Peter Mandelson - The Third Man - Life at the Heart of New Labour

I had spent the early months of Gordon’s premiership trying to keep my head down. But I was goaded during a Today programme interview shortly before he took over to observe a bit mischievously that while this might ‘come as a disappointment to him’, the new Prime Minister couldn’t actually fire me from my Commission post, because I had been appointed by the government to a full, five-year term. Yet I hastened to add a note of reassurance. I said I did not intend to seek a second term once my time in Brussels ended in November 2009. I assumed the new guard in Number 10 would recognise that I was playing an important role in delicate negotiations for a world trade agreement. I also knew that my ability to do the job well, and to finesse the interests of individual EU states along the way, would suffer if I were seen to lack the confidence of my own government. The more I could stay off Gordon’s political radar, the better, and my Today interview was a maladroit first move in achieving this.

Privately, I was still upset over the way he had treated Tony, and me. I not only resented the personal pain caused to me by his behaviour, and that of his parliamentary foot-soldiers and media briefers; in addition to their part in ending my own cabinet career, I felt they had kept Tony from delivering on key areas of New Labour’s policy promise to Britain. They had acted to weaken his room for manoeuvre and his legacy in government, well beyond the huge damage caused by the aftermath of the war in Iraq. But Gordon was now leader. I did not want to become a sulking, resentful presence, desperately clinging on to past bad feelings and finding fault in everything he did. At his first party conference as Prime Minister, in Bournemouth at the end of September 2007, I used an address to the modernisers’ policy group Progress not just to praise him for his part in the transition from one New Labour government to another, but to extol him as the man incomparably qualified to tackle the new challenges facing our country in the twenty-first century.

I spoke with more certainty than I actually felt – though neither I nor anyone else could have anticipated the vertiginous decline in Gordon’s fortunes that would begin within days of the conference ending. Still, the message of support was genuine. It was rooted not only in political calculation, or a desire to ward off trouble for myself in Brussels. Though my earlier doubts about Gordon’s fitness as Prime Minister remained, I wanted to be proved wrong. Before our spectacular falling-out, he had been my closest friend and ally in politics. I was intimately familiar not only with Gordon’s weaknesses, personal and political. I knew his strengths: intelligence, iron determination, and above all a grasp of the economic challenges that were increasingly threatening our country and the world.

By the time Gordon arrived in Brussels, the seriousness of the world economic crisis for Britain was becoming clearer. Fully-fledged recession was some months ahead, but the American sub-prime banking meltdown had claimed its first UK victim. The previous autumn, a run on the Newcastle-based bank Northern Rock had brought it to the brink of collapse. It was saved only by financial support from the Treasury. In the months that followed, Gordon and his Chancellor, Alistair Darling, tried desperately to find a private buyer for the bank. Only days before Gordon came to Brussels, they had given up, and taken Northern Rock into public ownership. I happened to believe they were right both to have worked for a private deal as the better option, and to have chosen nationalisation when that proved impossible.

The immediate problem for the Prime Minister was that he was now mired in a political crisis as well as an economic one. It had begun at party conference. While I was publicly on my best behaviour, I had seen it coming. For days, Gordon’s inner circle had been stoking up speculation that he was about to call an early general election. His first three months in power had gone extraordinarily well. He was confronted with a cattle-disease scare, but the effects had been less severe than at first appeared likely. Two attempted terror bombings had mercifully resulted in only a single death, of one of the terrorists. A spate of summer flooding was of course bad for those affected, but turned out to be less serious than feared. He had dealt with these potential crises in an assured way, and his supporters were hailing his strength and statesmanship. Going into conference, he was riding high in the opinion polls. But he was also an unelected Prime Minister – not just because our 2005 general election campaign had been under Tony’s banner and not his, but because he had not even faced a challenge for the succession inside Labour. Now, here was a chance for a mandate of his own.

But from the moment I’d seen the first of the media hype, I was almost sure it wouldn’t happen. Gordon – the Gordon I had known so well and worked with so closely since the 1980s – was a risk-averse politician. In 1992, he had shied away from fighting John Smith for the party leadership. After John’s death – in fairness because Gordon had finally realised he couldn’t possibly win – he had stepped back from challenging Tony for the leadership. Most of all, Gordon was cautious when it came to Britain’s voters.

As the pre-conference election speculation intensified, a number of the old Blairite stalwarts had phoned me in Brussels. What did I think? Would there be a snap election? ‘I’ve known Gordon for more than twenty years,’ I replied. ‘I can tell you when the date of the election will be – May 2010.’ Yet, by the time I arrived in Bournemouth a snap election was being touted as a foregone conclusion. When a reporter asked me to comment, I said the minimum I felt I could get away with. ‘I can see no reason,’ I replied, ‘why he shouldn’t call an election.’

Within days, it all went horribly wrong. I was back in Brussels, and the Tories were holding their own conference in Blackpool, when I suddenly saw TV pictures of the Prime Minister pitching up in Iraq, where he let out news of plans to begin reducing British troop levels. It immediately worried me. I had no way of knowing – at least until later – of the thinking behind Gordon’s visit to the front line. I did, however, know what it would look like: a publicity stunt during David Cameron’s conference, with our troops used as pre-electoral wallpaper. Then things got worse. Cameron’s Shadow Chancellor, George Osborne, used the Tory conference to unveil a proposal to ease inheritance tax, trebling the threshold to £1 million. This was tailor-made to appeal to the aspirational voters of Middle England, who were not alone in feeling over-taxed as the signs of world recession intensified. They were the very voters who, by buying into Tony and New Labour, had helped give us three election victories. They were the voters Gordon needed, too. But they were the voters he understood least well, always a particular frustration for him because Tony connected with them so instinctively and so easily. To top it off, Cameron used his closing conference address to taunt the Prime Minister into action. Go on, he said. Call an election.

Gordon was torn. First, he ham-fistedly decided to steal Osborne’s inheritance-tax trick. Then, even before Alistair Darling had unveiled our version of it in the Pre-Budget Report – the series of government finance announcements made in the autumn prior to the spring budget – he announced that there would be no election after all. As if that were not damaging enough, he insisted that he had never been minded to call one in the first place. Having looked so assured as Prime Minister at the start of his time in office, Gordon was now portrayed – by Cameron, of course, but also by the media – as hapless and a ditherer. All the controversies and embarrassments that bedevil any government were fed into that narrative. Not only the serious issues that arose in the weeks after the party conference, like improperly declared Labour donations, or the loss of a set of computer disks containing millions of Revenue and Customs records, but even the frankly farcical. In December, European heads of state gathered in Lisbon to approve the amended EU constitutional treaty. Gordon, apparently fearing the political toxicity of the issue, at first feinted at staying away. He ended up managing not to have his cake or to eat it either. He went to the ceremony, but showed up only after the other heads of government had done their signing.