Vol. 18 No. 20 · 17 October 1996

‘I will embarrass you now by saying that I always thought you should be Chancellor of the Exchequer’

Paul Foot

3784 words
Sleaze: Politicians, Private Interests and Public Reaction 
edited by F.F. Ridley and Alan Doig.
Oxford, 222 pp., £10.99, April 1996, 0 19 922273 8
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Changing Trains: The Autobiography of Steven Norris 
Hutchinson, 273 pp., £16.99, October 1996, 0 09 180212 1Show More
The Quango Debate 
edited by F.F. Ridley and David Wilson.
Oxford, 188 pp., £10.99, September 1995, 9780199222384
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The abject surrender of Neil Hamilton, the ‘envelope man’ who changed the law so that he could sue the Guardian for libel, deprived the nation of an exhilarating and informative court case. When the Guardian alleged that Hamilton, Tory MP for Tatton, had taken money from Mohammed AI Fayed, chairman of Harrods to lobby Parliament against a Department of Trade inquiry which eventually denounced Fayed as a liar, the cocky MP announced that he was at last going to get even with the liberal press. He sued for libel, but the case ran into the sand because any allegation in court of corruption against an MP is technically a breach of Parliamentary privilege. Hamilton untied that knot at once. Supported by Lady Thatcher, Lord Archer and the entire Parliamentary Tory Party, he conspired to force through Parliament an amendment to the Defamation Act which allows MPs to waive their privilege in order to sue for libel. Backed by his new law, Hamilton charged back into court and, a few months later, hit more solid buffers: the facts. The Guardian insisted on discovery of all relevant documents from the Government and the Tory Party. A huge flow of paper about Hamilton and his paymaster/co-plaintiff, the lobbyist Ian Greer, emerged for the first time. The decisive revelation was a tape-recorded conversation between Hamilton and the First Secretary to the Treasury, Michael Heseltine, in which Hamilton denied any ‘financial relationship’ with Ian Greer. Greer knew he had paid, and realised his fellow plaintive would be exposed in court as a liar. He told Hamilton he wanted to fight the case separately, with a new set of lawyers. The unity of the plaintiffs was broken, and the towel, plus a £15,000 contribution to the Guardian’s costs, was thrown sullenly into the ring.

Though the chances of full judicial discovery and the public process of a court hearing are, sadly, gone, the Hamilton case cannot end there. Bit by bit, either injudicious leaks or as a result of a secret inquiry by the new Parliamentary Commissioner on Standards, yet another sleaze story will emerge to haunt the Tory Party in the months before the general election. By now all talk of sleaze should have been buried, and a determined effort underway to remind the population that, whatever the mistakes and greed of a few individuals, the men in charge are honest fellows, who know right from wrong. Alas, the carefully-planned Tory agenda now lies in ruin.

Cometh the hour, cometh the word. In an intriguing piece of research for Sleaze, Stuart Weir and Patrick Donleavy have counted the appearances of the S-word in British national newspapers. In 1985-6, it appeared 21 times; in 1994-95, 3479 times. The word still has no precise meaning. Often it refers to politicians’ sexual behaviour, which has probably changed very little over the centuries. The adulteries of a few, mostly junior ministers which led to what became known as the ‘back-to-basics resignations’ hardly account for the staggering increase in the public awareness of the dire state of British politics. The introduction of ‘sleaze’ into the British vocabulary in the mid-Eighties and the astonishing growth in its use ever since is only marginally connected to the sexual adventures of top Tories.

The word ‘sleaze’ may be new, but the concept is not. British political history this century, from Rufus Isaacs to Horatio Bottomley to Maundy Gregory to John Poulson, is littered with great corruption stories. The explanation for the increase in sleaze under Thatcher and Major is not to be found in any particular scandal, nor in the sudden susceptibility of certain individuals to corruption. Contemporary sleaze derives from the systematic removal of the props – the checks and balances – in modern capitalism which previously kept its excesses under control. Mrs Thatcher and her allies never made a secret of their aim: to break the power of the trade unions and the influence on ‘business’ of long years of postwar social democratic government. The result has been a proliferation of bureaucracies and monopolies far more powerful than the most powerful trade union or government regulator. In the matter of making money, the new monopolists and bureaucrats have shed embarrassment, shame and self-discipline.

Everyone knows about ‘fat cats’ but few identify two recent sources of their fat – both innovations of the Thatcher years. The first is the ‘remuneration committee’, made up of non-executive directors, which, usually with the help of the fattest cat of all, the chairman, decides on the ‘remuneration’ of executive directors. The practice was introduced to give an impression of fairness: the responsibility for huge pay rises can be palmed off on a committee of directors who do not benefit from them, and can therefore reach their decision ‘objectively’. Yet the objective gentlemen who serve on remuneration committees are themselves beneficiaries of similarly huge pay rises from remuneration committees of their own. One frog jumps right over the other frog’s back. Last year, the remuneration committee at Bass decided that chairman Ian Prosser should get a 17 per cent rise, to bring him up to a respectable £593,000 a year. The chairman of Bass’s remuneration committee was Sir Geoffrey Mulcahy, chairman of Kingfisher, whose own remuneration committee decided he was worth an equivalent rise, bringing him to £ 1.3m a year. Kingfisher’s committee was chaired by Sir Nigel Mobbs of Slough Estates, whose own remuneration committee decided that, after a bad year, Sir Nigel was the only executive who deserved a rise at all – his pay went up to £312,000. Slough Estates’ remuneration committee was chaired by Sir Christopher Harding, chairman of BET, whose own remuneration committee brought him up to £540,000. Sir Christopher is now chairman of the remuneration committee at GEC, which recently decided on a remuneration package for a new chief executive so large that it caused a shareholders’ revolt and had to be renegotiated. They are, to be sure, only playing leapfrog.

Another creation of the Eighties was directors’ ‘share options’: that is, ‘options’ to buy shares at the price obtaining when the options are granted and instantly to sell them again. By this device directors of companies – whose shares go up in value – as has been the case throughout the period in the enormous majority of companies – proceeded to enrich themselves by quite astonishing sums. They could not lose on the deal, since if their shares went down they could hang onto their options for a sunnier day. The official justification of share options is that they reward directors of successful companies. But the ‘success’ involved in the rise of a share price often bears no relation to the success of the undertaking or the product sold. In the last decade, the quick way to jack up share prices was to sack people. To pluck an example from my own experience, when Mr David Montgomery was appointed chief executive of the Daily Mirror in 1992, he was immediately showered with share options. The price of the shares was relatively low at the time because the Mirror was doing rather well. It had no proprietor. A year earlier, Robert Maxwell, who, with Mrs Thatcher’s encouragement, had been allowed to buy the Mirror in spite of the findings of a government report 13 years previously that he was unfit to run a public company, had gone overboard once too often and drowned. Trade unions were active, morale was high and, as a consequence, the Mirror was closing the circulation gap with the Sun. Montgomery swiftly broke the unions and sacked away until morale was sapped and the circulation gap with the Sun started to widen again. The product was worse, but the share price went up. When Montgomery ‘exercised’ his second set of options earlier this year he made a personal profit of over a million pounds. That story is repeated over and over in boardrooms throughout the City. A striking recent example is the fantastic ‘relocation’ payment of £431,000 made to Mr Peter Aikens, chief executive of the drinks firm Matthew Clark. The company decided to shift its headquarters from Guildford to Somerset (about a hundred miles) and Aikens had to move house. Almost as soon as he moved, his company started predicting losses. It seemed that the new craze for ‘alco-pops’ had done terrible damage to the cider market, and the brilliant Mr Aikens had not spotted the danger.

All this enrichment has been made much easier by the wave of privatisations which has engulfed vast tracts of formerly public industry. When the Yorkshire Water Authority was privatised in 1989, the total annual salaries of the directors was £200,000. In 1995, the directors of Yorkshire Water plc got £641,000. They were mostly the same people. Their stewardship of the company had been so outstanding that, in the summer of 1995, many places in Yorkshire had no water at all. For this achievement, Sir Gordon Jones, Yorkshire Water’s chairman, increased his annual salary from £75,000 to £189,000, and topped it up with £158,023 by ‘exercising’ his share options. Privatised electricity and gas were notable for the same contradiction: no increase in production or service, but fantastic increases in pay, options and directors’ perks, all of them funded almost exclusively by mass sackings.

The greatest privatisation scandal is the most recent: that of the railways. The Secretary of State for Transport who presided over the privatisation was John MacGregor. MacGregor appointed a chief adviser to help him: Sir Christopher Foster, a senior partner at Coopers and Lybrand, best known as Maxwell’s accountants. The two men carefully considered who should fill the top jobs at Railtrack, the new company to preside over the privatised network. MacGregor had a good idea for chairman: Bob Horton, who had been chucked out of BP for his high-handed management methods but was plainly the best man for the job. Coincidentally, he had also been to St Andrews University with MacGregor. Who should be Horton’s deputy? MacGregor and Foster pondered long and hard before coming up with an inspired suggestion: Sir Christopher Foster. In a single day, Sir Christopher went from chief adviser on privatisation to the Secretary of State to deputy chairman of the new company his advice had helped to create. Soon afterwards, MacGregor left the Department of Transport to become a director of the merchant bank Hill Samuel, which, while he had been Secretary of State, advised British Rail on the Channel Tunnel. (MacGregor has now been sacked in a cull of jobs at Hill Samuel, and we must wait for next year’s accounts to know the extent of his golden handshake.)None of this seemed to shock anyone. When MacGregor later gave evidence to the Nolan Commission on standards in public life, a member of the Commission, MacGregor’s former cabinet colleague Tom King, signalled his approach to MacGregor’s conduct with the memorable sentence: ‘I will embarrass you now by saying I always thought you should be Chancellor of the Exchequer.’

MacGregor’s antics were governed by the prevailing Parliamentary ethic during the age of avarice. The old Tory rules have been re-written. In the early Fifties, Lord Chandos, Secretary of State for the Colonies, had a disturbing conversation with his accountants. They told him he was ‘rapidly exhausting my capital and savings and that in fairness to my wife and children I should not continue in politics much longer’. He therefore resigned and resumed high office in the City. Forty years ago rich Tories left politics to return to their wealth-making. Nowadays, Tories go into politics to help them get rich. Since the Register of Interests was first imposed on MPs after the Poulson scandal in 1975, there has been a dramatic increase in the number of Tory MPs who have taken posts in industry and finance at fees which supplement, and in many cases exceed, their Parliamentary salaries. Only a tiny minority now declare ‘nil’, and this minority is often resentful.

Not long ago a Tory MP advertised in a House of Commons magazine for ‘a consultancy’ – it really didn’t matter which. Tory MPs indignantly protest their right to hold outside jobs and some of them modestly pretend that these jobs improve the calibre of the House of Commons. The old argument that elected representatives should be paid a standard (and, by comparison with their constituents, generous) salary for full-time representation, and if they want to do something else they should make way for some other representative, is hardly countenanced on the government benches.

The latest in the long line of whiners is Steven Norris, the glamorous MP for Epping Forest, who writes in what he is pleased to call his autobiography: ‘Unless we are prepared to pay sufficient to attract candidates of high calibre, we are in real danger of finding ourselves represented increasingly by nobs and nerds.’ Judging from his own story, Mr Norris is a mixture of the two. During the Lawson boom, NobNorris MP became very rich, chiefly by gambling in property. He thought the Lawson boom would go on for ever and invested in a particularly ridiculous high-tech company in Scotland. When the company went bust and the property market slumped, Nerd Norris was almost bankrupt. (His story is strikingly similar to that of another famous Tory Nob-Nerd, Jeffrey Archer.) Though he stood again in the general election of 1992, Norris decided recently that he must, after all, take the Chandos road and go into business to ‘mend the hole in my finances’.

An essay by Roger Mortimore in Sleaze reveals a poll which showed 64 per cent of the British people agreeing with the proposal that ‘most members of Parliament make a lot of money by using public office improperly.’ This view does not seem to have infiltrated Parliament, where the number of privately paid ‘consultancies’ undertaken by MPs has dramatically increased, as have their salaries, even in the last two years. So, too, has the number of lobbyists who now swarm over the building like locusts, subverting the idea of democratic representation.

A complementary process of subversion is discussed in The Quango Debate, an earlier set of essays for the Hansard Society produced in the same format and by the same editor as Sleaze. While fat cats have been enriching themselves, and MPs taking more and more consultancies, whole tracts of government which were previously the responsibility of elected politicians have been taken over by what is now known as ‘the new magistracy’: some 63,000 people appointed by government patronage. In the best essay here, Stuart Weir reveals that at the time he was writing there were 1025 grant-maintained schools, 557 further education establishments, 629 National Health Service Trusts, 2628 housing associations. All have been ‘floated off’ from the control of elected councils or health authorities with elected councillors on them. Margaret Thatcher’s chief measure to solve the problem of the ‘inner cities’ – the councils of which consistently opposed her policies – was to set up Development Corporations. Like most other quangos, these were run entirely by appointed businessmen, almost all of them committed Tories, who suddenly found themselves possessed of vast planning powers previously vested in elected councils. Weir estimates that, in 1992-93, ‘the total ego’ (extra-government organisation, as he more accurately calls a quango) ‘share of public spending on local services came to about £35 billion – some 50 per cent of the total, £69 billion, spent by local government in the same year.’ These bodies grow less and less accountable to the public. Fewer and fewer of them allow the public into their meetings. Fewer and fewer of them, despite their highly-paid press officers, are prepared to divulge information. When Friends of the Earth asked North-West Water how much poisonous lead they had measured in their water, the quango haughtily refused to reply, complaining that they did not know where the questions were leading. I cite one example from a whole host of sealed lips I have encountered among press officers of the quangos, which are paid for by the taxpayer, but consistently deny the taxpayer any real information. I was amused to discover that Derek Latham and Associates, an architects’ practice in Derbyshire, had won some contracts for work on a grant-maintained school during the time Derek Latham’s wife Pauline, a prominent Derby Tory, was sitting on the new grant-maintained schools quango, the Funding Agency for Schools. I formally asked the agency how many other schools Lathams had worked on. The reply was, as follows: ‘There is no reply – it is not our business to pass on that information.’

Partly to appease the growing public wrath, John Major set up the Nolan Commission to act as a permanent standing committee. The Commission concentrated its attention on Parliament, and made a series of mild recommendations, not for stamping out MPs’ outside interests but for declaring them. One Nolan proposal which was bitterly opposed by most lory MPs, but eventually carried by vote of the whole House of Commons, was that the amounts received for outside consultancies should be declared. This admirable proposal seems to make little difference to the Register. David Mellor, for instance, who resigned as a cabinet minister because of allegations about his affair with an actress, almost immediately built himself up an enormous portfolio of consultancies for all sorts of companies, including four arms companies. Mellor’s moving appeal for a ban on handguns after the Dunblane tragedy did not even reach the agenda of any of those four boardrooms. His income from most of these consultancies is not declared in the Register, because, he says, they have nothing to do with his duties as an MP. The simple point that his constituents might like to know how much he earns from merchants of death, compared with how much he earns for his duties as an MP, does not seem to have occurred to him.

One reason for the failure of the Nolan Commission is that it is composed at least in part by the MPs it purports to supervise. Central to the ideology of the fat cats and the quangos is the notion that regulation should be left exclusively to the regulated. Parliaments and councils accountable to the electorate have been replaced by groups of worthies who are engaged in whatever is being regulated. Thus the greatest swindle of modern times, the bribing and bullying of millions of people in safe occupational pension schemes into private schemes which produced a much worse return, is now being ‘put right’ by a new self-regulatory body called the Personal Investment Authority. All ten ‘practitioner directors’ of the PIA are associated with firms which sell private pensions.

The Environment Agency is the new monster-quango which regulates pollution. It was formed from a merger of former regulators, most of whom were under direct government control and directly answerable to ministers in Parliament. The Agency, which is chaired by a fourth baron who lives in John Major’s constituency and supports the local Tory Party, is dominated by people previously connected with the Country Landowners Association, the nuclear industry, the cement industry, the dredging industry, the water industry and other organisations which often find themselves being accused of or inspected for pollution.

The Funding Agency for Schools, ‘freed’ from their accountability to elected councils, is chaired by the chairman of Sun Alliance, which insures some grant-maintained schools. For good measure, a member of the FAS is Sir Bob Balchin, a former Tory Party official who chairs the Grant-Maintained Schools Foundation. The Further Education Funding Council, which funds and regulates the privatised further education colleges, has among its board members Mr Christopher Jonas, a partner in Drivers Jonas, London surveyors and valuers, who in spring 1994 tendered and won the contract for a surveying job on a further education college. When I asked the FEFC whether Drivers Jonas should have been left out of the tendering process, I was told: ‘No. It’s one of the major firms engaged in this area.’ The idea that there was anything wrong in a publicly-funded body giving a contract to a firm whose partner sat on their board had perhaps not occurred to anyone.

The apogee of self-regulation was reached earlier this year in an angry report by the House of Commons Public Accounts Committee about Oflot, a.k.a. Peter Davis, an accountant who regulates the National Lottery. Even in the United States, lottery directors’ annual salaries are restricted to less than £ 100,000. The annual salary of Tim Holley, chief executive of the British lottery company, Camelot, is £443,367. All the main lottery contracts go to the five companies which own all the shares in Camelot. All this is ‘regulated’ by Oflot, who, in a trip to the US, travelled in a plane provided by the biggest supplier of the company he was supposed to be regulating. The MPs on the Public Accounts Committee were cross, but Virginia Bottomley, the Secretary of State for Heritage, could see nothing wrong. Oflot survives.

In general, MPs, for all their select committees and powers to discover information, have had very little success in exposing the prevailing sleaze. The Labour MP Tony Wright is quoted in these essays as saying that ‘not one resignation has been forced by information uncovered by MPs.’ The Commons, he remarked, has been ‘a mere echo chamber for noises off’. This, at least, has not changed. Lord Salmon’s 1976 Royal Commission on Standards in Public Life reported that ‘almost all the investigations that have led to prosecution have been sparked off either by Private Eye or by commercial television or by other unofficial bodies or individuals. They have not been initiated from any official source.’ Private Eye, because it has no fat-cat proprietor with his own agenda, still attracts endless information about sleaze. Almost every example quoted here comes from the Eye in the last three years. Press and television still act as some sort of independent source of inquiry and investigation, though less and less so. The shrewdest of the quangocrats, the big NHS Trusts in Leeds and Plymouth, for instance, have co-opted managers and executives from the local press. The self-sufficiency of the quangos isolates them from the public gaze.

The key issue in all this is the lack of democratic accountability – the movement away from public bodies and public regulation to privatised get-rich-quick irresponsibility. The process has a long way to go, and there is every sign that Major’s ministers want to go the distance. William Waldegrave, Minister for Open Government when The Quango Debate and Sleaze were published, poured scorn on complaints about the erosion of elective accountability. What matters, he said, ‘is not whether those who run our public services are elected, but whether they are producer-responsive or consumer-responsive’. The conclusion is obvious. Why bother with an elected council or parliament if unelected businessmen can do the job much better?

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Vol. 18 No. 22 · 14 November 1996

I was left with a feeling of dissatisfaction at the end of Paul Foot’s sleaze diatribe (LRB, 17 October). The phenomenon which he describes is worldwide. Quangos certainly need to be more open about what they spend our money on, how much they pay their managers and the extent to which they stick to the rules. But I would have liked a bit more about solutions. For there are no obvious ones. More regulation is expensive and we are short of individuals who know how to regulate the regulators. The anti-quango and anti-bureaucrat rhetoric which emanated from Blackpool in October misunderstands the problem. Technology is transforming all organisations, public and private, and more ‘managers’ are probably necessary to cope with the changes it brings. Re-introducing the unmanaged quangos of yesteryear, like the ‘old’ universities, is just nostalgia; as is much talk of the ‘democratic deficit’. Modern Western democracy has been working badly for some time and the sleaze record of democrats is not much better than that of fat cats. As Paul Foot reminds us, Poulson was bribing MPs, senior civil servants and a range of both local councillors and municipal bureaucrats for years before he was found out; since then the difficulties of Parliament and government with self-regulation have grown exponentially. It is because no party has yet properly grappled with the problem of managing the modern state that political leaders are now reduced to preaching sermons. In the longer term, the solution may well lie in less Thatcherite managerial values, a new public-service ethic and a more honest citizenry. For the moment I suspect we shall have to rely on the one shining light Foot offers us: the disinterested, eleemosynary and private patronage of the late Peter Cook, which enabled Private Eye to be founded and still enables our public hypocrisies to be exposed and ridiculed.

Christopher Price
London SE21

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