and the experience of James Callaghan's government, especially with reference to the "Winter of Discontent" in 1978-79. Having served with Callaghan in No 10 as head of his policy unit (as I did previously under Harold Wilson), I agree that there are some parallels.

Between 1976 and 1979 we had, as now, a new nonconformist prime minister who was politically very experienced, a strong party man who was a former chancellor of the exchequer and had succeeded a brilliant, if controversial predecessor who had won several general elections. Callaghan, like Brown, inherited the tail end of a series of Labour governments, by which time the electorate and the media were getting tired of Labour and ready for a change. Also like Brown, he was handed the premiership by the party and ducked the much-touted opportunity of getting an electoral mandate from an early general election (which he might or might not have won). Scotland similarly presented difficulties for Cal laghan - and finally brought him down in a Commons defeat. Above all, again like Brown, he faced a daunting economic climate with an energy crisis, threatening inflation and foolishly rebellious trade unions.

However, I am also struck by the differences between then and now. The 1970s were, after all, a generation ago and it was a very different age, dismal in many ways.

The economic climate facing Jim Callaghan was far worse than anything that confronts Brown or the Chancellor, Alistair Darling (when the latter finds time to read the economic history of the 1970s and early 1980s he will want to revise his curious claim that today's is the worst economic situation for 60 years). Inflation peaked around 30 per cent just before Callaghan took over, and was usually in double figures. Most other economic indicators were worse than today's, with growth and productivity very poor over a long period and strikes continually disrupting industry. Not for nothing was Britain then known as "the sick man of Europe".

Politically, the challenges facing Callaghan were daunting. Labour was in a Commons minority throughout his premiership (he skilfully cobbled together small majorities through pacts with the Liberals and the Ulstermen). Labour itself was riven by deep ideological differences of a kind and on a scale unknown today, with the strong left wing consistently on the edge of rebellion and limiting the policy options available to the government. The unions and activists facing Brown at this month's conferences are mere pussies compared to the wild men fighting Callaghan.

The parliamentary opposition facing Calla ghan, led by the formidable Margaret Thatcher, was much more threatening than that operating today, which has few figures of stature and even fewer alternative policies on offer. They have nobody to compare with Thatcher, Michael Heseltine, Geoffrey Howe, Nigel Lawson, Nicholas Ridley, Jim Prior and Keith Joseph. They have no policy programme comparable to Thatcher's liberating, if to some frightening, proposals for free markets, big tax cuts and reducing the monopoly power of our deeply unpopular trade unions.

Today the main opposition is the media, most of which have decided to try to destroy the Labour government and its prime minister, misrepresenting everything it attempts to do as foolish and a failure. The media are more powerful than in the 1970s. But the people will not be electing a cabinet of newspaper editors and Today programme egotists to run the country. A government can see off the media if it demonstrates that it is governing well.

Governing, not surviving

Yet, despite these daunting political and econo mic problems, Callaghan's government survived for three years. And it did more than just survive. For much of that time it governed impressively. Until the final shambles of the Winter of Discontent, when irresponsible trade union behaviour made Thatcher appear to many as the only way out of chaos, Callaghan's government won public approval. In the autumn of 1978 it was ahead of the Tories in the polls and won a key by-election. Callaghan ran well ahead of Thatcher and always dominated her in the Commons until those final months. Inflation was brought down into high single figures. Jim turned the 1976 IMF loan saga into a triumph of cabinet management. The first key steps were taken towards reforming our education system and bringing monetary policy under control.

Although we lost the 1979 election, the Tory lead was cut down from more than 20 per cent at the start of the campaign to 7 per cent on polling day and the defeat was by a modest 40-odd seats - not by the landslide that had appeared inevitable in the months before polling day (and which Charles Clarke fears now faces Labour).

Of course, we were defeated and the Tories were given 18 years of power blessed with North Sea oil. The Winter of Discontent was a gruesome experience for the country, a dreadful failure by the Labour government and by those trade unionists (not all) and the few marsh mallow ministers who inflicted the damage on their own movement and so gave Thatcher the opportunity to carry out her revolution and wreak revenge on the unions. Those 1976-79 years were not a time of proud Labour glory, but they contained many achievements against immense economic and political odds.

Politically, the main lessons were that a prime minister with national values, courage and leadership skills, working collegiately with a strong and loyal cabinet, keeping close to his parliamentary colleagues and remaining connected with the concerns of the public and party rank and file, can overcome most obstacles.

Callaghan had most of those values and skills. He trusted his cabinet colleagues (except perhaps Tony Benn, who behaved as if he was not part of the government, though Callaghan always showed him courtesy, which Benn commendably returned) and his cabinet colleagues trusted him. This collegiate atmosphere made for a relatively coherent government (given the doctrinal divisions) and presented to the nation from No 10 a sense of unity and purpose that is not always apparent today.

Callaghan did not usually - education was an understandable exception - interfere in the micro-details of departmental affairs. But he showed a close interest in his ministers' objectives, holding regular meetings with them individually in the No 10 study, discussing their policy programmes and always encouraging them. In the key Treasury area, he and my policy unit monitored economic policies closely and he held regular meetings with his admirable chancellor, Denis Healey. They had disagreements, but always in private. Callaghan, having expressed his views, then always backed his chancellor in cabinet and in public. His conduct of the 1976 IMF crisis, with seven tense cabinets in which he gave all sides every chance to argue their views and worked with his chancellor throughout, was a good example of how to conduct cabinet and was perhaps the last supreme example of British cabinet government before Thatcher and Tony Blair brought the institution into sad decline.

Gordon Brown (or any successor) could benefit from studying those events: Ken Morgan's biography of Callaghan and my recently published Downing Street Diary of the Callaghan years might be a helpful start. He would see that, even in an age of so-called presidential government, having a strong cabinet is a great asset. Certainly it is hard to be a strong and successful prime minister with a weak cabinet. Callaghan's cabinet - with Healey, John Smith, Merlyn Rees, Roy Hattersley, Shirley Williams, Bill Rodgers, Benn, David Owen and Harold Lever, to name but nine - was clearly stronger than Brown's today.

But it could have been even better and was not as impressive as Wilson's previous cabinet. Cal laghan sadly lost Tony Crosland due to death. He dropped Barbara Castle and did not discourage Roy Jenkins from leaving for Brussels (he almost encouraged him). The latter two were political heavyweights. I could understand Jim's personal feelings against Castle but he would have benefited from her experience and clout. Jenkins seemed semi-detached but he was a great loss and might have been persuaded to stay. When suffering the crunch of the Winter of Discontent Cal laghan might have been better placed with these giants beside him than with mediocrities such as David Ennals, John Silkin and Bruce Millan.

Brown could learn from that earlier experience. His own cabinet - with some commendable young exceptions - seems lightweight compared to Callaghan's and especially relative to the challenges that face it. Some of the biggest current Labour beasts are sadly (and, in my view, unnecessarily) outside the cabinet and if included would add weight and experience. John Reid, Charles Clarke, Alan Milburn and David Blunkett should, if they could be persuaded, be inside in senior positions.

Of course, they have had their problems with the Prime Minister in the past - and he with them. They may initially prefer the comfort of the back benches. The Prime Minister may personally like neither them, nor the way they have criticised him. But he should swallow his animosities and try to persuade them to join the team. Clarke will have offended some with his comments but he would add great weight to the cabinet and would be better occupied fighting the enemy from inside than trumpeting outside the castle walls. Certainly, such a cabinet of heavy hitters would outpunch David Cameron's team of Notting Hill Gate lightweights.

Once, in 1975, when Wilson had promoted a critic in a reshuffle, I protested, "Harold, have you seen what he has said about you?" He replied, "Bernard, that is not the point. My job is to construct the best possible Labour cabinet." That is Gordon Brown's job, too.

Journalists will sneer that these are "yesterday's men". So what? They are at least yesterday's big and experienced men. We need them for the next 18 months. Does anybody believe it would not be better to listen to one of them chewing up John Humphrys and Jeremy Paxman in defence of our government than some of the goblins who now appear?

The Prime Minister might also note that mutual loyalty is a political asset in government. Callaghan backed his ministers and encouraged them to back one another. Admittedly, the left wing plotted over weekend dinners in Hampstead, but Michael Foot continued to preach loyalty. Callaghan discouraged cabals and would not have allowed his deputy whip to plot against his chief whip. He certainly did not encourage No 10 to brief the media against ministerial colleagues. Loyalty is a kind of political cement and is very useful in stormy weather. If the present prime minister has not always demonstrated loyalty in the past, that makes it harder for him to expect loyalty now. But he could learn from Callaghan, who was himself not always loyal to Wilson earlier on but told me that when he suffered prostate cancer in 1972 he swore to reform. Wilson returned the feelings, to the benefit of them both in the crises of 1974-76.

The days of cabals are over

All the above is about the conduct of the job of prime minister, especially the handling of people, where personality is very important and not easy to change. Being prime minister is a uniquely difficult job and it is impossible to know if somebody can do it until they try. Callaghan showed he could do the job in No 10 - better than he ran the exchequer. Gordon Brown has not so far completely managed that, but he is a highly intelligent and experienced professional politician with strong Labour values and, given time, might learn to become a successful prime minister. As a lifelong Labour man, I (of course) hope he can learn, but I cannot be certain that he will. What I know is that he does not have much time.

I am sure he could learn from Jim Callaghan how to handle policy. He needs to focus the government's policy programme in such a way that it gives Labour a fair chance of winning the next election. Callaghan did not dabble in a wide range of policies. He left that to ministers. He did not launch an endless flow of policy initiatives to catch the froth of morning media headlines, which the public ignores or soon forgets. He prioritised a few key areas that mattered to ordinary people: especially controlling prices, sustaining jobs and improving education. In the end he failed on inflation. But he made a good fist of achieving these priorities and they gave his government a policy coherence and a clear political identity and purpose. The public knew what Jim Callaghan and his government were about.

Brown has not yet conveyed (as he did successfully with "prudence" in his early days at the Treasury) a clear sense of purpose. Hence his government appears to lack coherence, purpose and identity. It will not be easy for him to correct that while the media are bent on diminishing and destroying him. But he must try - or else Charles Clarke's stark warnings will be fulfilled.

What should he do? The answer is not easy and anybody who is off the pitch, such as myself, should be wary of advising the present team how to play. But I believe some things can be done quickly. The Prime Minister might, for example, do three things.

First, he should strengthen his cabinet by persuading some big beasts back inside in senior positions - one of them at the Treasury. Labour needs him to try sincerely, and them to agree.

Second, he should overtly try to create trust within his government by giving genuinely full support to his chosen ministers and making it clear that the days of cabals are over (he might wish to acknowledge the past sins of his own entourage in this area and the so-called Blairites could do the same).

Third, and above all, he should abandon micro-tinkering with a wide range of policies and focus on two or three major policy areas where he means to make progress in ways that matter to the mass of ordinary people. He should realise that Labour's legislative programmes in recent years have contained little political potency. I have read the Queen's Speeches in dismay and wondered, "Where are the votes in this?" They are usually full of administrative management and politically correct claptrap. We need a few policy initiatives on a dramatic scale if we are to change the current public mood - which is that it has made up its mind and wants change (Cal laghan told me in 1979 that "there is a sea change in the public mood and it is for That cher"). If that is the case now, we must still try to change it.

My own suggestion would be to take four million of the lowest-paid workers out of the tax net by the time of the next election. That would have an impact on millions of people who are our natural supporters and would offer desirable redistribution of income.

Trimming the fat

How could the £20bn-plus that it would cost be paid? It could be found not by further borrowing, but by cuts in public expenditure, where there is plenty of fat. We could abolish all consultancy in Whitehall (a useless exercise of buck-passing currently costing many billions). Various bureaucratic extravagances, such as "regional development", could be abolished and others, such as "health and safety", seriously trimmed. They were created for symbolic reasons, are costly and often offer little to the public good. The bureaucracy in the NHS might benefit likewise. Abolishing future child benefit beyond the third child (I had four) would save more than £1bn in the next six years.

The Prime Minister should urgently conduct some cabinets to cut bloated expenditure by the required amount. Jim Callaghan did that in 1976-78 and the resulting savings of more than £6bn would, in today's money, produce much of the revenue required.

Concentrating on a few major issues need not mean ignoring particular reforms, provided they matter practically to ordinary citizens. Harold Wilson asked us in 1974 to produce a list of "little things that mean a lot" (and did not cost too much). We did (for example, free TV for the elderly and rescuing the pint measure from Brus sels). Similarly, we could look at the closing of post offices, our appalling rubbish collections and recent proposals to cap or balance net immigration - issues that matter to people of all parties. The central point is that the government must reconnect with the concerns of ordinary people.

Executing such an exercise would require strong leadership and a courageous approach from the top. It would offend some interests, though not the mass of the people. However, the danger is that, without strengthening the cabinet and introducing a few bold policies that have a major impact on the public mood, the government will drift towards electoral defeat. It may be that the public mood is too hostile to change, but at least the effort should be made.

Certainly, Gordon Brown does not, as Jim Cal laghan did, face outwardly a formidable opposition nor (yet) suicidal trade unions inside our tent. The next election is not yet lost for Labour. But it will need a change of leadership style, improved ministerial performance and more politically attractive policies if the public mood is to be shifted. Learning lessons from Callaghan might achieve that.

Lord Donoughue's "Downing Street Diary: Volume 2 - With James Callaghan in No 10" is published this month by Jonathan Cape (£30)