A Journey (101 page)

Less happy was the episode over the new anti-terror laws which we were seeking to pass following the House of Lords ruling in December 2004 that our existing power to detain suspects was unlawful under the European Convention on Human Rights, which was now incorporated into UK law. Here, there was simply a fundamental disagreement between myself and the judiciary and media, or at least a large part of it, about the threat we faced.

Although these decisions are supposed to be a strict matter of law, inevitably in the human rights field there is a lot of subjective judgement around the politics. I doubt such a ruling would have been reached in September 2001 or July 2005 – i.e. in the wake of terrorist attacks in the US and London – but as time passes, the sense of urgency goes with it. And it was true: we were asking for draconian powers, unacceptable in principle except in the most rare circumstances.

Essentially, the problem was straightforward, at least to describe: the terrorist suspects being watched were, we believed (‘we’ being the security services, police, political leadership), a danger. But proving a charge beyond reasonable doubt was often very difficult. We were spending a large amount of time and manpower watching such groups, in more or less constant surveillance and assessment. Frequently we would want to wait until evidence of terrorism was collected, but were also afraid of waiting too long in case something unexpected happened, the plot came to fruition and we missed it. With suspects who were foreign nationals, and most were, I conceived of offering them a choice: leave the country, or stay in custody. This both fell foul of the usual principles of habeas corpus and also discriminated between foreign and UK nationals, so it was a problem legally but born of a real-life security conundrum.

Once the House of Lords made the ruling, we had to amend the law. The issue was over the power we sought to allow the police to detain terror suspects for up to ninety days without charge. Of course, there was a stack of safeguards, including the fact that every seven days they had to come before a court. But the police were clear the power would help and after the July bombings I just felt we had to err on the side of toughness. We tried before the 2005 election. The Tories opposed any further detention without trial. David Davis, who was at that time the Shadow Home Secretary, had moved the Tories to a liberal position on many law and order issues, opposing not just the international terror laws but measures on fraud trials by jury, antisocial behaviour and proceeds of crime. I liked David and thought him an unusual and principled politician. But I also thought it a crazy mistake for the Tories.

However, in the run-up to the election, traditional Tory support rallied to an untraditional Tory position. Right-wing papers like the
Mail
and
Telegraph
that, had I been a Tory prime minister, would have been tearing the Opposition apart, instead tore us apart. It all got very ugly.

After the election we were able to take it more calmly, but the Tories remained opposed. The Lib Dems were naturally against it, and a hefty group of the PLP rebelled. I knew that at the time, and for all I know the position is the same today, we were watching a score or more of cells of radical groups and potential terrorists, and I wanted the power both in its own right but also to send a strong signal out that Britain was going to be a severely inhospitable place for terror groups to operate. As I used to say to people: you may not like Bush’s methods, but since September 11 2001 no serious terror attack has occurred in the US. Don’t ignore the possibility that it may not be luck.

Although the public were with me, the majority of the House of Commons wasn’t. In November 2005, we lost a vote for the first time since we came to office. However, I was easy enough with it. By then, I had calculated that my only chance of survival for the two years I had set myself as a minimum time necessary to put in place the reform programme was to govern in a way that kept people constantly surprised by the seeming indifference to party or even public opinion, provided I thought what I was doing was right and would work for the long-term benefit of both party and public. In other words, I believed that the only way to keep power was to be prepared to lose it, but always to lose it on a point of principle.

I had complete clarity about what it was I had to do. I really did feel absolutely at the height of my ability and at the top of my game. I appreciated the bitter irony that this had happened when my popularity was at its lowest, but I also knew that in May 2005 I had won, not lost, and that there was a residual respect for and attachment to strong and decisive leadership. I might be bloodied but I would definitely also be unbowed.

Contrary to conventional political wisdom, when it came to the vote I decided not to compromise on the essentials, but to lose without having yielded. Of course, when we lost there were all sorts of articles about the prime minister’s vanishing authority, etc.; but I could sense that the very recklessness of it, on something I believed was right, got me traction among the public. Now, to have done that on schools or the NHS might have been different. But on this – a simple, almost pristine issue of national security – I felt instinctively more comfortable losing than winning through compromise.

A couple of weeks later, the storm already behind us, we introduced another controversial measure: allowing UK drinking laws to come into line with those in Europe. I thought the insistence on a strict closing time was irrational and in many respects counterproductive. I also had an inbuilt resistance to the idea that because a small minority misbehaved, the overwhelming majority should be restricted in their freedom to enjoy a drink when they wanted. The answer, I reasoned, was to come down hard on the lawless minority, not penalise the law-abiding majority. There was the usual
Mail
campaign, supported by some of the others, but we held our nerve. Tessa Jowell was adamant and saw it through (though from that moment she became a target).

I was pushing hard on all fronts. At the end of 2002 I had appointed Adair Turner to do a review of pensions policy. This had provoked strong opposition from Gordon, as had the appointment of David Freud, an independent consultant, to do a similar review on welfare. I knew Adair and David would give me radical proposals. Both issues had to be confronted.

Both also had to do with my concern over the future pattern of public spending. The FSR, as I say, had been created to try to shift the debate from the amount of investment to the value added by it, which is why the pace of reform had to be quickened. I had no precise percentage of public spending in my mind that corresponded to the right figure for the economy’s equilibrium between public and private sector, but I knew there was a limit. So I thought, post-2005, this was the time to shift focus and to drop the notion that it was all about who would spend most.

I thought this right for the country, and also smart politics. It would have been tougher if the Tories had carried into effect their initial instinct, which was to back the reforms. It is always uncomfortable to be cheered on by the Opposition. Although David Cameron did take this view to begin with, and in education they more or less kept to it, elsewhere in public service reform they started allying themselves with vested interests, especially on health. In a political sense, this was far more congenial and allowed us to secure our basic coalition, who distrusted the Tories on litmus-test questions and felt they were changing position too often.

However, it wasn’t just about the amount of public spending, it was also crucially about its composition. This is where the pensions and welfare reforms were so critical. Like every other developed nation, we were going to face major problems from the pensions bill in time to come. A growing elderly population; a declining younger generation; expectations of increased living standards; and increased health care costs as people live longer: there was inevitably going to be a crunch at some stage. Better to confront it now and set in place a framework that over time would make costs manageable and tilt the responsibility for provision from state to individual. The state would still be there as an enabler and, in case of hardship, guarantor; but it made sense for people to provide more for themselves; and also to do it in a way that reflected something else: that today they choose far greater flexibility in how they provide for their retirement – in working part-time, in the equity in their home, in various savings investment vehicles, instead of conventional pension arrangements.

We had tried once before with the ill-fated reforms of Harriet Harman and Frank Field, but the trouble with ‘stakeholder’ pensions, as they were called, is that they were never quite one thing or another, sitting uneasily between state and private provision. During the course of that attempt at reform, I had learned one rather larger lesson: be clear that if someone isn’t screaming somewhere, it probably isn’t going to work. Consensus is great, but in modern politics, where debate unfortunately works through disagreement, it is like the philosopher’s stone sought by alchemists: if it sounds too good to be true that you can turn base metal into gold, that’s probably because it is. So consensus is wonderful, but not if it is part of a delusion that making real change with real impact is going to please everyone. It isn’t. And in these circumstances the ‘consensus’ can be a sign that the reform isn’t really biting, in which case it probably isn’t going to fulfil its purpose.

Stakeholder pensions hadn’t aroused much opposition; but nothing much had flowed from them. We needed to think far more radically and devise both a more realistic package for state support, including raising the retirement age, and a far more comprehensive method for middle-income earners to save.

I asked Adair to lead on the reform. He had two sensible wing players with him in John Hills and Jeannie Drake. What they produced in two reports of October 2004 and November 2005 will, in the end, form the basis of the next generation’s pension provision. The reform protected the basic state pension, but used it as a platform upon which the individual could choose to enhance the pension by his or her own efforts and decisions, and it did so within a framework that meant spending on pensions would not rise as a percentage of GDP.

As a team they conducted a hugely wide-ranging consultation, and actually,
pace
what I said earlier, got as close to consensus as it was possible to get without yielding on the essential principles of reform. But bits of support peeled off on various different aspects. The Tories were not fully behind it, and the Treasury reaction was fierce. On this occasion, to be fair, Gordon’s disagreement was genuine. It wasn’t simply to frustrate progress – he felt that by protecting the basic state pension we were making an unnecessary commitment. He was in favour of rebalancing rich and poor in provision of the basic state pension.

I was totally opposed to that. I felt that the public at large would consider the basic state pension as their ‘dividend’ or ‘entitlement’ for their National Insurance contributions. Start tampering with that, and especially on the basis of some drive for redistribution, and we were going to be ensnared in a really damaging debate.

This touched on another highly sensitive political issue. I had opposed the 50 per cent top-rate-tax idea before the 1997 election. I had always wanted to keep the option of tax cuts open, on the basic rate. But I had allowed some really significant measure of redistribution. National Insurance ceilings had changed; personal allowances altered; and above all, as the economy grew we had spent billions on the poorest families and pensioners. It was and is the purest moonshine to suggest the 1997–2007 government wasn’t redistributive. It was, and massively so.

Now it is also true that because the economy grew strongly, the middle class and highest earners did well, and the very highest did best. So you could always take the income gap – very top to very bottom – and say it’s widened. In reality, this was a function of the very top doing well. The bottom deciles had had their income changed really substantially. I might have done it differently, not being a fan of tax credits, but I would have done it anyway. The poorest pensioners had a huge rise in income, something that the better-off pensioners came to resent (as my mother-in-law used to express to me with consistent persistence).

Emotionally I shared the view that some of the top earnings were unjustified, but rationally I thought this was the way of the world in a globalised economy, and there was more harm than good in trying to stop it. Should Wayne Rooney earn more than a nurse? Or actors or best-selling authors? Or market traders of stocks or derivatives? Or people who sell businesses at the right time and pocket hundreds of millions with a low capital gains tax? In a sense none of it is rational, but it’s irrational to stop it in a world in which, like it or not, certain people have transferable, global skills in high demand and short supply.

And, ultimately, you could tax every Premier League footballer double and it wouldn’t bring in much money. What you inevitably end up doing is pushing the higher taxes down the income chain, until the people you are hitting are those who work hard, don’t have global transferable skills and aren’t really what we might call the ‘undeserving rich’ at all.

So I also thought post-2005 that we needed to take care. Some might say we hadn’t been redistributive enough. I was sure we had done plenty of redistribution and needed to give some TLC to our middle-class and lower-middle-class aspirants as well. Therefore I backed and encouraged Adair to come up with a policy that eschewed any notion of redistributing the basic state pension.