Cameron at 10: From Election to Brexit

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‘Snap out of it: we have a job to do,’ barks Jeremy Heywood, Number 10’s permanent secretary, the senior official, the top dog. It is 7.55 p.m. on Tuesday 11 May. Outside, dusk is descending. Staff are still dazed from Gordon and Sarah Brown’s deeply emotional departure moments before.1 They stand around the departed PM’s open-plan office torpid, drained. Many have tears in their eyes. ‘The prime minister will be here in half an hour.’ Heywood’s piercing voice urges them back into action.2 Tom Fletcher, Brown’s (and now about to be David Cameron’s) foreign policy adviser, changes his red and yellow striped tie to one with blue and yellow stripes. Ever the diplomat, he wants to shift emotional and political gear before his new boss arrives in the building.3 Dirty mugs and plates are spirited away, out-of-date papers removed, computer screens cleared. Here is the British Civil Service at action stations. The king is dead. Long live the king.

Just after 8 p.m., Brown delivers his farewell statement to the media circus outside Number 10. His former staff are too busy inside to notice. Three hundred yards down Whitehall, a similar riot of activity is taking place in the Leader of the Opposition’s office in Parliament in the Norman Shaw building. Ed Llewellyn, Cameron’s chief of staff, receives a call from the American ambassador: ‘It looks like you guys are going across the road. The president wants to be the first to talk to your man when he gets there.’4 Coalition conversations with Liberal Democrat leader Nick Clegg are still ongoing, though they are close to reaching an agreement. Cameron’s wife, Samantha, is caught off guard by the fast-flowing action. She is called in the early evening by Kate Fall, Cameron’s gatekeeper and senior female aide, at the family’s London home in Notting Hill: ‘You’re going to have to come down soon. David is about to form a government.’ ‘I don’t have to get dressed up, do I? I’m at home with the kids.’ ‘Er, not yet,’ Fall replies. Minutes later, Fall calls her back. ‘Get ready. You’ll need to put your dress on quickly.’ With moments to spare, Samantha arrives at Cameron’s office.

David and Samantha are bundled into a car to Buckingham Palace for the Queen to invite him to become prime minister, Britain’s youngest for nearly 200 years. Their hands touch in the back of the car. Their lives are about to change forever, but the short journey gives them final moments of peace. The car sweeps through the open gates. Cameron, still calm, ascends the wide stairs to where Her Majesty awaits him. He listens with barely concealed pride as she invites him to form a government. Audience over, and now in the official prime minister’s car under police escort, they are driven the half-mile to Downing Street.

His team have been advised by Heywood to enter Number 10 by the Cabinet Office entrance on Whitehall. Most of them have never been inside Downing Street. They walk down its long central corridor from the Cabinet Room to the front lobby in awe, before heading outside. Standing in front of the door to Number 11, they observe the lectern that Brown has just spoken from still standing on solitary duty outside the black front door of Number 10. Liz Sugg, who organises Cameron’s trips, wants to tell him not to use the lectern and where to stand for his first speech as prime minister. She knows he is on his way back from the Palace, but is unable to get through. ‘So this is what it’s going to be like now he is prime minister,’ she thinks to herself, ‘he won’t be able to take my calls.’ Then her mobile rings. It is Cameron. ‘Sorry, I was ringing my mum,’ he tells her as if they are old friends sharing a latte at Starbucks. She tells him – she is nothing if not emphatic – exactly where his car is to stop, and where he is to speak.5

At 8.42 p.m., the prime minister’s small convoy drives into Downing Street. He steps out beside a visibly pregnant Samantha, and delivers the statement he has put the finishing touches to just moments before:

Her Majesty the Queen has asked me to form a new government and I have accepted … our country has a hung Parliament where no party has an overall majority and we have some deep and pressing problems – a huge deficit, deep social problems, and a political system in need of reform. For those reasons I aim to form a proper and full coalition between the Conservatives and the Liberal Democrats … I believe that is the best way to get the strong government that we need … This is going to be hard and difficult work.

Huddled on the pavement in front of Number 11, his aides watch anxiously. ‘I’ll never forget that evening. The sun was setting. It was twilight, adding to the magic. While he was speaking, crowds in Whitehall were shouting. Helicopters were hovering overhead. It all seemed surreal,’ recalls Cameron’s political private secretary, Laurence Mann.6 The new prime minister and Samantha walk to the front door. An official removes the microphone. Cameron poses with Samantha on the front steps, hugging her awkwardly. As the door is opened, he gives a final wave. A few chants float in from the streets: ‘Gordon out!’ vies with ‘Tories out!’ before the sounds of the outside world fall away with the closing of the door. He has arrived.

Staff line up along the long corridor from front door to Cabinet Room, clapping him and Samantha. His small team follow on behind. One looks down at his shoes in embarrassment, overcome by the occasion. Another notices the smell of newly cleaned carpet. Cameron turns round at the end of the line and says a few words to his new staff who less than forty-five minutes before had been tearfully clapping out Gordon and Sarah. Samantha is peeled away. Kate Fall goes with her, dividing her time that first evening between looking after both of the principals.

Inside the Cabinet Room, Cameron greets Cabinet Secretary Gus O’Donnell and Heywood. Britain’s two top officials brief him about his most pressing tasks – some, such as procedures in the event of nuclear threats, are held over to the following morning.7 His staff are shown to their offices. They are amazed to be presented with appointment cards showing the PM’s diary neatly typed up. ‘I realised then that this is the Rolls-Royce state in action,’ recalls one.8 Cameron is escorted through the double doors at the end of the Cabinet Room into his office, which Blair used and called his ‘den’, at almost the furthest possible point in the Downing Street warren from Brown’s office in Number 12. He looks around, disconcerted to see doors on each side, the other leading on to the long room where his aides and officials will work. He wonders about having people constantly entering his office from both sides.9 Number 10 has no ideal room for a prime minister; nothing like the Oval Office. Unlike the White House, it was not purpose-built, but evolved from history. Discussions have taken place in the preceding weeks whether, should Cameron win, he would occupy the space Brown had chosen in Number 12, move upstairs in Number 10 to the office Thatcher had worked from, or use the den.10 Cameron briefly flirts with the idea of using the White Room, one of the state rooms on the first floor, with views across to St James’s Park and Horse Guards Parade. Heywood, Fall and Llewellyn later persuade him to use the den, for practical and security reasons.

Discussions had taken place also about Heywood in the preceding weeks. Should he stay? He had been very close – perhaps too close – to Labour’s operation under both Blair and Brown. Was he a Labour man? He had been intimately involved in all Labour’s decisions for the previous few years, bar a period (2004–7) when he left the Civil Service for the private sector. Some of these decisions under Labour Cameron and George Osborne thought were disastrous. They knew Heywood believed passionately in capitalism, but was he enough of a free marketeer, enough of an enthusiast for competition and the small-enterprise initiatives they wanted to see? But it was decided before the election that Heywood, one of the most omni-competent officials since 1945, was too important to lose.

Present in the den at nine o’clock that first evening are Llewellyn, Cameron’s chief of staff since 2005; Osborne, his master strategist; Steve Hilton, his exuberant and intellectually brilliant thinker; and Andy Coulson, his worldly-wise head of communications. It had been felt by some observers that tension between them had seriously hampered Cameron’s election campaign, but tonight their feelings are temporarily put aside.

The den clears suddenly at 9.10 p.m. when Fletcher enters to announce the Obama call is coming through. ‘Here I am, just us in the room, less than half an hour after he’s entered the building, with the American president waiting to speak,’ Fletcher thinks to himself.11 The two national leaders barely know each other. The White House are aware they mucked up the relationship in the president’s first year by being brusque to Brown, who they found needy. Obama thus wants to get off on the right foot with the new prime minister. ‘Congratulations,’ he booms down the secure line. Cameron has not used the apparatus before and has just been briefed that officials will be listening to his every word, taking careful notes. The prime minister is businesslike, savouring the moment when he says ‘I’m speaking from Number 10’ for the first time. When he does so, he winks to his aide. ‘Come over and see me in the White House,’ Obama says. This is a big deal, and very welcome news to the team. They are delighted to hear him utter the totemic words ‘special relationship’ between the US and Britain. The call is short and to the point. As the line goes dead, Coulson is agreeing the lines to brief about it with Robert Gibbs, White House press secretary. Coulson is anxious to get it right, and not hype it beyond what the White House wants. Cameron’s team are now playing in an altogether new league.

Llewellyn and Fletcher decide which foreign leader talks to the PM and when. Next on his list is the German chancellor, Angela Merkel. ‘Your job is to defend UK interests and my job is to defend German interests,’ she tells a dazed Cameron, who has just been given a briefing on hedge funds, an issue between both nations at the time. Her tone is polite but formal. The chancellor is still cross that he withdrew the Conservative Party from the European People’s Party (EPP) in May 2009. Their call gives no hint of the warmth that will develop after the first few months, though she invites him nevertheless to visit her in Germany. From France, President Sarkozy – always anxious for the limelight – is pressing to speak to Cameron. He will have to wait. The team debate whether Cameron should visit Germany or France first. Stephen Harper, Canadian prime minister, gets in with a quick call: ‘Take it all in and pace yourself,’ he tells the new prime minister.12 This sounds better, Cameron thinks, sensing here is someone with whom he will be able to relate.

He is enjoying his new toy. He looks up from the telephone to see aides anxiously pointing to their watches. He is running late for his address to the Conservative Party. He is driven the short distance to the House of Commons accompanied by the special protection officers who have been at his side in the weeks leading up to the election and will now accompany him for the remainder of his premiership, and indeed the rest of his life. His new escorts follow him up the stairs to the Grand Committee Room where he is greeted with wild cheering from Conservative parliamentarians. The chief whip, Patrick McLoughlin, calls for silence with the words ‘Colleagues, the prime minister.’ ‘I can honestly say that I was the first person to call him prime minister in public,’ McLoughlin recalls.13

It is 10.06 p.m. The atmosphere in the cramped room is near hysterical with excitement. After the long election campaign, MPs have endured a further five days of uncertainty until it becomes clear only a couple of hours before that Cameron will be prime minister. Aides recall ‘a ferocious cheer, banging of desks and wild excitement’ after he makes a short speech about events during the historic day.14 It will not always be this cordial when Cameron meets his party’s MPs. Farewells over, the team repair to Cameron’s former office in the Norman Shaw building. Osborne’s team join them and together they tuck in to pizzas in celebration.15

Cameron relaxes in his old haunt among old friends, but becomes aware that Llewellyn and Fall are telling him he needs to go back to Downing Street. Once there, Cameron returns to the phone, absorbing the quickest of briefings between calls. Sarkozy will be his ‘best friend and biggest rival’. ‘I need you to tell me when I get it wrong,’ Cameron says to his officials. A respectful conversation with Manmohan Singh of India follows while calls stack up with the Japanese and Chinese. Meanwhile, calls are still being put through from Number 10 to Gordon Brown, who is being driven to the airport to head north to Scotland. Obama and other leaders are keen to bid farewell to the former prime minister. At one point, Brown rings Number 10 to thank Fletcher for his assistance with the calls. It is a surreal moment. Foreign leaders would have been surprised if they knew that their words to Brown a few hours before – ‘It’s a pity you are having to leave because you were so good’ – were being noted down by the same official who heard them say to Cameron, ‘We always wanted you to win. It’ll be great and we can now reset this relationship in a much better way.’

William Hague is present at Number 10 for much of the evening. Hillary Clinton, US Secretary of State, wants to congratulate him, but officials decide that the call should wait until the following morning as he is yet to be formally appointed Foreign Secretary. Hague, ever philosophical, accepts their advice with a smile, and walks through to Brown’s old office in Number 12 where more pizza is being shared by Cameron’s small team. With amazingly few exceptions, here are the team who will carry him through the entire five years. They are his four closest Cabinet colleagues: Osborne, Hague, fixer extraordinaire Oliver Letwin and close friend and colleague Michael Gove. His aides are Llewellyn, Hilton, Coulson, Fall, Oliver Dowden (a senior party aide), and Laurence Mann. Present too are the officials, Heywood, Fletcher, James Bowler, the PM’s principal private secretary, and Rupert Harrison, Osborne’s heavyweight economist and multi-talented chief of staff who is still only in his early thirties.

The new incumbents notice the pen marks on the table and ask officials, ‘Is this where Gordon stubbed his pen? Is this where he threw his phone?’ Their questions are not driven by point-scoring, but more by awed curiosity: ‘There was no gloating,’ notes one. Officials’ first impressions of Cameron that night are that he is more level and composed than they had expected. Already they detect a calmer and more orderly tone to Downing Street. Cameron’s team start drifting away from 1 a.m. The adventure for which they have worked tirelessly since Cameron became party leader four and a half years before is about to begin. Llewellyn leaves at 3 a.m. ‘It was the most exciting night of my life,’ he recalls.16

TWO

Origin of ‘Plan A’ (#uba0a51dd-dc28-5d4d-a78f-deb473deec82)

September 2008–February 2010

The most important decision to be taken by the Cameron government of 2010–15 was made before it even got into power. The decision had three distinct phases: the autumn of 2008, June 2009 and the autumn of 2009. Together they formed the building blocks of what became known as ‘Plan A’: placing deficit reduction at the very heart of their economic strategy. It provided the coalition government with its core narrative and principal claim to success, and it gave a coherent platform for the Lib Dems to sign up to and their rationale for remaining in the government. But these very decisions in 2008 and 2009 were also to cleave Cameron’s team right down the middle, to contribute to him losing his stride in the 2010 general election, and almost certainly cost the Conservatives an overall majority. It is important thus to examine this history.

The first plank in the Plan A platform was put in place in the autumn of 2008. On 15 September, Lehman Brothers, the 158-year-old investment bank and the fourth largest in the United States, filed for bankruptcy. The shockwaves triggered the global financial crisis. Jon Cunliffe, a senior official in the Cabinet Office, sent an email around Whitehall: ‘If we don’t do something now the whole system is going to go down. We have to act.’1 That week, the survival of British banks RBS and HBOS was at stake. As Prime Minister Gordon Brown and the Labour Party gathered in Manchester for their annual conference on 20 September, Brown was brought a note to say that Goldman Sachs, the bluest of blue-chip banks, might be on the verge of going under. The British economy was in dire danger. Cameron and Osborne regarded Brown as the principal architect of the economic position the country found itself in. But it was the PM who held the initiative, and was about to absolve himself of any blame.

Brown took the unusual step of addressing the Labour conference on the opening Saturday, speaking without notes and with gravitas about the profound problems in the global economy. It underpinned his own position in the party, as well as in the country, as the leader uniquely placed to handle the grave predicament. His main speech on Tuesday 23 September was preceded by a masterstroke. The conference expected him on the podium, but his wife Sarah walked on to the stage. ‘Every day I see him motivated to work for the best interests of the people around the country,’ she said, concluding her two minutes by introducing ‘my husband, the leader of your party, your prime minister, Gordon Brown’. It was a coup.2 He remained on a high throughout the speech. His most effective line was that it was ‘no time for a novice’, referring not only to Cameron, but also to Brown’s would-be challenger, David Miliband. The most powerful of his three conference speeches as prime minister, it further underwrote his credentials as saviour of the nation. Brown left Britain on 24 September on a much-hyped trip to New York and Washington, leaving Cameron and Osborne behind at their conference desperately trying to find a way to make an impact. As PM, he had found a role.

Unlike Brown, whom they disliked, and the chancellor, Alistair Darling, whom they quite admired, the two leading Conservatives had neither the power of office, nor the boon of the advice and information from the Treasury, Cabinet Office and Bank of England. They were very young and inexperienced, as they were painfully aware. Cameron had more understanding of economics than Osborne. He had studied it as part of his politics, philosophy and economics (PPE) degree at Oxford, and had worked in the Treasury as a special adviser in the early 1990s.3 Osborne, who studied modern history at Oxford, had been appointed shadow chancellor in May 2005 at the age of thirty-three. Though he served briefly as shadow chief secretary, Osborne had much to learn in his new brief. ‘As shadow chancellor, my first and biggest political task was to establish economic credibility,’ he later said. ‘I did that by being a small “c” conservative and saying that I wouldn’t promise unfunded tax cuts.’4 Like Cameron, he looked to the example of Margaret Thatcher rather than her 1980s contemporary, President Ronald Reagan, ‘who ran big deficits to pay for big tax cuts’.5 The totemic event for Cameron, as for Osborne, was Geoffrey Howe’s Budget of 1981, which raised taxes despite Britain being in a recession.6

After Cameron was elected party leader in December 2005, seven months after Osborne’s promotion to shadow chancellor, they rapidly became the closest of allies: the closest indeed that British politics has seen at the top since the Second World War. They both yearned for credibility at a time when their youth and inexperience provoked so many questions. So in September 2007 they took a decision deliberately to imitate what New Labour had done before the 1997 general election, when Blair said he would match Tory spending plans, and promised to maintain Labour’s spending plans if elected. Osborne’s predecessor as shadow chancellor, Oliver Letwin, said Osborne ‘took the decision early on deliberately to avoid an argument with Labour on public spending, in an attempt to neutralise the issue’.7

When the financial crisis hit, Osborne and Cameron were wrong-footed. They thought they were dealing with a failure of the banking system rather than a more general economic crisis. Osborne criticised Brown’s government for creating ‘an economy built on debt’, saying of the public finances that ‘the cupboard is bare’, but he deliberately eschewed using the word ‘austerity’, because of the negative connotations of the term for the Conservatives.8 He released a document called Reconstruction: Plan for a Strong Economy, which outlined his thinking, although it was soon to be overtaken by events.9 The Conservatives held their annual 2008 conference in Birmingham. On 1 October, Cameron announced he would work with the Labour government ‘in the short term to ensure financial stability’. During the conference, Osborne travelled to London with his aide Rupert Harrison to meet Alistair Darling and Financial Services Authority chief executive Hector Sants. He also spoke by phone to governor of the Bank of England Mervyn King and bank leaders in the City, realising he faced a fast-moving situation where only the authorities really knew what was happening.10 Brown and the Labour government held the initiative and knew it. On 8 October, they announced a £500 billion bank bailout package to restore market confidence. Just days before, the Bush administration in the US had announced the Troubled Asset Relief Programme (TARP), allowing for $400 billion to purchase troubled assets.11

Yet Cameron’s and Osborne’s relationship was cemented during these difficult weeks. A close team had begun coalescing around Osborne, consisting first and foremost of Rupert Harrison. Harrison began working for the shadow chancellor in 2006, recruited from the respected independent think-tank the Institute for Fiscal Studies. He is an intriguing character. Eight years younger than the chancellor, he is the possessor of a powerful and capacious mind. After having been head boy at Eton, at Oxford he switched from Physics to PPE, excelling at both. He went on to complete a PhD in economics at University College London. Harrison’s influence on policy grew steadily in Opposition and his role would be pivotal when he became Osborne’s chief of staff in 2010. He dislikes the comparison, but his relationship with Osborne is uncannily similar to Ed Balls’s with Brown. Balls and Harrison have the much profounder technical understanding of economics and both are more intellectually assured than their masters. They are trained economists and highly effective operators in the Treasury and Whitehall at large. Both spend much time talking to Treasury officials before and after their chancellor has expressed his opinion, and both are skilled drafters of their speeches. They liberate and empower their bosses. There are differences. Harrison is a silky courtroom barrister where Balls is a backstreet fighter. Balls dominated the Treasury because of Brown’s dysfunctionality; under Brown, it was a cliquey and conspiratorial place. The Treasury under Osborne is more open, collegiate and empirical. Osborne, unlike Brown, is happy to be challenged in front of officials, and Harrison for one does so regularly. Osborne, like Brown, is an historian, but unlike him, never claims to be an economist. Balls and Harrison are the principal éminences grises of the Labour and coalition governments respectively. Brown had tried hard to make Balls chancellor in June 2009, while Osborne would come to rely equally heavily on Harrison at the Treasury.12

Matthew Hancock was another key member of Osborne’s team, serving as his chief of staff until 2010. A former Bank of England economist, he joined shortly after Osborne’s appointment as shadow chancellor: ‘I can do the politics, I want someone to do the economics,’ Osborne told the young aide.13 They were joined in April 2006 by Rohan Silva, a Manchester and London School of Economics-educated former Treasury policy analyst, and in 2009 by Paul Kirby, a partner at KPMG. This high-powered team also included Eleanor Shawcross, another economist. Letwin remained a constant source of counsel to them all, self-effacing and intellectually brilliant. A group of former Conservative chancellors – Geoffrey Howe, Nigel Lawson, Norman Lamont and Kenneth Clarke – were only too happy to provide discreet ballast and experience to the young team. They were to prove notably important in the decision Cameron announced on 18 November 2008, to ‘decouple’ the Conservatives from their decision fourteen months earlier to match Labour’s spending plans, which Brown was using, Keynesian-style, to drive the country out of recession. ‘Matching Labour’s plans seemed a very smart move at the time,’ admitted an Osborne aide, ‘but by late 2008 they were anything but sensible.’ Letwin felt strongly: ‘For Labour to be going on a spending spree in response to the downturn, deploying fiscal not monetary tools, was a basic strategic error. I felt deeply it was a terrible decision for Labour.’14

Six days later, on Monday 24 November, Labour delivered its Pre-Budget Report (PBR), as the Autumn Statement was then known. The top rate of income tax for those earning over £150,000 was raised from 40% to 45%, ditching Labour’s manifesto pledge not to do so. A temporary cut in VAT from 17.5% to 15% was to come into effect on 1 December, in time for Christmas shopping, to stimulate the economy. This was to form the centrepiece of a £20 billion fiscal stimulus package to last for thirteen months. Bigger shocks followed. Darling announced that the £43 billion borrowing requirement forecast in his March 2008 Budget had been revised upwards, to £118 billion. He said the Budget would not be brought back into balance until 2015, that the economic situation was even worse than had been feared, and that public sector debt would rise from 41% to 57% of GDP by 2013/14. These figures did not even take into account the bank bailouts. To Osborne, Darling’s statement was the opportunity to regain the initiative. ‘I knew we were right to focus on the rapidly rising deficit. He just read out these numbers and everyone was completely stunned. That’s when we felt we were on the front foot and picked the right issue.’15 He decided to oppose the stimulus and made a series of increasingly strong statements in late 2008 and early 2009 damning Labour for its response to the recession. By Christmas 2008, confidence in the Conservative camp was rising as it became clear that Labour’s package was not giving the British economy the stimulus that it needed. Cameron and Osborne had now committed themselves against spending their way out of recession. They had yet to say that spending had to be cut. This was to come.

The second plank of Plan A was put in place in the spring and early summer of 2009. Cameron was planning to give a speech at the Conservative Spring Forum a few days after Darling’s Budget on 22 April. The speech, on spending plans, had already been written. But he was so incensed by what Darling said, he came back up to his office ‘extremely angry, thrashing around the place and kicking the buckets. He suddenly realised how everything was going to be fucked up because of the figures. I’d never seen him so angry at the way that Labour had mucked up the spending,’ an aide recalls. He sat down to work almost immediately rewriting his forum speech. ‘He’s rarely happy talking about economics,’ says the aide. But on this occasion he produced a draft which he regarded as really important. In his words can be traced key parts of what was becoming Plan A.

Osborne and Cameron had yet to announce if they were prepared to make cuts if they won the general election, because they were fully aware of the damage it could do to the Tories if they became known as the party of cuts. But for much of the first half of 2009, they goaded and taunted Brown and Darling into saying whether Labour would introduce cuts (known as the ‘c’ word). In his April Budget, Darling announced that income tax for top earners would rise again to 50%, and that borrowing would rise to £175 billion in the next two years.16 But on cuts, not a word.

On 10 June, shadow Health Secretary Andrew Lansley went on Radio 4’s Today programme and admitted that, if the Conservatives were elected, 10% cuts might be necessary to all departments except Health, International Development, and Education. Fatally, he omitted to mention that the Conservatives would just be matching what a leak suggested Labour would itself be doing.

‘That’s it! We can beat them on this,’ a jubilant Brown yelled out to his team in Downing Street when he heard what Lansley had uttered. At last he thought he’d found a clear Labour agenda for the future, a ‘eureka’ moment. Brown thundered across the despatch box at PMQs later that day: ‘This is the day when [the Conservatives] showed that the choice is between investment under Labour and massive cuts under the Conservative Party.’ Brown claimed that ‘wide, deep and immediate’ Tory cuts of 10% would be introduced ‘in order to fund a £200,000 tax cut for the 3,000 richest families’, a reference to the inheritance-tax reform Osborne had unveiled to wide acclaim at the Conservative annual conference in 2007.17 Brown’s team were deeply torn about the honesty of this claim, as well as the gulf opening up with his increasingly disillusioned chancellor, whom the Conservatives thought Brown had appointed as a mouthpiece, only to discover he had appointed a heavyweight with a mind of his own.18 His discovery further fuelled Brown’s desire to replace the independent-thinking Darling with his right-hand man and protégé, Ed Balls.

Cameron and Osborne went into a tight enclave to debate how to respond to Brown’s latest attack. The outlet they selected was an article in The Times under Osborne’s name, to appear on 15 June. In the first draft, Harrison had avoided using the word ‘cuts’, but Osborne insisted the dreaded ‘c’ word must be mentioned, rewriting the piece himself.19 Rather than avoiding the language of ‘austerity’, as Tories had in the past, Osborne wanted to come out into the open and say the plan really was for ‘cuts’. ‘We have fought shy of using the “c” word – cuts,’ he wrote. ‘We’ve all been tip-toeing around one of those discredited Gordon Brown dividing lines for too long. The real dividing line is not “cuts vs investment”, but “honesty vs dishonesty”.’ The reference to honesty was a calculated tactic to undermine Brown, whose integrity was being called into question, and by implication Labour’s.20 ‘We should have the confidence to tell the public the truth that Britain faces a debt crisis; that existing plans show that real spending will have to be cut, whoever is elected,’ wrote Osborne in The Times.21 In September, a leak from the Treasury suggested that a future Labour government would itself make spending cuts of 10%.

Plan A’s third and final plank was put into place in the autumn of 2009 with the announcement where the cuts might actually fall. For several weeks, working in the shadow chancellor’s Parliament offices, Harrison, Hancock, Kirby and Philip Hammond (the shadow chief secretary) had been reviewing the spending options for a future Conservative government and where any cuts could take place. Their thinking was fed through to Osborne and Letwin, and then up to Cameron himself. The media, sensing they had both main parties on the run, brought immense pressure to bear on them during the summer and early autumn to be specific about cuts. Brown admitted at the TUC annual conference on 15 September that there might have to be some cuts, but failed to mention them in his party conference speech two weeks later, with the gulf between the realism of his chancellor and the obduracy of the prime minister becoming more and more apparent. Darling had become very much in tune with his officials at the Treasury. For the ten years 1997–2007, Brown had ruled the roost with these same officials, and he was furious.

Osborne was determined to craft an economic message to the 2009 party conference in the autumn that would stand up to any challenges, and show that he was serious about taking the necessary risks. The public, as well as the media, had to be shown that he meant business. The Conservatives enjoyed a strong poll lead in the summer of 2009, and he believed that lead would be challenged all the way through to the general election in 2010 unless he set out his stall very firmly. Nick Robinson, the BBC’s wily political editor, got under his skin more than anyone, needling him to be precise about the Conservative plans.

Final decisions on the conference speech were taken only in September, and Osborne’s voice proved decisive. His team came up with a package of cuts aimed to save £23 billion over the life of the next parliament. The key elements were public sector pay to be frozen, the state pension age to rise, and the cost of Whitehall to be cut by a third over the life of the parliament.22 To ensure the proposals were seen to be fair, Osborne memorably later said ‘we could not even think of abolishing the 50p rate on the rich while at the same time we are asking many of our public sector workers to accept a pay freeze to protect their jobs’.23 Cameron and Osborne had adopted a high-risk strategy. ‘We threw away the rulebook and came up with all sorts of measures that you’d never normally advertise in advance of a general election,’ recalls Osborne.24

In the speech in Manchester, Osborne announced that the Conservatives would deal with the bulk of the deficit over the life of the parliament. Mervyn King had already suggested this timeframe: Osborne deliberately used it, without King’s knowledge, as it seemed sensible to align the Conservatives with the Bank’s thinking. He committed the Conservatives to ‘in year’ cuts in 2010, and laid out structural reforms that autumn to abolish the Financial Services Authority, to have more supervision of banks, which led to the setting up of the Prudential Regulation Authority in the Bank of England, the establishment of the Financial Policy Committee (also in the Bank of England), and to take all regulation into a new body, which was to be the Financial Conduct Authority. As he walked off the stage at the end of the speech, Osborne was reported as telling aides, ‘Now let’s see if I’ve cost us the election.’25 Ever the risk-taker, he relished the daring he had shown and the headlines which spoke of his decisiveness. Martin Kettle writing in the Guardian called the speech ‘smart, well delivered and in some respects really quite brave’.26 The Telegraph leader writers praised his ‘hard-headed realism’.27

Plan A was thus virtually all in place by Christmas 2009, five months before the general election, crafted in these three separate stages. The high command appeared united on the economic message, the party seemed content, large parts of the commentariat were won over. But at this point, the status quo became unbalanced. Hilton, who had come back from a sojourn in California, was not pleased. ‘What the fuck is all this focus just on cuts and negativity? It’ll cost us the election,’ he said. He eyeballed Cameron and told him that the narrative around the ‘Big Society’ and modernisation that the party had built up over the previous four years would be jeopardised unless the message of the long election campaign beginning in January 2010 wasn’t more positive. He argued forcefully to shift the focus from spending, which he thought a media-imposed narrative, and he was dyspeptic about the influence of communications director Andy Coulson. Coulson in return had no time for Hilton’s luftmensch theorising about localism and social action, which he thought lacked popular resonance with the core voters whose support the Conservatives would need if they were to win the election.

Worryingly for Cameron’s team, the Tories’ poll ratings had started to dip by Christmas, despite Osborne’s economic strategy receiving continuing support in large parts of the press. Cameron’s camp was divided. On one side stood Osborne and Coulson, and on the other, Hilton. Letwin, along with Llewellyn and Fall, was trying desperately to bridge both camps. It was a hopeless position.

January 2010 started badly. Cameron wanted to set the tone for the New Year with his appearance on BBC’s The Andrew Marr Show on Sunday 10 January. Hilton wanted Cameron to apologise for the uninspiring start to the campaign made by all the parties, with poster launches, attack dossiers and an obsessive focus on the cuts and say, ‘This is the electorate’s campaign. Tell us what you want to talk about and we will do so.’ Coulson exploded when he heard, and heated discussions followed. A torn Cameron did not follow Hilton’s advice. Embarrassingly, Cameron then became embroiled in a media furore over whether photographs of him on billboards, put up across the country, had been digitally enhanced.28 At the end of the month, at the World Economic Forum at Davos, he tried pulling back from an overly harsh economic message by saying that any first-year cuts in spending would not be particularly ‘extensive’. A few days later, on the BBC Politics Show, he said that cuts would definitely not be ‘swingeing’; rather, the government would simply want to take a nibble out of the deficit to make ‘a start’.29 Private polling had been showing the Conservatives that their advocacy of deep cuts early on was politically highly risky.30 The impression of dissonance appeared all the greater when a defiant Osborne said on The Andrew Marr Show that ‘early action’ was required to avoid a ‘Greek-style budget crisis’.31 Cameron was uncomfortable and worried. Osborne punched back strongly in February in the annual Mais lecture, an important fixture among economic policymakers. Entitled ‘A New Economic Framework’, drafted by Harrison, it laid out more clearly than ever the entire Conservative vision of a tight fiscal policy on tax and spending, an active monetary policy to assist borrowing and investment, supply-side reform to bolster economic activity, and a rebalancing of the economy from consumption towards exports. Osborne argued ‘we have to deal with our debts to get our economy back on its feet’.32

Dissonance in Cameron’s camp continued all the way up to the general election. The Conservative manifesto title, Invitation to Join the Government of Britain, echoed Hilton’s mass participation idealism, and contained many ‘Big Society’ modernising ideas. But it equally spoke of the need to ‘deal with Labour’s debt crisis’ and said that savings of £12 billion could be made without impacting front-line services. The dual message was confusing, epitomised by an election poster that said they would ‘cut the deficit but not the NHS’.33

Cameron wasn’t sure which way to turn. The campaign was a mess, with Osborne’s and Coulson’s voices being heard on some days, and Hilton’s on others. Cameron’s heart inclined him towards Hilton, whose passion and message chimed deeply with his own, but his head drew him towards Coulson and Osborne, because he knew instinctively that the public finances required stern measures. The memory of Margaret Thatcher’s fiscal rectitude weighed heavily with Cameron and Osborne, as it did with the right-of-centre press whose support they wanted to maintain. Cameron couldn’t find his mojo or any passion during the election campaign, epitomised by his lacklustre performance in the TV debates against Brown and Clegg. He knew he had squandered the first debate, the only one he felt that really mattered. He felt terrible, that he’d let everybody down. He only found his stride again when he woke up on 7 May, the day after the general election, with one idea in his mind: a ‘big, open and comprehensive offer’ to the Lib Dems.

THREE

‘If we win’ (#uba0a51dd-dc28-5d4d-a78f-deb473deec82)

6–12 May 2010

Cameron may not have won the election on Thursday 6 May. But he has not lost either. Yet. A ‘big, open and comprehensive offer’ to the Lib Dems is the thought in his mind when he awakes on the Friday morning, in his suite at the Park Plaza Westminster Bridge Hotel, where he has been camping out through some of the campaign. The words are Steve Hilton’s but the seminal decision to deploy them is Cameron’s. He may have had only two or three hours’ sleep after going to bed at 6.30 a.m., but he awakes refreshed with the clear determination that he will make the Liberal Democrats an irresistible offer to form a coalition. His team arrive at 10 a.m. When he tells them, they are not surprised: ‘I’d have been flabbergasted if he’d come up with any other way forward,’ says a close aide. ‘My definite instinct was that it was the right thing to do given the circumstances,’ says Cameron.1 When Liz Sugg expresses surprise at why he intends to embrace a party they have been fighting so hard for weeks, he replies, ‘It is the right thing for the country.’2 Nick Clegg himself offers a less rose-tinted interpretation: ‘I don’t want to sound ungenerous, but it was the only way they were going to get into power.’3

Cameron’s team meet on election day at Hilton’s country house in Oxfordshire. They finalise details for the ‘If we win’ file, running over ministerial appointments one last time and reconfirming the grid of action for the vital first few weeks. They hold a sweepstake on how many seats they will take. ‘We’re going to win,’ Andrew Feldman, one of Cameron’s closest friends from Oxford and, in early 2010, chief executive of Conservative campaign headquarters, says emphatically. ‘We’re not going to win,’ Osborne replies curtly. Two weeks before, Osborne had reached the conclusion that the party was unlikely to win outright and the only way to power would be via a coalition government which it would dominate. Without it, any hopes of seeing Plan A and their domestic agenda enacted will be dead in the water. Too risky to be seen to have his own fingerprints anywhere near ‘defeatist’ talk of coalitions, Cameron continues to rail against the iniquities of any form of coalition after the election. It is Osborne therefore who asks Oliver Letwin, the supreme fixer, to analyse exactly what a deal with the Liberal Democrats might look like. The brain of the team locks himself away for a week at Conservative Campaign Headquarters (CCHQ) exploring which policies the Conservatives might jettison, and what they might demand from the Lib Dems. ‘For weeks before I had been analysing every single statement that the Lib Dems had been putting out, so I was up to speed when I began this exercise. I knew their weaknesses and our strengths intimately.’4 The weekend before the general election, 1 and 2 May, Letwin meets William Hague, Llewellyn and Osborne at the latter’s London house to brief them on his conclusions.5 ‘We then secreted away the fruits of his detailed analysis, while we went flat out in the final last few days to do everything humanly possible to get us over the line.’

Osborne leaves Hilton’s home in the afternoon of polling day to travel up to his Tatton constituency in Cheshire. Cameron, Andy Coulson and Llewellyn, joined by Kate Fall and Gabby Bertin, who had been a press aide since the leadership campaign, go for dinner at Cameron’s home in Dean, several miles away.6 They are under no illusions. As they gather around the television screen, the results are greeted with a deadpan silence. The exit poll at 10 p.m. confirms what was expected: a hung parliament with the Conservatives as the largest party. There will be no election miracle. The Conservatives emerge after the final count with 307 to Labour’s 258 and fifty-seven for the Lib Dems out of 650 parliamentary seats. The Conservatives may be the largest party, and gain the largest number of seats (net ninety-seven) in a general election since 1931, but it is little consolation. They are left nineteen seats short of an overall majority. Pressure mounts suddenly on Cameron. Critics in the party and the right-wing press, suppressed during the campaign, are now on the airwaves blaming him for a lacklustre campaign and for failing to engage core Tory voters. At 3.30 a.m. on Friday, a newly-energised Brown flies south from his Scottish constituency, believing he can cling to power. Cameron says Brown has lost the right to govern, but does not publicly call for his resignation. The prime minister, for whom Cameron’s aides have such strong reservations, is far from finished yet.7

Before he went to bed, Cameron had told his team to reconvene in the morning so they can explore options. They all know, none more than Cameron, that a minority government in hock to the Conservative right wing will be their idea of a total nightmare. Cameron has no love for them, nor they for him. ‘Let’s face it, coalition really suits him,’ says one close aide. ‘Is he really going to be happy with a minority government, with Eurosceptics like Mark Reckless and Bill Cash knocking on his door every ten minutes?’

At 2.34 p.m. on Friday, Cameron speaks at a press conference at St Stephen’s Club, Westminster, saying that the Conservatives will approach the days ahead with the ‘national interest’ in mind, and he will be making the ‘big, open and comprehensive offer’ to the Lib Dems to work with him in forming a government. ‘Cameron’s decision to call for a genuine coalition partnership is very significant,’ says master of ceremonies, O’Donnell. ‘This wasn’t going to be a short-term deal: there was going to be a real commitment that it would last for the life of the parliament. That’s what he wanted.’8 Cameron’s words are deliberately chosen, falling short of mentioning a coalition by name, leaving some room for manoeuvre, and offering some reassurance to the large numbers of Conservative MPs for whom the Lib Dems are anathema. Cameron’s team knows that he must carry the party, including his leadership rival in 2005, David Davis, the Eurosceptics, and others on the right of the party who dislike his politics.

Five days of intense negotiation with the Lib Dems follow in the secrecy of the historic Cabinet Office at 70 Whitehall.9 Cameron delegates the details of negotiations to a four-man team: Osborne, Letwin, Llewellyn and Hague, who acts as their head.10 The Lib Dems include David Laws, Danny Alexander, Chris Huhne and Andrew Stunell. As they meet, television screens in the background show riots in Greece. The eurozone crisis, brewing since mid-2009, broke out into the open in February 2010. It focuses their minds on the importance of achieving a stable government to take Britain forward.

Hague and Alexander banish O’Donnell’s posse of civil servants from minuting their discussions. Left alone, both sides find an affinity: ‘Talks with the Conservatives go far better than we imagined. There were no rows or unpleasantness. They are polite and civilised. It started the relationship below the Clegg–Cameron level,’ says Laws.11 Hague emerges from the talks pleased not to have conceded more to the Lib Dems: there is an agreement to introduce a fixed-term parliament (later enacted in 2011), reform constituency boundaries, hold a referendum on the Alternative Vote (AV), reform the House of Lords, introduce a ‘pupil premium’ in schools, and raise the income tax threshold. These are not considered big deals: the Conservative team believe they will easily win the AV referendum, and neither the pupil premium nor the rise in tax thresholds are out of tune with party thinking.12 The Lib Dems insist they would only agree to support the package if they can secure a fixed-term parliament, thus binding the Conservatives into a coalition for a full five years. Tory negotiators agree, believing it will contribute to stability. To O’Donnell, the deliberations ‘provided a chance for both parties to drop their rubbish policies. It was all pretty much as expected. Obviously they agreed to go further than Labour on the extent and speed of the deficit reduction.’ The pace of the negotiations would have consequences. Some policies, such as NHS reform, get through, which ‘none of them understood – frankly no one examined them carefully’.13 Ken Clarke, who encouraged Cameron to form a ‘proper coalition’ after the election, is surprised at how soon an agreement is reached. ‘It was precisely because no one had any experience of forming a coalition that they drew up an extremely good agreement in three days flat – no one on the Continent would have done that so quickly.’14

Letwin estimates that 80% of the policies hammered out in the ‘Coalition Agreement’ are straightforward because both parties have relatively similar proposals. The hardest concessions for the Lib Dems to swallow are retaining nuclear power stations and renewing the Trident missile system, which the Conservatives make clear are essential, but which the Lib Dems opposed in their manifesto. Both parties lose only some 10% of their favoured policies. The Conservatives lose out on inheritance tax, the West Lothian Question (namely the issue that since devolution in 1999, Scottish MPs could vote on English domestic matters) and the replacement of the Human Rights Act.15 Osborne is sanguine about losing inheritance tax. He knows it would be portrayed by Labour as a bung to the rich and has doubts about his ability to have got it through in his planned Emergency Budget.

Osborne thinks the discussions are not difficult because the areas of overlap are considerable. On the matter of Plan A however, the Conservatives are resolute: ‘The big judgement the Lib Dems had to make in policy terms was to back our fiscal judgement, which they had attacked during the election campaign,’ he says. ‘They consented because we insisted that it was non-negotiable.’16 Osborne believes that discussions the Lib Dem leadership held in private with O’Donnell, Nicholas Macpherson (the permanent secretary to the Treasury) and Mervyn King acted as a reality check, educating them in the need for urgent and tough action. He credits Vince Cable as a highly significant player recognising that Plan A was the right thing to do.17

Hague is struck by the naivety of the Lib Dem negotiating team, as by their lack of knowledge of nineteenth- and early twentieth-century coalitions. ‘Liberals always come out badly.’ Hague realises this, his Conservative colleagues know it, but the Lib Dem leadership he thinks does not. He is surprised too by their lack of familiarity with European coalitions, where the junior partner, whether in Ireland, Germany or elsewhere, is frequently annihilated at the next election. After the final meeting of the five days, Hague staggers home at 1 a.m. and tells his wife, Ffion, with prescience: ‘Well, we have formed a government … but we might well have destroyed the Liberal Party.’18

Without Clegg, the coalition would not have been formed. None of his predecessors as leader – Menzies Campbell, Charles Kennedy nor even Paddy Ashdown – would have countenanced a coalition with the Conservatives. Clegg insists too it will be a full coalition, not a ‘supply and confidence’ deal to enable a minority government to get through its Budgets and survive confidence votes, which would have been far more fragile. Clegg believes that the Lib Dems have the Conservatives on the run, and that unlike Labour’s team of Peter Mandelson, Ed Balls and Ed Miliband, the Tories are biddable: ‘Frankly, for Cameron and Osborne, the alternative to joining us was not pretty. They would have been out on their ears within two seconds at the hands of their own party.’19 So given this realisation, why does he not push harder?

The dominance the Conservatives achieve in the Coalition Agreement which emerges from the talks is much down to Letwin’s planning for such an eventuality.20 ‘In contrast, I was not aware of any detailed planning on the Labour side,’ recalls Gus O’Donnell.21 Clegg always deemed coalition a possibility, but put in less serious work during the campaign because the Lib Dems lacked the resources to do it. The Conservative Party is thus best prepared for coalition talks in May 2010 by a considerable margin.22 The Coalition Agreement is drawn up by centre-leaning, pragmatic Conservatives, and by right-leaning Lib Dems. Many MPs, still more members in both parties, do not share their outlook. Here at the very genesis of the coalition, the seeds of future strife and discord are sown.

On Monday evening, 10 May, with the coalition talks at a delicate point, Cameron meets his Conservative MPs in Committee Room 14 in the House of Commons. It is the most important meeting of that body in the entire 2010–15 parliament. His MPs have the power to strangle the discussions with the Lib Dems before they reach a conclusion. Cameron tells them that Brown is offering the Lib Dems the AV system without a referendum. He tells them that unless he can offer the Lib Dems an AV referendum, the talks might break down.

Critics later accuse Cameron of bouncing the party into a coalition in this meeting. During the discussions with the Lib Dems, only a handful of phone calls take place between the Conservative negotiators and the rest of their party, and senior figures in the 1922 Committee are disappointed to see only ‘some negotiators running by and asking for our views on what should and should not be considered’. Many feel the process is neither ‘systematic’ nor ‘comprehensive’. They also say the PM exploited the fact that 147, almost half of the 307 Conservative MPs elected, are new, overawed and highly biddable. Another ninety-plus had served on the back benches in Opposition and are eager for ministerial jobs. The scenario Cameron offered ‘made most colleagues think there was no choice’, says Graham Brady, chairman of the 1922 Committee. ‘A lot of people were unhappy with what was being done, but felt they couldn’t say so.’23 For the time being, discontented MPs are quiet. But they come to bitterly resent being told they effectively have no choice other than a coalition with the Lib Dems. It confirms their impression that Cameron and his allies would sooner deal with Clegg and the Lib Dems than with them. How right they are.

The Conservative shadow Cabinet discuss and approve the Coalition Agreement on Tuesday afternoon, with the world’s media speculating what is going on. Brown is pacing around Number 10 but knows the game is up. He is told by officials that he cannot go to the Palace to resign until details of the new government are locked into place. Cameron is given the green light. Suddenly, everything happens very quickly. Llewellyn needs the ‘If we win’ file. At 5.40 p.m., he calls senior party aide Laurence Mann to retrieve it from CCHQ. Behind Mann’s desk in his office in Downing Street throughout Cameron’s premiership is pinned a fading receipt for a short taxi journey that starts at 5.41 p.m. and finishes at 5.59 p.m. that Tuesday. Mann jumps into a cab in the street outside Norman Shaw building and asks to be taken to CCHQ. He runs in and lifts the file out of the party’s safe, trying to look as unobtrusive as possible. A group of aides crowd around him. ‘He is smiling,’ shouts out one. Mann is silent, jumps back in the cab and just before Big Ben chimes six o’clock, runs back up to Cameron’s office.24

Llewellyn joins him. Moments before, Cameron has called him back to the office from the marathon in the Cabinet Office. Llewellyn worries his departure might lead to media speculation that Cameron is about to form a government. So officials take him from the Cabinet Office through a tunnel that comes out in Horse Guards Parade. He then walks round the back of the Foreign Office and enters the Norman Shaw building, thankful for the detailed preparation work over the last few months which Mann carries in his hands. Cameron’s first hours in Number 10, which follow, have been described in Chapter 1.

Fast-forward to the next day. It is 2.20 p.m. on Wednesday 12 May. Cameron and Clegg are waiting inside the Cabinet Room for a press conference which they have decided will work better outside under a mid-May sun. Aides notice how well and naturally they relate to each other. Warmth, generosity and good humour are palpable.25 Clegg’s aides are watching Cameron closely. They do not know him well yet and do not know what to expect.26 Both leaders hear the journalists assembling for the press conference in the Rose Garden below. Neither have any illusions. They have both said and thought terrible things about each other. Moments before, Cameron has received a brief listing the criticisms he has voiced of Clegg, so he can be prepared for questions.27 ‘What we need is a show of unity and a light touch,’ Coulson tells them both shortly before they walk down the steps into the garden. They hardly needed the advice. The obvious rapport between both men grates with Cameron’s malcontented backbenchers. ‘They saw Cameron and Clegg looking rather smug about being freed from having to deal with their own barking wings,’ says a friend of Cameron’s.28 The word the backbenchers most detest is when Cameron says a minority government would have been ‘unappealing’. Not to them it wouldn’t. Payback will be just a matter of time.

The coalition angers many Conservative MPs further because it means fewer jobs to go around for them. The Coalition Agreement doesn’t say anything about ministerial posts, only policy. Cameron and Clegg agree that positions should be allocated in proportion to the number of MPs, i.e. roughly three to one. But for Cabinet, the Lib Dems do even better with five full members. They say that in addition to Clegg and David Laws, the Chief Secretary to the Treasury, they want Energy, Business and they also claim Scotland, because the Conservatives have only one MP north of the border. Lib Dems debate amongst themselves whether Clegg should have his own Whitehall department; Cameron is very happy to place him in the Home Office. Conversations with allied parties in coalition in Europe hurriedly take place: they conclude that the deputy prime minister (DPM), as he will be called, should mirror the prime minister himself and not run his own government department, allowing him to range across all departments. They later wonder whether they have made the right call: the Civil Service fails to provide matching resourcing for the DPM’s office to allow it to compete with the considerable resources at the disposal of the prime minister. The ratio of eighteen Conservatives to five Lib Dems in full-time positions in the Cabinet rubs salt in the coalition wound for many in Cameron’s party, especially when it is announced that these five posts will be retained for the Lib Dems all the way through the life of the parliament. But at the top, all is harmony. ‘What struck me was how relatively easy the appointments for the coalition government were to make,’ says O’Donnell. ‘Much of it was attributable to the closeness of Cameron’s relationship with Clegg. I was really amazed by how mature both sides were, even down to agreeing who should chair the various Cabinet committees.’29

Cameron works closely with Osborne and Hague in making the final switches required for coalition. Hague himself becomes First Secretary of State. The Conservative Cabinet appointments see very few surprises; one is Theresa May to Home Secretary, an appointment that brings tears of joy to her eyes. The appointment of Iain Duncan Smith to Work and Pensions Secretary is another surprise as he hadn’t held a portfolio in Opposition, though he had made it clear it was the post he wanted. Finally, it is a surprise that Chris Grayling is not offered a Cabinet position (though he later joins in September 2012 as Justice Secretary).

The decision to have a small-scale Number 10, attributable to Letwin, causes some consternation. Letwin looks back fondly to his time in the Policy Unit in the 1980s when Downing Street was regarded (not always correctly) as operating very effectively under Thatcher. Two factors were in their minds. ‘Because tensions between the prime minister and Chancellor had gone on for decades and were endemic, we wanted the whole of Number 10, Number 11, the Treasury and Cabinet Office facing in one direction. We knew the money would never be controlled properly if we were not absolutely sharing the same overall strategic direction,’ recalls Letwin.30 Avoiding Number 10 breaking up into a series of sub-units, all pulling in different directions, was another concern. A small PM’s office was thus considered by some to be much more biddable. Others understand that a strong Number 10 is necessary for the delivery of policy. In the months leading up to the election, Hilton and Rohan Silva spoke to some of the key New Labour figures, including Blair (twice), his chief of staff Jonathan Powell, head of policy Matthew Taylor, and speechwriter Phil Collins. They all said that Number 10 should remain big, advice that was ignored. Various Labour-devised units to enhance policy implementation, like the Delivery Unit, are promptly closed down in Number 10. Cameron will be a trusting, ‘hands off’ PM: why does he require a large office at the centre? But he soon realises he has been hasty to throw the baby out with the bathwater. He is critically short of capacity at the centre. The Policy Unit is thus expanded again from 2011, partly as a result of the patient chivvying of Jeremy Heywood, who repeatedly points out that Number 10 is not fit-for-purpose. But the inner circle around Cameron does not scale up: it remains small and tight. There are real gains from this, not least cohesion. But its social exclusivity is a source of irritation and anger which is to rebound on Cameron all the way down to the general election in 2015. Do they have the experience, the breadth and the stomach to master the maelstrom of political, social, military, security, economic and diplomatic challenges that are about to be hurled at them?