Cameron at 10 Page 35

  He gets straight down to work. The Welfare Reform Bill, which builds on the extensive agreement with the Lib Dems on welfare enshrined in the Coalition Agreement, is announced in the Queen’s Speech on 25 May. To IDS, it is ‘absurd’ that some of the poorest people faced ‘huge penalties for moving from benefits to work’. Almost 5 million people, he says, are on unemployment benefits, 1.4 million of whom have been receiving support for nine of the last ten years. ‘A system that was originally designed to support the poorest in society is now trapping them in the very condition it was supposed to alleviate,’ he says.8 These anomalies are what he wants to address with his legislation. The October 2010 Spending Review announces the government’s intention to cap total household benefits at £500 per week for a family and £350 per week for a single person with no children, from April 2013.9 The measures are popular with the public and in government; ‘Everyone was agreed that it should happen,’ says one official. The proposal even manages to gain eventual begrudging support from the Labour Party, with Ed Miliband later claiming in January 2015 that he would keep the welfare cap and even consider a reduction in the £26,000 a year limit on household benefit introduced in the Welfare Reform Bill.10

  The bill has its first reading in the Commons in February 2011, and in the Lords on 16 June. In January 2012, the Lords defeat the bill on seven key items, including the capped out-of-work benefits. Cameron, sensing the public is on side, fights back. The day following the defeat, he writes in the Sun, ‘I respect [the Lords’] concerns, but … I’m prepared to battle all the way … I’ve lost count of the number of people who’ve said “I go to work early in the morning and on the way I pass neighbours with their curtains closed, lying in because they’ve chosen to live on benefits” … The cap is going to help us crack welfare dependency.’11 The measure eventually receives Royal Assent in March to become the Welfare Reform Act 2012.

  As seen earlier, Osborne pushes for IDS to be moved in the reshuffle of September 2012.12 Now the Act has passed through Parliament, the chancellor sees no need to keep the Work and Pensions Secretary in post a moment longer: implementation will be much better handled by another minister. IDS says he would rather stay at DWP and see through his reforms than move to Justice, the job Cameron offers him. Cameron knows the stink a forced departure would cause, not least with the right revved up over gay marriage, and does not want to move IDS against his will.

  Osborne’s low opinion of IDS appears to be justified in 2013, the most difficult year for welfare, when the huge number of changes are introduced and the damaging reports from the MPA and NAO are published. Negative reaction on the airwaves and in the press seeps into Number 10, despite DWP’s insistence that they are on track and have identified potential problems several years before. Even Cameron’s faith in the former Tory leader begins to waver. IDS irritates Number 10 by being so outspoken with his Eurosceptic views. Details of a dinner in Downing Street at which Cameron tried to win him and Owen Paterson over to his European policy find their way into the press.13 The political side of Number 10 become increasingly exasperated with IDS, finding him difficult to manage.

  Tribulations over welfare can be tolerated only as long as they are not creating poor headlines. But in August 2013, IDS is accused of being disingenuous by the Trussell Trust, which provides food banks in the UK, after he argues that the explosion in demand for their services comes not from benefit cuts but from an enhanced awareness of the service on offer (by advertising them in Job Centres, which Labour had never allowed). In October, the media is full of reports about the steep rise in numbers using food banks, with cases of food poverty reaching ‘scandalous levels’, and reports of mothers ‘not eating for days’. Some of the reporting is exaggerated, but the chorus of charities is growing. Oxfam comment that ‘these figures lay bare the shocking scale of destitution, hardship and hunger in the UK. It is completely unacceptable that in the seventh wealthiest nation on the planet, the number of people turning to food banks has tripled.’ The British Red Cross announce it will be providing volunteers for the first time to support food banks as ‘it is so concerned by levels of UK hunger’.14 A letter signed by twenty-seven bishops in early 2014 blames ‘cutbacks and failures’ in the benefit system for driving people to food banks.15 IDS believes that the Trussell Trust, whose chairman is a Labour Party member, and other charities are behaving in a highly political manner. It is telling that by 2015, much of the hostility has died away. Even the left-wing blog Left Foot Forward features a story in 2015, based on a report by the Trade Union Congress (TUC) and Child Poverty Action Group (CPAG), on how Universal Credit might be used to reduce child poverty.16

  And yet in 2013, these reports are greeted in Number 10 with almost the same horror as reports of winter crises in the NHS. Relations between IDS and Osborne reach new lows. IDS resents Treasury intrusions into welfare and for continuing to regard UC as ‘a waste of time and unmanageable’. IDS has his own views of the Treasury: he thinks officials have a young average age and lack ‘collective memory’, seeing their job merely as overseeing money in the short term without any long-term forethought – an essentially dysfunctional process. He thinks that from the ‘top down’, by which he means Nicholas Macpherson, one-time principal private secretary to Gordon Brown and now permanent secretary, the Treasury has had its fingers burnt by the ‘shambles of tax credits’. It was a Brown policy which IDS regards as a disaster, and he thinks, rightly or wrongly, it has made the Treasury risk-averse against UC.

  Introduced by the DWP to save roughly £500 million a year by lowering the amount of housing benefit received for a family living in a house deemed to have a spare room (the Spare Room Subsidy), the ‘bedroom tax’ comes under particular attack from the Labour Party and a number of charities. It continues to be a source of difficulty and internal tension for the government right up to the 2015 election. A study published in the Journal of Public Health in March 2015 finds that worries around debt, rent arrears and the prospect of being forced to move from their family home, caused by the removal of the Spare Room Subsidy, produced a sense of ‘hopelessness verging on desperation’.17 A National Housing Federation report in May 2014 finds that more than half of affected tenants have cut back on essentials and that more than a quarter have racked up debts.18 The measure proves so divisive that it causes a Lib Dem U-turn in July 2014. IDS claims that the proposals have not come from him or his team, but were presented to him in his first few weeks at DWP by an official who ‘raised an eyebrow and said, “We’ve done a little bit of work on this before,”’ leading some in the department to question whether the policy was actually being developed by the outgoing Labour government. The DWP is also frustrated by what they see as ‘appalling behaviour’ by the BBC, claiming it consistently refers to the removal of the Spare Room Subsidy as the ‘bedroom tax’ – they feel this is a partisan approach that helps unite public opinion against the reforms.

  The skates are under IDS, and amidst regular speculation during 2013 that he will fall, or UC will be abandoned, the negative coverage in the media cumulatively makes the department look weak and uncertain. IDS rues the death of Philip Langsdale, who had earlier project-managed the deployment of IT systems at London Heathrow’s new Terminal 2, and was described by special adviser Philippa Stroud as the ‘Stephen Hawking of the IT world’.19 Langsdale was one DWP figure trusted by the Treasury and the Cabinet Office. Following a ‘red team’ investigation initiated by IDS in 2011, Langsdale identified problems with the roll-out of UC but crucially not the IT systems. As a result of his report in July 2012, UC is ‘reset’ and a more pragmatic approach to the roll-out is agreed. DWP are annoyed when the NAO and PAC reproduce the original warnings of the ‘red team’ investigation into their 2013 reports, which, in their eyes, stokes further unjustifiable criticism in the press.

  With Langsdale’s death in early 2013, the way forward temporarily looks unclear. IDS invites Francis Maude and the Cabinet Office to help get UC back on track. While Maude
is personally supportive, IDS and his team think his staff approach UC in an overly ‘conflict-orientated manner’. Over six months of intensive meetings between IDS, Maude, Oliver Letwin, DWP permanent secretary Robert Devereux and project manager David Pitchford, who is crucial, problems are analysed and solutions identified. The Cabinet Office insists that UC adopts newer digital technology, in line with all fresh government programmes. Indeed, it is only in 2013 that the new technology exists which can manage the changes. The Treasury equally are hammering DWP throughout 2013 for more financial control, which they achieve. With employment and support allowance and the removal of the Spare Room Subsidy causing difficulties, it often appears that UC will succumb. ‘It was hanging in the balance and might have gone. Doubters might have taken the opportunity to stop it,’ admits IDS. ‘Without Philip Langsdale, the whole programme was leaderless. There was nobody in the department capable of running the programme.’20 Cameron is deeply frustrated. ‘The prime minister was really cross,’ recalls Bob Kerslake, head of the Civil Service. ‘The whole fraught project did influence Cameron’s view about the capability of the Civil Service in this area.’21

  One of the recommendations during the months of meetings between the Cabinet Office and DWP is the need for a top manager to take the place of Langsdale. DWP invites Howard Shiplee, who had project-managed the Olympic Park, and in May, he arrives at the department in the nick of time. He looks over the Langsdale plan and opines the department should in essence stick with it: ‘You have to have a plan, you need to stick to the plan, and people need to deliver on their parts of the plan,’ he would say, sounding like a welfare version of Lynton Crosby. Like Crosby too, he is forceful: ‘This is your bloody job. You do it or you bugger off!’ is his approach. Blunt emails fly around the system day and night. Shiplee is determined that there will be no more problems. But it takes some months before the impact of his leadership begins to be felt. Despite this, as the year progresses, the conventional wisdom in the media still remains that UC will not happen. IDS is told that ‘there are no journalists in the country who think that it will survive’. In an effort to win over the press, Stroud takes Peter Oborne of the Telegraph to a Job Centre in Hammersmith on a cold December morning to see Universal Credit in action. It is a gamble. ‘We hadn’t taken any journalists down to see it,’ she says.22 The gamble pays off. Oborne becomes one of the first journalists to become a wholehearted supporter of UC, writing that ‘With Universal Credit, work might finally pay.’23

  Over the course of 2014, the welfare story begins to improve. Figures suggest that the amount of money being spent on welfare claimants is falling, and that the policies are helping the unemployed back into work, a change for which the Treasury tries to claim credit. Osborne makes a speech against a backdrop of a list of successful government programmes. Harrison emails Stroud, his opposite number, to say: ‘Hope you saw we placed Universal Credit beside George’s head,’ a move regarded as totemic. IDS notes with wry satisfaction not only that Osborne is now happy to be identified with his flagship policy, but also that UC begins to become a more regular feature in the PM’s speeches. Matthew d’Ancona, whose book In It Together published in 2013 catalogues the battles between Osborne and IDS, starts to write articles about Osborne’s belated admiration for IDS’s stoicism and work to bring about behavioural and cultural transformation in welfare.24 Doubts remain whether Osborne has genuinely warmed to IDS, or has simply adopted the position that ‘I’ve got to live with him and work with him’. But from 2013, they have fewer disagreements. ‘They are not natural bedfellows, but the relationship has become perfectly functional,’ says one of Osborne’s team, ‘It just needs looking after.’

  Cogs at last are beginning to turn. Having weathered the Midterm Review and the hostile press in 2013, the revised roll-out plan, agreed by the DWP and the Quad, continues unabated. Cameron has to adjudicate in a minor spat between Osborne and IDS at the time of the March 2014 Budget over savings to pay for childcare for those receiving UC. He comes down on Osborne’s side: IDS is not happy, but this setback is small beer compared with the epic battles of earlier years. In September, an accelerated programme for UC is announced, to go nationwide in February 2015, ahead of the election.25 In October an NAO report, whilst still critical (like many of its reports), is not nearly as damaging as in previous years.26

  Welfare, like health and education, is a battleground for the coalition government. Cameron and Osborne wholeheartedly supported Education Secretary Michael Gove, at least until early 2014, which explains the ready passage of his schools policies. They both gave up on Lansley’s health reforms, hence the change of Secretary of State. But Cameron and Osborne are split on welfare: over personal judgement on IDS, philosophical priorities, and turf wars between the Treasury and the DWP. Osborne’s unrelenting hostility to IDS and UC worked for the chancellor as long as the department and the flagship were mired; but from mid-2014 onwards, the overall welfare policy eventually starts to come right with numbers of people either earning more or moving back into work increasing, having been ‘slowed down to a painfully slow snail’s pace in order to allow it to be on track’. It gives Osborne a new set of problems. The impact on his popularity, and on his prospects of becoming the next leader of the Conservative Party, has to be reckoned with. Osborne’s supporters claim much of the credit on welfare is due to him.

  As for the impact of the reforms themselves, many in the government see them as one of their greatest achievements. Letwin claims that it will be ‘transformational by 2020’ and talks of the reforms ‘utterly changing the face of the relationship between benefits and work’.27 Time will tell whether they actually achieve this feat. What is without doubt is the scale and radicalism of the reforms. They amount to the biggest changes to the welfare state since its inception. The path has been rocky and uncertain, but IDS’s survival against the odds may prove to be seen as the quiet revolution of Cameron’s government in years to come.

  TWENTY-FIVE

  The Darkest Hour Before Dawn

  January–June 2013

  ‘The most difficult period, the darkest hour, was just before the dawn,’ says George Osborne. ‘I felt we’d done everything we could, we had made our economy more competitive, we’d taken very unpopular decisions, but according to the preliminary figures it still looked as if we were heading for a triple-dip recession which turned out to be completely wrong and the difficult decisions were in fact paying off.’1 Osborne is in Davos for the World Economic Forum on 25 January 2013 when the preliminary GDP Q4 figures for 2012 come out, which show an estimated shrinkage of 0.3% compared with Q3. Worse, production industries are estimated to have decreased by 1.8% in Q4 compared to Q3 in 2012, reversing a 0.7% increase over the previous quarter due to a bounce from the Olympics. Osborne and Rupert Harrison reel at the news. They had hoped that the double dip at the end of the 2011 and beginning of 2012 had been reversed by the Olympics factor. ‘It was a very significant blow. Definitely the low point,’ recalls Harrison.2 ‘When we got the news he went blank, he was lost,’ says one close to Osborne. ‘It was immediately difficult as we knew we had to get through that day without him giving any indication on his face or voice that there was anything he was worried about.’ The night the figures come out, Channel 4 News present a discussion about the likelihood of a triple dip.3 Triple dip is suddenly the talk everywhere that January.

  On 4 February, Osborne, Ed Llewellyn, Kate Fall and Harrison are talking to the PM in his room shortly after their return from Davos. The atmosphere is bleak. A triple dip may well spell the end for Plan A, the chancellorship of Osborne, and possibly even the premiership of Cameron. They contemplate this grim scenario, and debate stimulus possibilities for the 2013 Budget. Then, suddenly, Harrison pipes up: ‘We don’t need to change our strategy. The next few months will be difficult, but by July, we’re going to be going gangbusters.’ It takes some time for what he says to sink in, then they laugh. They want to believe him, but they are not certain he is
being serious, or that they understand his grounds for optimism. Harrison is not normally brazen but today he is a man possessed. He thinks that Whitehall has allowed itself to become hexed by looking backwards, at the last set of historic figures, rather than forwards. He is struck by the important improvement in financial conditions in the second half of 2012, helped significantly by the Funding for Lending scheme, which Mervyn King announced at Mansion House in June 2012, and which was feeding through into some of the monetary numbers and consumer confidence. Smart hedge-fund managers too were buying and making money. So sure of his ground is Harrison that he gets Llewellyn to record the prediction in his notebook. He asks Llewellyn to sign a copy and puts it up in his office in the Treasury.

  Osborne nevertheless remains under intense pressure. Too many of those who had backed him since 2010 are beginning to turn away. There are some in the Treasury who feel that the ‘community of support we had built up from 2010, the OECD, the IMF, the governor of the Bank of England, most of the broadsheet press, it was all beginning to wither’. The Economist gives out noises that it is still supportive, whereas in reality, it is joining a long list of doubters. On 23 February 2013 it concludes ‘the long road to a balanced budget is getting longer’.4 A few remain loyal, including some in the business community, many Conservatives and Liberal Democrats. ‘Above all, very crucially, George had the support of the PM,’ says a figure close to Osborne. ‘But George’s worry was that even the remaining support would begin to fray if we registered a triple dip, and things could get really tough in the summer.’ As the weeks pass, cracks begin to appear within Cabinet. Ken Clarke, with all the authority of a former chancellor, begins to say a triple dip is now likely, and that they should ‘brace, brace’. Vince Cable is making his unhappiness increasingly evident. In early March, he writes an article in the New Statesman about Plan A entitled ‘When the facts change, should I change my mind?’5 Cameron’s team worry that Cable might be about to abandon camp: for several weeks, he appears to teeter on the brink, before pulling back. ‘He always does that. He looks strong but then ends up bottling it,’ sighs one of Cameron’s team.