Who Runs This Place?: The Anatomy of Britain in the 21st Century by Anthony Sampson, 2005, London: John Murray
The London Guardian published a 4,500 word extract of this book in 2004.
The following “Veracity Index” published by MORI is often referred to:
|Profession||1983 (per cent)||2003 (per cent)|
|Trades union officials||18||33|
The Commons' role is not to run the country but to hold those who run the country to account. It does this in two main ways: through its debates and committees. The committees are a more recent development, or at least their current extent, although rather crippled by their members' party loyalty (illustrated by the Hutton inquiry, in which a non-partisan investigator with none of the committees' powers revealed far more information far more quickly than any parliamentary committee in living memory). Debates, in contrast, tend to be of greatest import in times of crisis, particularly in time of war (the most crucial recent debates being at the start of the Battle of Britain, Suez, over poll tax and Iraq). Parliament is frequently ignored with contempt by government, but in times of crisis the government often relies on it for support and legitimacy. Interestingly, although Chamberlain won his debate on the pursuit of the war in May 1940 by 81 votes, since his nominal majority was 213 he interpreted the outcome as a vote of no confidence and resigned. In contrast, 139 dissenting Labour votes in March 2003 were not enough to force the government to back down over the Iraq war (despite a global protest on a scale without precedent in history).
Since the 1960s, parliament has become increasingly professionalized. Previously the institution had been designed to allow MPs to pursue their separate careers, and their pay reflected their amateur status. Over time the professionalisation of parliament has been considerable, partly to make it more accessible to mothers. Alongside the tendency for the 'Westminster village' to grow, providing everything that an MP needs, there is a feeling that this has increased the insulation of the commons from the public. It has also been a fashionable complaint of all periods that as an institution parliament is in decline. It is certainly true that over the last fifty years parliament has lost out to the media as a centre of debate, a trend which the Blair government has accelerated, routinely providing information to the media before parliament and particularly in the case of Iraq contriving to keep the debate in the media for six months before allowing parliament to consider it. Additionally, there is a tendency for parliamentary talent to come in 'waves' — there was a particular wave of talented politicians during and after the war, in contrast to the commons in the 1920s and 30s. Politicians are amongst the least trusted members of society, comparable only with journalists in the extent to which the public believes that they are lying (see the Veracity Index on pp12–13 and reproduced above).
The Lords, essentially, have no real power, and they tend to attract substantial criticism whenever they attempt to use what theoretical power they do hold. It is questionable whether this is a good thing or not: on the one hand, the process by which they are assembled clearly lacks any real legitimacy and yet despite this they remain a group of people with a different background to the commons that could offer an alternative perspective, some sort of check on the power of parliament (particularly a parliament with a large majority) — they should either play a significant role or else not exist at all.
Under Blair, hereditary peerages have ended altogether: like Margaret Thatcher, Blair prefers life peerages, which are mostly allocated by the PM and give the lords an even more crony-like air, full of friends of the PM and loyal party supporters. It is now more dominated by career politicians, lawyers, media professionals and Londoners than ever — the hereditary peers had offered one final lingering perspective of rural communities far from London, of amateur politicians involved in other things. Further reform is often proposed but nothing akin to a consensus can be reached, and Blair has been actively trying to block further reform. The removal of hereditary peers was not much resisted by those being removed — they have other means by which to protect the various laws that treat them very well and are traditionally keen to draw as little attention to themselves as possible. Their removal from the house has made it easier for them to keep a low profile.
The Queen takes her responsibility to impartiality very seriously, careful never to express a remotely political opinion. This impartiality restrains her exercise of power, and it is difficult to see how any other head of state could be so restrained by any other force than this sense of tradition and duty. It is claimed that there is a sort of power inherent in this role, “the power it denies to others.”1)
It is at any rate possible, that while this division of functions exists [between monarch and PM], a Hitler or a Stalin cannot come to power.
The heir to the throne is rather more outspoken, writing strongly worded letters to cabinet ministers that find their way into the public domain, but it cannot be claimed he has any pressing power. Perhaps the largest practical power attached to the monarchy is that of the honours system — and yet these are chosen principally by the PM. As time passes they have become increasingly political, rewarding ex-cabinet ministers and favourable newspaper editors.
We take democracy so much for granted in our country that we scarcely notice any more whether it exists.
—John Major, p45, citing Daily Telegraph, 24th October 2003
The very broadest arc of post-war history of the major political parties has been one of the gradual disintegration of the traditional interests from which they were built, gradually becoming
more like the Republicans in America, a coalition of shifting interests held together by the rewards of power.
—p48, referring specifically to the Thatcher government, although almost identical comments are made about Blairite New Labour
The conservatives had represented a patriotic collection of traditionalists that believed in institutions on all levels, from the family through the church to the monarchy and were united in their fear and distrust of socialism. They favoured the empire and were sceptical of Europe, and as a party they were fiercely loyal — as Galbraith has noted, a natural attribute of a conservative, not to be too quick to question its leaders and doctrines. But Thatcher took power in 1979 hating institutions and preaching individualism, challenging the idea that loyalty was a virtue or even that there was anything to be loyal to. She was convincing, and the party crumbled…for a while she replaced it, until she was deposed by a party that had had enough of her but had neither a replacement nor the party machinery to find or unite behind one.
Labour on the other hand stood for an ideal of socialism, and yet was composed of an often awkward combination of middle-class intellectuals, often Oxbridge-educated, and unionists who formed the great bulk of the party and were the source of its finance. They had rather different ideas of what socialism would actually mean in practice in Britain and were unable to lead a functioning economy in which the unions had enough power to create either inflation or strikes and the government had no means of controlling both at once. The traditional values of the party disintegrated in the desperation to regain power after 18 years of conservative rule — Blair took power using a framework of conservative and liberal policies that had seemingly no association with a traditional socialist framework, ignoring the opinion of party members and relegating their annual conferences to a professionalized PR spectacle. Membership of both parties has continuously and seriously declined since the war, each with around a quarter of a million remaining — in both cases a party membership far out of line with party voters (the conservative party is full of elderly Eurosceptic women, labour is still full of unionists). Both parties have failed to attract new members and can no longer afford to listen to what their current members think.
If democracy doesn't have local roots, it isn't democracy. You cannot have a parliamentary system based on political parties if across most of the country they have ceased to exist.
—Jackie Ashley, daughter of a Labour MP, 2003
There is no controversy in the observation that union power has declined drastically. The Labour party was originally an offshoot of union power, and during the post-war decades all governments consulted the unions regularly, understanding their power to disrupt the economy. Membership peaked in 1979, after which point they underwent a dramatic decline. Thatcher's strategies were to [a] destroy Britain's heavy industry, the core membership of the most powerful unions, [b] increase unemployment, [c] pass a raft of anti-union legislation, and [d] use it to break the miners' strike in 1985, a crucial symbolic victory. The tamed unions eagerly helped New Labour to power, desperate to see the Tories gone, but New Labour saw them as an embarrassing impediment that would put off the middle-class voters they had gained from the Conservative party. By Blair's re-election the unions were losing faith that New Labour was preferable to the Tories, and the leaderships of the major unions became increasingly militant, but aware of their much diminished power compared to twenty years earlier. However, the current union outlook is also startlingly different from forty years ago: what was once an insular, nationalistic institution distrustful of foreign workers stealing their jobs is now fiercely international, pro-immigration and anti-racism, having become intimately involved in pan-European union federations. They hold little power, but with their direct connection to and understanding of their large grass-roots membership, they are perhaps the institution most likely to democratise Britain if their influence were to increase.
Unlike other chapters, this focuses exclusively on the history of Tony Blair. It outlines his origins, as a religious, apolitical Tory-sympathising lawyer that had no association with socialist politics who fell in love with and married a barrister involved in trade union law and the Labour party. When standing for parliament and becoming an MP he had no serious political convictions, often enthralled by Thatcher's ideas. As he rose rapidly to the top of the party, he became increasingly obsessed by power and success, and saw the adoption of many Thatcherite policies as the most efficient means to steal ground from the Tories. Many in the Labour party were appalled by the notion of 'power at all costs' and the rejection of virtually all of Labour's long-term ideals and values, culminating in the rejection of Clause Four, which committed the Labour party to the common ownership of the means of production. In power he centralised ruthlessly, ignoring parliament, ignoring the unions even more, and stealing ground from the monarchy by acting increasingly as a head of state. He supported his roots, never challenging the legal profession, private enterprise or public schools. He ignored human rights and American Foreign policy. He continued broadly Thatcherite policies, picking up hints from Clinton as to how to sell them through the media to the middle class.
'I have taken from my party everything that they thought they believed in. I have stripped them of their core beliefs. What keeps it together is success and power.'
Whilst he was centralising (and talking about the importance of increasing democracy and giving more decision-making power to 'the people'), he was aided by the gentle collapse of various institutions that might otherwise have checked his power. Since most of his policies were Conservative, there was little parliamentary opposition, and the Liberal Democrats were marginalised by the technical operation of the parliamentary system. Blair's superior showmanship, particularly over Diana's death, marginalised the monarchy, creating a vacuum into which he has gradually encroached. Alistair Campbell's manipulation of the media was extremely effective, aided by the move towards 24-hour TV news, in which new headlines were needed every hour and Number 10 did a far better job of providing these on cue than parliament or (God forbid) The Outside World.2)
The cabinet contains 21 members, mostly ministers responsible for government departments. Each minister has a dual function, to administer their department as a sort of chief executive, and to defend their department's policy and actions to parliament. Cabinet, then, is a forum in which government policy can be discussed and coordinated. In the US, cabinet members can be drawn directly from the private sector. In the UK, they must be members of parliament, either elected MPs or they must be ennobled, which Blair has done particularly often. Many observers believe that the quality of MPs is in a long-term decline, and that this has created a lack of talent for jobs in government, which are ever-increasing as government has expanded over the 20th Century. “You have to find maybe ninety people to form a government.”3) It has often been a problem that a popular PM with a large majority has the power to dominate the cabinet, whose powers are not formally defined; in general, a cabinet is only able to reassert its power once the PM loses the support of parliament or country, as Thatcher did before her cabinet turned on her. However, Thatcher's dominance of parliament took PM-dominance further than it had previously been taken in peacetime, and Blair has taken it still further. He is assisted by the fact that so many members of the cabinet have very little political support — many are foreign or uncharismatic 'managers' rather than politicians with a lot of support in parliament or in the unions. Cabinets are often formed of odd little coteries, of aristocrats or Oxford economists; Blair's cabinet contains a lot of Scots and people from the North or who grew up abroad. Exceptionally, Alistair Campbell sits in on cabinet meetings, becoming essentially a minister for the media. Under Blair the amount of cabinet discussion and communal decision-making has dropped significantly; decisions are more frequently made within Number Ten and then announced to cabinet or to the press without discussion. Unusually, Iraq was extensively discussed, but much of the information on which decisions were being made were closely guarded by Number Ten and not distributed to the cabinet. The only other power centre as of 2004 was Gordon Brown, who is politically unable to challenge Blair's power until Blair's 'fatal mistake', like Macmillan waiting for Eden's Suez disaster.
It is an open question to what extent the civil service should possess an independent character and culture, acting as a counterbalance both to government and the private sector. Certainly the civil service during the Second World War and in the decades that followed did have a distinctive character relative at least to the private sector and population at large: of the senior positions, approximately three-quarters came from Oxbridge and four-fifths from independent schools,4) although the proportion (especially at lower levels) from grammar schools rose as they became more similar to public schools after the War. Such independence has a positive function, as an antidote to political short-termism and the over-centralisation of power, and a negative one, as in the pursuit of self-interest depicted in Yes, Minister.
The ability of the civil service to pursue interests independent of government was certainly curtailed sharply by Thatcher, and then even further by Blair, who both saw the civil service as an unwelcome check on their power. They were successful, reducing civil service numbers from 746,000 to 480,000 and selecting political allies to the top jobs in the service (a practice that Blair naturally attacked in opposition), with conscious respect for the American system in which such positions are politically appointed (as in most of the Third World). Civil service morale and the quality of its staff certainly fell in concert with these changes. The service has also moved closer in character and culture to the private sector, another transition largely begun by Thatcher, who had the unrealistic idea that the civil service rather than corporations were the main cause of relative British decline since the War, whereas in truth British corporations were no more a model of efficiency than Whitehall.5)
Up until the 1960s government set strict rules to delay the transition from public to private service, but the rules have been relaxed, and mandarins now switch over more swiftly into commercial jobs. Today there are well-worn paths between Whitehall and industry…
The result is a large number of former civil servants lobbying the civil service on behalf of corporations who have poached them for the purpose, which substantially enhances the ability of the private sector to influence government policy.
The main realm in which the civil service and government have a shared interest is in protecting the process of government from public scrutiny, and in this effort they continue to be very successful. Again, the secrecy that Blair attacked in opposition, he staunchly protected from all threats once taking office, and the civil service play no small role in the maintenance of this secrecy — a fact revealed as never before by the Hutton enquiry into the arming of Iraq.
The chancellor of the exchequer is unquestionably the second most powerful figure in government, and a strong chancellor has often been a catalyst in the demise of a weak prime minister. The Treasury has always stood apart from the rest of the civil service, with higher standards of recruitment, longer working hours and prides itself on much more rapid turnaround. In the decades following the Second World War, the Treasury was criticised for being staffed primarily by generalists, whose academic training was more likely to be in classics than economics, but this has changed in the last few decades, with economists becoming dominant. Criticisms remained of the staff as being well suited to policy formation and analysis, but hopeless at implementation. The more recent move towards taking more staff from the private sector has raised new problems common to other areas of the civil service: the “Treasury was so eager to accept the methods of businessmen that it seemed to forget its duty to control them.”6) The Treasury was terrible at running public corporations like British Rail, British Airways and British Steel, and was glad to be rid of them upon privatisation.
When one Treasury man who was responsible for dockyards wanted to visit one to see how it worked, his bosses were horrified lest he lose his detachment.
Brown extended the power of the Treasury considerably, taking control of a larger realm of policy space than any of his predecessors and gaining more invasive influence over other ministries, largely at the expense of other cabinet members. Aside from Brown's capacity and strong personality, this was largely allowed to happen because Blair gave tacit support, and refused ever to back other ministers' claims against the Treasury.
The Foreign and Commonwealth Office (FCO) has always been the most opulent branch of government, and over the last half century its network of extravagant embassies and British properties have become increasingly out of synch with its waning role in world affairs. British power has obviously declined relative to other powers, whilst the scale of FCO operations has not — despite mostly failed efforts to curtail its expenditure, most prominently by Thatcher and Brown. But further, its diplomatic expertise — which is certainly highly advanced, particularly when it comes to difficult linguistic and cultural contexts such as Japan, China and the Middle East — is becoming less relevant: relations between states are increasingly commercial, whilst the FCO's new rival DfID (the Department for International Development) now disburses far more money in Asia and Africa and has consequently greater influence over foreign governments, both directly and indirectly. One response to these threats is the increasing placement of secondees from large British firms such as BP, Shell, banks and construction companies, paid for by the companies themselves. This certainly responds to the private sector's call that the FCO should more actively promote its interests to foreign governments, but also raises questions about the proper role of the government in such transactions, especially in industries such as oil and arms.
The FCO and its global network of expertise has frequently been marginalised by the prime minister in times of crisis such as Suez, Vietnam and the Falklands — but never to such an extreme degree as under Blair. Over the years, Blair built up an entire nexus of advisors and special envoys recruited from outside the civil service, with no diplomatic background and with strong loyalty to him. The result, particularly since 11th September 2001, was that the prime minister's office was able to pursue a diplomatic policy insulated from the entire FCO system. This policy began as an oversimplified crusade of good against evils such as terrorism and weapons of mass destruction (again, isolated the more nuanced picture that FCO expertise may have provided), but ended as reflexive support for the United States, once Blair had personally bonded with George W Bush, both “very self-disciplined and religious” personalities.7) The result was a string of serious miscalculations over the Iraq war, both concerning military intelligence but also diplomacy — Blair had been certain that he would be able to deliver French support for a second UN resolution authorising war.
Blair's personal diplomacy, working through his band of advisors, was looking much more perilous. Many of the earlier warnings from diplomats in the Foreign Office began to seem all too prophetic, with British troops confronted by the intricate dangers of occupying Iraq, and relations with Washington growing more strained. Blair's persuasive skills had enabled him to survive many domestic political crises, but they were much less effective in the face of the complexities of an international crisis. 'He had never before been seriously tested in foreign policy,' said the American diplomatic commentator William Pfaff. 'The Iraq affair revealed that in such matters he is an amateur.'
—p147, citing International Herald Tribune, 30th August, 2003
British secret services are made up of: Special Branch, MI5, MI6 and the GCHQ. Special Branch is a component of the police force, reporting through the Home Office, established in 1883 to counter anti-British Irish groups. It retained responsibility for supervising domestic political activities. It remained a small force until the 1960s, but grew rapidly in response to growing political activism and infiltrated organisations like the Campaign for Nuclear Disarmament and National Union of Mineworkers, and increased in scale again in the new century in response to the perceived terrorist threat. The internal security service MI5 works closely with Special Branch.
The Secret Intelligence Service (SIS), also known as MI6, is responsible for foreign intelligence. It has long had an uneasy relationship with the FCO, as diplomatic postings have frequently been used as a cover for spying. Relative to diplomats, MI6 enjoys a greater freedom from protocol, the ability to use less conventional tactics and a larger budget.
Ambassadors resent reading reports from British spooks, wrapped in their own language about a 'trusted and reliable source' or 'a source close to the President', which they suspect may come from a lowly official or even a newspaper. 'I suggest that the whole system of intelligence-gathering is all too often prone to producing inadequate, unreliable and distorted assessments…' said Sir Peter Heap, a former ambassador to Brazil, in 2003. 'The whole process is wrapped around in [sic] an unnecessary aura of secrecy, mystery and danger that prevents those from outside the security services applying normal and rigorous judgements on what they produce.'
—p150, citing The Economist, 31st March 2001 and The Guardian, 2nd October 2003
Local MI6 chiefs may be closer to foreign governments than the British ambassador, but contrary to popular belief MI6 officials are often more left-leaning than their diplomatic counterparts; for instance MI6 befriended ANC exiles in Zambia when Thatcher forbade the FCO from making any contact with the organisation's leaders. GCHQ is responsible for analysing signals intelligence (eavesdropping and electronic surveillance) and relies heavily on its American counterpart, the National Security Agency (NSA) with a much larger and more expensive surveillance network. MI6, in contrast, is able to provide a more distinctly British analysis.
MI5, MI6 and GCHQ are coordinated through the Joint Intelligence Committee (JIC, pronounced 'jick'), on which the Treasury, Foreign Office and the Ministry of Defence are also represented. The reliable operation of the intelligence services has always relied on the independence of this committee from political interference that might induce intelligence agencies to provide analysis skewed towards established political conditions. This has always been a concern, but the committee's ability to provide an independent analysis failed much more comprehensively than ever before immediately prior to the 2003 invasion of Iraq. Unlike conflicts in recent history (such as the Falklands and the wider Balkan conflict), the justification for action in Iraq was highly reliant on intelligence, as opposed to well-known and uncontroversial facts such as the Argentine invasion or acts of genocide.
Prior to the invasion, MI6 had a much atrophied Arabist section, although still much more comprehensive than that of the CIA. The Iraqi threat and the quality of intelligence on it were exaggerated by Alistair Campbell in his reediting of intelligence reports, to which he then added plagiarised material from the PhD of an Iraqi exile, giving the impression that this too was the highly vetted analysis of the intelligence agencies. At the same time, information that harmed the case for war — such as the fact that MI6 perceived the invasion of Iraq would increase the likelihood that al Qaeda would obtain weapons of mass destruction — were not publicised, even though al Qaeda was considered a much more serious threat to Britain than the Iraqi regime. It was somewhat unfair to blame these 'intelligence failures' on MI6, since in large part they were distortions introduced by the prime minister and his advisors. MI6 does not report directly to parliament, but only indirectly through the prime minister, denying parliament the opportunity to use the testimony of MI6 to determine whether the prime minister is honestly portraying intelligence available to him.
[T]he most crucial danger that emerged from the Iraq war and the Hutton inquiry was the danger of politicising the intelligence services.
The war on terrorism (“if it is a war at all”8)) will require a significant reorganisation of the security agencies for the more sophisticated challenges of understanding “unseen enemies at home and abroad who are supported by religious groups”.9) They will also need to be less dependent on American intelligence, which has proved inadequate and whose interests increasingly differ from their British counterparts. This reorganisation in MI6's operations in the Middle East is underway.
Despite severe reductions in the personnel of the armed forces (by almost 50 per cent) since the end of the Cold War, the Ministry of Defence (MOD) has remained largely beyond the scrutiny of the Treasury. The MOD is still the second-largest governmental landowner, second only to the Forestry Commission. In recent decades, the government has succeeded in unifying an establishment that had once been very distinctly divided into three services, but this has increased the MOD's power and ability to resist scrutiny.
The services no longer battle against each other. Some may say we have united against the common enemy — Her Majesty's Treasury.
—Sir Charles Guthrie, p163
The MOD has to consider the influence of the substantial network of British arms suppliers, most prominently BAe Systems, who also have easy access to the prime minister, and scientists engaged in research into new British and foreign powers' weapons, of which the MOD is the country's largest employer. The latter have a strong tendency towards independent-mindedness instilled by their professional culture, as highlighted by the Dr David Kelly affair and Hutton's inquiry that followed. “It was suitably ironic that the enforcement of secrecy should lead to hearings which revealed more secrets about the workings of government than any investigation over fifty years.”10)
The armed forces themselves have proved remarkably adaptable and competent over the last few decades, have maintained the public trust more than any profession (with the possible exception of judges), and have remained consistently relevant, with a clear sense of identity and purpose. The reasons for their success are not easy to determine, especially given their internal devotion to anachronism and tradition, and their continued dominance by the public schools and under-representation by ethnic minorities and women. And yet:
When I lectured to senior officers I found them much more aware of the politics of developing countries than top businessmen were. And while the British army remained entirely separate from the British political scene, it was learning more about the realities of global politics than many politicians.
The forces have proved much better prepared than most foreign militaries in recent conflicts, including peacekeeping roles and Iraq. Comprehensive experience in Northern Ireland is an important reason for this: a conflict that posed enormous challenges common to most modern conflicts, and one in which a more subtle approach relying less on military might than learning to handle civilian populations in urban areas with sensitivity. “Very few American soldiers below the rank of NCO had been under fire before, while nearly all the British had considerable operational experience, whether in Bosnia, Kosovo or Sierra Leone — and most importantly had experienced urban warfare in Northern Ireland.”11)
The legal profession is more complex and obscure to the layman than most, and requires more basic explanation of its intricacies. But as a whole, the political influence of the legal profession is in long-term decline. Forty years ago it had much greater collective power to block change than today. At the broad level, it is also worth noting the stark difference in public trust and appreciation between lawyers (who have long been seen as untrustworthy and unaccountable) and judges (who are perceived as vastly more trustworthy than, say, politicians or ministers).
Solicitors naturally come under the most criticism from the public as they deal most directly with them. The number of solicitors in the UK has increased alarmingly by more than four times since the early 1960s. They are also the section of the profession most influenced by the American culture of enormous, escalating and illegitimate fees, particularly in the corporate sector but increasingly in billing government as the importance of human rights cases has grown.
Barristers represent a client in court, but deal exclusively with the client's solicitor. There are far fewer barristers than solicitors (perhaps one sixth as many), but they too have multiplied sharply: six-fold in four decades. They are more isolated both from the public and from commerce, with managing clerks handling the detail of their fees with clients. They live a collegiate lifestyle, highly concentrated in the Inns of Court in London. At any one time around 10 per cent of their number have been designated Queen's Counsel (QC) by the lord chancellor (at which point their fees rise).
Somewhat unusually when compared to other professions, these enormous fees do not last long, as top barristers are expected to become judges in mid-career — involving a pay reduction of approximately seven eighths and a great increase in respect.
The transformation of a barrister into a judge is the most extraordinary of all professional promotions, like a tadpole becoming a frog. The competitive and talkative advocate who thrives on one-sided arguments is changed overnight into the silent figure of authority whose duty is to discover the truth and reach a balanced judgement.
Judges are also selected by the lord chancellor. They have retained their reputations with the public much more effectively than politicians and show an independence from political pressure, but “that independence carries a serious limitation” — elitism. In 2003 “98 per cent were male, 84 per cent went to Oxbridge and 78 per cent had a 'full house' — white, male, public school and Oxbridge.”12)
The institutions of juries and magistrates both predate British democracy by some distance. The right to trial by jury is often considered one of the first targets of a tyrant in power, after subduing parliament. “By 1998 only 7 per cent of cases were allocated to juries, but the New Labour government sought to reduce them further.”13) The desirability of juries has long been debated. Some lawyers look down upon their lack of professional knowledge, whereas they are popular with the public precisely because of their immunity from lawyers' ways of thinking, and it is not uncommon for jurists to complain about the incompetence of barristers.
Lay magistrates, or justices of the peace (JP), are a more peculiarly British institution, and often considered shocking by foreigners. They are part-time amateurs with no formal legal training, who rely on clerks for advice on legal technicalities — and yet they deal with more than 90 per cent of prosecuted cases in England. Despite their lack of training, they are defended staunchly by judges, they are
a democratic jewel beyond price… In the eyes of the public they have one great advantage: they are free of the habits of thought, speech and bearing which characterise professional lawyers and which most people find to a greater or less extent repellent.
—Lord Bingham, p186
JPs have become much more representative of the population in recent years, unlike other sections of the legal profession, including judges in higher courts.
The structure of the higher courts is thus: there are 107 high court judges (excluding Scotland), 35 lords justice of appeal, and at the very top twelve law lords (or lords of appeal in ordinary), who provide the highest court of appeal, operating in a committee room of the House of Lords. In the past these latter have remained obscure, but have recently dealt with more politically sensitive cases, dealing with human rights and civil liberties. They are as unrepresentative as judges more broadly: in mid-2003 all were male and Oxbridge-educated (half from just three colleges), and only one had not attended a public school. Although they could not claim to represent, or know about, a large section of the population, nevertheless
They were mostly original thinkers, more liberal-minded and thoughtful than most earlier law lords, with a strong instinct for independence.
The power of the law lords to defy government depends to a large extent on the government's majority in parliament and public opinion.
The highest judge in the land has traditionally been the lord chancellor, with an extraordinary combination of powers: he sits in cabinet, is speaker of the House of Lords, appoints all judges including law lords and sits as a judge in the Lords. Blair made a hasty decision to reform the position, without consultation, which largely unravelled amidst a mess of objections and constitutional barriers. Reform in fact progressed more slowly: Blair appointed a close friend, Lord Falconer, as lord chancellor but the position still did not disappear, nor did the planned supreme court materialise (separate from the House of Lords, an institution common to all other constitutional democracies). Falconer pushed for the selection of judges to be handled by a judicial commission rather than an individual, although the judiciary protested, unnerved that a government showing authoritarian tendencies and an obsession with political correctness should be attempting sweeping changes to the constitution with apparently little thought or consultation. Despite their backgrounds, the law lords were “strikingly without political affiliations, and had no inhibitions about defying the government, particularly the Home Secretary” — whereas Falconer, despite his talk of openness and impartiality, appeared to be no more than an instrument of the prime minister.
The attorney-general (AG) is the government's legal advisor, and had responsibility for advising the government on the legality of the Iraq war (a protocol that has not always been respected in the past, such as in the case of Suez). The current AG is Peter Goldsmith, a close friend of Blair and long-term supporter of Labour. He appeared unsure, until he received reassurances from US AG John Ashcroft that action could be justified on the basis of UN resolutions 678, 687 and 1441. He presented his case in the House of Lords under heavy criticism, unable to do so before the House of Commons, where MPs accused government of “making up the law as it went along.”14)
The story of the power of academia over the last four decades has been one of catastrophic decline. In the early sixties academics were well paid, respected, fiercely independent of government, yet provided many cabinet ministers and independent advice. But academia more than most professions has been unable to resist the invasion of successive governments, most notably of Thatcher and Blair although the assault was certainly well underway before 1980. Academia was seen as elitist and undemocratic, an in particularly the luxury and detachment of Oxbridge made a natural target for anti-elitist reformers. Thatcher attacked the funding of universities and undermined the independence of universities, striving to introduce new management techniques and targets that were particularly unsuitable to the purpose of academia. John Major attempted to destroy the age-old division between universities and polytechnics in 1992, but in time the division reasserted itself, with polytechnics unable to obtain the 'critical mass' of excellent academics and students required to attract research funding away from more established universities, their aspirations towards less applied research died, and the nominal equivalence of degrees that replaced the division between degrees and diplomas was rejected by employers. New Labour saw that the proportion of entrants to Oxbridge from public schools had risen steadily from 38 per cent in 1969 to 45 per cent today — largely because of the destruction of the grammar schools that had previously been able to compete with public schools, not least by attracting the highest quality teachers, including from Oxford. Public school fees were rising sharply — Eton's had trebled over 40 years — and Blair reasoned that it was wrong for government to provide such a large subsidy to these students when they arrived at Oxbridge, stubbornly ignoring the obviously logic that such parents might be only too happy to pay if higher fees even further reduced dreaded competition from state school students.
In the face of determined cuts in funding, and massive long-term decline in academic salaries (from 3.7 times the manufacturing average in 1929 to just 1.5 times in 1989), the universities, particularly Oxbridge, proved unable to respond or even face up to the crisis in their financial position, and failed to develop a strategic response. The result is an underpaid, under-funded and thoroughly demoralised academic establishment, unable to compete internationally, stripped of its independence from government by invasive state management and no longer able to fulfil it's functions within society. Meanwhile the system as a whole has become no more democratic, and overall social mobility is falling. Foreign academics marvel at the meddling of the state: “'Until I came to Britain,' wrote the Swedish philanthropist Lisbet Rausing, a senior research fellow at Imperial College who moved from Harvard, 'I had never encountered double-checking of faculty grades, year-long procedures for approving courses or government forms on how faculty spent each hour of a sample week'”.15)
I doubt there are any internationally first-rate universities in Britain… Perhaps a few departments here and there.
—Shirley Williams, visiting professor at Harvard, p209
The reason is clear: Harvard's total endowment in 2001 was £13 billion, more than double the total endowment of all British universities combined, and one of the results is large British expatriate populations in Yale, Harvard and Stamford.
'Universities should bring crucial judgements to bear on the nature of their society,' wrote Richard Hoggard in 2001, 'and not simply aim to meet that society's asserted needs. They should make value judgements on the way their society is going.'
The more far-sighted mandarins in Whitehall still look to universities to bring new thinking to politics, but they find them too dependent on government to produce original ideas. 'When I went to Oxford in search of new thinking,' said one former head of the civil service, 'I found they only wanted to know about what the government is thinking.'…
The problems of global terrorism call for much greater expertise in foreign cultures and languages than diplomats or spooks can provide. The economic problems — whether of collapsing public services, unaccountable corporations or irresponsible pension funds — cry out for long-term thinking and analysis. The short-termness of politicians and the media…can be balanced only by confident scholars shielded from political and commercial pressures. But academia has become so dependent and demoralised that it can no longer play that role.
The media's power has increased markedly since the Second World War, and in various ways its has inherited power that declining institutions have lost. It is now a greater counterweight to government power than academia and even parliamentary opposition, and is no longer shy about proclaiming its own power.
Until commercial television was introduced in Britain in 1955, the BBC closely followed its mandate to provide programmes “'of information, education and entertainment' (in that order)”.16) Many were optimistic about the arrival of commercial channels, believing that they would “democratise” television, freeing it from the patrician elite of the BBC, and to this end, commercial broadcasters began life as small, regional organisations, each with a distinct identity. Others feared that, as in America, financial interests would quickly gain direct control of programming content. The optimists were quickly proved wrong, the preoccupation of commercial channels with ratings and advertising revenue leading to a focus on shallow education — although the mechanism by which advertisers exerted their control was far less direct than in the US. And the BBC felt the pressure to follow suit and mimic the more entertaining style of the commercial channels in order to maintain its ratings and thus justify its license fee. Over time deregulation (permitting the small regional stations to merge and to be sold to overseas interests) and the addition of new channels exacerbated the trend towards entertaining, content-free programming, including much more second-hand American content and avoiding serious news and efforts to inform.
By the strange laws of media competition, the more channels there were, the more alike they became.
Channel 4 and BBC2 — both introduced to improve the quality of programming, either through increasing diversity or a greater focus on serious subjects — soon came to closely resemble the established channels. British Satellite Broadcasting, dedicated to providing higher quality programming, was “one of the greatest commercial disasters in British history”17) and was bought out by a Murdoch company, whose success had been derived from buying up popular sporting events and mainstream movies. In the end, the main beneficiaries of commercial television were the advertisers, and the impact of television advertising on society has been immeasurably greater than the effects of commercial programming: “[p]eople's television had created television's people.”18) Commercial channels were crippled as a political force: rather than even pursuing the views of their owners, they've buckled to pressure from advertisers for light, entertaining programming that avoids discussion of serious issues.
A much intensified cult of celebrity grew up as a corollary of the trivialisation of television. Although intense fame, and even suddenly intense fame, was not an historically new phenomenon, the elevation of people that hadn't actually achieved anything outside the self-perpetuating world of celebrity certainly was. Yet those famous for being famous are the obvious candidates to provide entertainment free of any unwanted political purpose. By the 1990s, celebrities were having an even greater impact on the media, as their image managers demanded — and were granted — editorial control over content relating to their clients. Access to the most famous celebrities was only granted to those who could guarantee positive coverage, and the media's ability to tell the truth diminished. However, although part of this positive coverage imbued celebrities with supposed power, in fact they were constrained to conform to their manufactured personalities and avoid controversy, and virtually none had the imagination to attempt to use their fame for any discernible purpose.
The BBC remained as the only broadcaster with any commitment to serious coverage.
And this strange institution was to become still more controversial in the twenty-first century. It was full of anomalies. On the one hand it was self-enclosed, arrogant and largely unaccountable; on the other hand it was independent, professional and envied by broadcasters in many other countries. And unlike so many other national champions… it had remained thoroughly British.
As soon as parliament created the BBC it had developed a strong independence — in 1926, when the BBC was only four years old, Churchill had wanted government to take control of the broadcasts during the General Strike. The BBC had “angry showdowns” with both Wilson and Thatcher, but its biggest ever struggle with the government came in 2004, when Alistair Campbell began an obsessive campaign of criticism of the BBC's coverage of the invasion of Iraq (following similar attacks on BBC criticism of the invasion of Afghanistan). The BBC were “openly sceptical of military briefings and government statements and provided evidence for anti-war critics”:
Campbell bombarded [the director of BBC News] with letters of complaint, almost daily, many of them disputing the reports of the BBC's brash defence correspondent Andrew Gilligan. But BBC managers stood firm, and when the governors met after the war on 30 April the chairman… expressed his pride that 'the BBC's international reputation had been enhanced'.
Gilligan's claim that the government had publicised Iraq's “45-minute weapon” before the war whilst knowing it to be untrue lead to the Hutton enquiry and the suicide of Dr Kelly, Gilligan's source for the story. BBC governors had defended Gilligan without being told that the executive responsible for his work had described the story as “a good piece of investigative journalism, marred by flawed reporting.” Hutton concluded that “the editorial system that the BBC permitted was defective”.19) The BBC needed to both champion the interests of journalists as well as regulate them, and there were signs that it was poorly equipped to do so. And yet the prime minister's office was far more greatly damaged by the scandal than the BBC.
Alistair Campbell, the unelected official, had proved to be beyond control by the prime minister as he pursued his obsessional vendetta. In any trial of strength the BBC would always have more credibility than the government… While the BBC had exaggerated and distorted some allegations, it had played an indispensable role in revealing the truth behind the misleading dossiers which the government had used to justify the war. And at a time when the parliamentary opposition was hopelessly weak, the BBC with all its faults and unaccountability had acted as the most effective opposition during a crisis.
There are important problems with the concept of the BBC adopting the role of parliamentary opposition. The BBC had exerted a great deal of pressure to be permitted to film inside the houses of parliament, but once permission was granted they quickly lost interest. The BBC, and viewers, preferred to stage their own debates, grilling politicians in high-tempo interviews and avoiding long-winded expositional speeches the viewers and listeners found boring: “Today [BBC radio programme] had become the new parliament.” But the BBC “could not legitimately replace MPs as representatives of the people, as no one had elected them, and their role remained negative: they were never required to offer alternative policies… they were never questioned themselves, and they never intended to hold office”.20)
In December 2003, Today even put itself forward as a lawmaker, by asking listeners to propose legislation: 'a unique chance to rewrite the law of the land'. The winning proposal, backed by 26,000 radio votes, was for legislation allowing homeowners 'to use any means to defend their home from intruders' — which implied that they could kill burglars without penalties. The MP Stephen Pound, who was charged with presenting the law to parliament, quickly denounced it as a 'ludicrous, brutal, unworkable, bloodstained piece of legislation', and left no doubt about his views of the new electorate: 'the people have spoken — the bastards'.
Newspaper owners and editors have much more concentrated political power than anybody involved in television or radio, because the medium is free to lobby hard in favour of a preferred policy or “pursue vendettas” against individual politicians, as they are subject to none of the detailed regulation that applies to television. They are feared as a consequence, particularly by politicians, although often out of proportion to their real influence over the electorate. Press owners have been powerful people throughout the twentieth century, but they have often been “outsiders”, frequently attacking traditional institutions like the monarchy and civil service, as well as parliament and government.
Several key figures are worthy of mention. Rupert Murdoch is originally Australian but a naturalised American with most of his commercial interests in the US, including the Fox network. He owns the Sun, News of the World, Times and Sunday Times, as well as BSkyB. He is probably the most anti-establishment of the key press figures, but an extreme hawk on the Iraq war, and never really settled in the UK, avoiding ever paying tax in the country. Conrad Black, owner of the Telegraph until recently, is somewhat similar. Canadian, anti-EU, fiercely pro-Israel, he urged Britain to join NAFTA, and like Murdoch was right-of-centre on most social issues and politically closer to Washington than London. But Conrad overestimated his own political power, failing miserably in his professed mission to remove Major in 1995, and in 2004 was found to have stolen $223 million from the newspaper over six years. The two men once controlled more than 40 per cent of the circulation of the British press, presenting opinions that “did not represent the majority view of the English people.”21) The Daily Mail has been controlled throughout the twentieth century by four generations of Lord Rothermeres, casting a “special spell over politicians as the spokesman for 'Middle England'.”22) The Guardian has been owned by the non-profit Scott Trust since 1936, which purchased and ultimately rehabilitated the Observer from “Tiny” Rowland in 1993. The British media is a tougher market than most comparable countries, yet the left-of-centre Scott Trust papers have a more secure financial base and stable readership than their commercial rivals.
Individual columnists have risen in power so much that they are now frequently thought to be more influential than MPs — a view affirmed by those who have moved from parliament to journalism (Brian Walden, Michael Portillo, Matthew Paris, Roy Hattersley, David Mellor). Yet their influence is not matched by the level of respect they receive:
People at the top of nearly all of the institutions which I have revisited have depicted the overwhelming influence of the media as the biggest change in the power-structure over the last decades. But they mention the media more often with fear or dislike rather than with respect, and a contempt for their short-term horizons, their superficiality and destructiveness. And most journalists, however confident they sound, are inwardly worried by the limitations and insecurities of their occupation, which they call a trade rather than a profession.
The relationship between the press and parliament is similar to that of television: the press originally fought for the right to report secretive parliamentary debates, but a century later lost interest in parliamentary coverage, which it believed bored its readers: better for columnists to lead the debate. And the government's spin doctors were able to drip-feed news and leaks that better suited the modern format, even when this “news” lacked any real content. As with television, though, journalists' legitimacy in their perceived role as the new opposition to government is questionable. They are not elected, and never subjected to the same harrowing bullying that they inflict on MPs (and others), itself an important reason that the quality of parliamentarians has declined:
[T]he tabloids continue to harass politicians and public figures with a mercilessness which amazes foreigners, including Americans.
The discrediting of politicians was becoming a real danger to the democratic process, for it was discouraging some of the ablest men and women from venturing into parliament. The kind of thoughtful and public-spirited people who were found on both sides in the post-war parliaments were unwilling to sacrifice their private lives, and to subject themselves to the constant demands for public appearances and comment which the media now required in the twenty-first century.
The importance of commercial interests in news reporting remains remarkable. The type of muckraking investigative journalism that is routinely applied to the political sphere is seldom if ever applied to corporations, and “[t]ycoons and financiers, if they [agree] to be interviewed at all, [are] likely to be treated with kid-gloves rather than boxing gloves” that were reserved for politicians.23) Business news is well covered, but segregated from political news, and different standards are applied. Many professions that pride themselves on their independence have edged closer to corporate power in recent decades, and journalists are certainly amongst them.
In the 1960s, the City was still dominated by a hereditary clique of banking families. Of the seventeen investment banks licensed by the Bank of England ('merchant' banks in British English), there had been only one new entrant since the First World War. The sector chronically lacked dynamism, but was based on 'relationship banking', high standards of trust and integrity enforced by personal reputations, with the result that Americans were astonished by the lack of lawyers and litigation involved.
This landscape was changed beyond all recognition by two acts of the Thatcher government: firstly, the removal of foreign exchange controls in 1979 and secondly the 'Big Bang' of liberalising the banking sector for foreign providers in 1986, after which pressure from American and European banks reversed the traditional British modus operandi of the sector. Chair and board salaries skyrocketed, and even many of those that benefited most complained of the takeover of “ruthless money-values imported from America”.24)
By the end of the millennium the City was no longer a British institution. The old English families had retreated into the country and the City had ceased to be any kind of club. It was ruled not by the governor of the Bank of England or by the unwritten rules of trust and relationships, nods and winks, but by complex legislation which high-price international law firms were paid to circumvent.
The largest high-street bank in the country was now HSBC, which few people were even aware stood for the Hong Kong & Shanghai Banking Corporation, an ex-colonial bank that had made its money investing in China and had absorbed the Midland bank, previously one of the Big Four.
Salaries in the private sector — but particularly in the investment banks — outstripped to an increasingly exorbitant extent formerly comparable roles in the public sector.
'In the course of a single generation, at this elite level,' wrote [Andrew] Adonis [later Tony Blair's adviser], 'the status of the public sector has collapsed in favour of a narrow range of private sector professions.' And over three-quarters of the 8,500 top earners in the private sector were connected with the City. They had become a 'Super Class', as he called it, rivalled in their incomes only by a handful of pop stars, media personalities and sportsmen. 'The rise of the Super Class as a large and distinct group is inextricably bound up in the growth of the City…'
However, after the fall of Barings in 1995, the collapse of Enron and World after the turn of the century, and then the finding that the three largest American investment banks had been fraudulent, with the largest, Citigroup, ordered to pay $400 million, the gross dishonesty and lack of trust in the sector became a severe handicap, as investors lost faith and withdrew.
The success of bankers had always depended on their government being able to provide stable societies, a trustworthy system of law, and institutions which could ensure fairness and political continuity. 'The world's most successful economies,' added [economist John] Kay, 'have the most powerful governments the world has ever seen… The economic success of rich states is the result of the quality of their institutions.'
Historically, the Bank of England played a crucial role in the regulation of 'relationship banking', the governor acting as “the arbiter of City reputations, the guarantor of trust, the ultimate decider of what 'wasn't done'”.25) Thatcher's reforms made this role, as it had previously been performed, impossible. However, the Chancellor of the Exchequer had had the right to set interest rates until New Labour granted the Bank independence (as is the case in most advanced economies) in 1997, although the government retained the right to set inflation targets (currently at 2.5 per cent). But shortly afterwards, Brown stripped the Bank of its role as regulator of the financial sector, establishing a new Financial Services Authority (FSA) with 2,000 staff to perform this role, whose head was soon to be described by the Financial Times as “the world's most powerful regulator”.26) The Bank's 19-strong board is now much more representative than in the past, including “six women, two trades unionists, several northerners and others from outside the Oxbridge–London networks”27) — but has almost no power over the affairs of the Bank. In contrast, the Monetary Policy Committee (MPC), responsible for setting rates (now the only real function of the bank), is composed entirely of Oxbridge economists, many with links to the Treasury or City. This recent addition to the processes of the bank is saved somewhat by its transparency: minutes are published two weeks after each of its meetings, so that the votes of its members are public knowledge and subject to some degree of public pressure.
The meteoric growth of pension funds in the ownership of industry is one of the most significant post-war economic trends in Britain, and one that was barely noticed until it was complete. Ownership of British shares:
|1939 (per cent)||1998 (per cent)|
|Overseas investors (mostly institutions)||28|
As the size of pension funds have increased, fund managers have understandably become more involved in corporate governance, intervening to depose incompetent or corrupt CEOs and board members. This power has always been controversial, because it is the exercise of influence that has been given to the fund managers for quite different reasons, and yet if they refuse to influence the companies they have invested in on behalf of their pensioners this is seen as an abdication of responsibility.
In theory, there is a happy coincidence of interests between the pension funds and industry: both are ideally suited to a long-term planning horizon (of two or more decades). Unfortunately, the management of pension funds has become increasingly unaccountable to its investors, and worryingly has set itself irrationally short-term planning horizons, contrary to the interests both of companies and pensioners (but of great benefit to stockbrokers):
'Fund managers are often set objectives which give them unnecessary and artificial incentives to herd,' [Paul Myners, a fund manager] explained [in a report requested by the Treasury on the business], while the vague time-scale gave 'unnecessary incentives for short-termism'. Two years later, after share prices had fallen much further, he provided a more damaging analysis. He pointed out that the buying and selling of shares now cost £2.5 billion a year, which contributed nearly a billion pounds to stockbrokers, but 'there is no evidence that this huge payment — a tax on investors — yields a positive return'. And he asked the killer question: 'What if fund managers decided not to trade?' The consequences, he concluded, would encompass 'significant advances in corporate governance as fund managers made fewer stock bets'.
There have been two main reasons for the recent loss of trust in pension funds. In 1988 Thatcher introduced a reform which enabled 11 million people to opt out of their company pension scheme so as to buy a personal pension instead.
But three years later the Securities and Investment Board, the then regulator, published a devastating report that showed that nine out of ten of all new pensions were based on incorrect or misleading advice.
Historically, pension funds had invested conservatively, mostly in government bonds, but felt compelled to move into the stock market in the 1960s and 70s to keep pace with inflation, despite the risks. Unfortunately, few fund managers anticipated the massive 21st century decline in the stock market, which lost 45 per cent of its 1999 value, some £700 billion, by mid-2003 — the biggest decline since 1930.28) In the face of this fall, various funds could not meet commitments made to their members, leading to criticism from members and legal challenges (but certainly no decline in executive pay).
John Ralfe, who had been in charge of corporate finance at Boots (whose pension fund had shrewdly moved out of shares before the falls began), warned in 2003 that it was probably only a matter of time before a large company scheme collapsed. He summed up the basic problem: 'People who understand pensions don't understand the big picture, and vice versa.'
|Company||Date of privatisation||Sale value|
|British Telecom||1984||£16.1 billion|
|British Gas||1986||£7.8 billion|
|British Petroleum (part share)||1987||£6 billion|
|British Steel (later Corus)||1988||£2.4 billion|
|British Airports Authority||1987||£1.2 billion|
|British Coal||1994||£926 million|
|British Airways||1987||£854 million|
Disappointment with the extent to which the boards controlling public utilities were subject to public control dates back to their initial nationalisation following the Second World War. But in the 1970s voters across Europe became increasingly dissatisfied with the bureaucracy and over-manning associated with nationalised industries. Thatcher offered the answer: 'popular capitalism', transferring the public utilities to private hands, enabling shareholders and the discipline of competition to hold the utilities' boards to account. Initially at least, share ownership was unusually diversified, as the market was unable to absorb such large share offerings (particularly BT and British Gas), and high visibility television commercials encouraged many small shareholders to purchase shares, which were deliberately undervalued. But many of these sold after a quick profit, and over time, ownership of the 'privatised' companies (a term coined by the British) became ever more dominated by the pension funds and insurance companies.
The broad trends across most of the privatised industries were as follows: a rapid and massive escalation of board salaries, large-scale redundancies, increases in foreign ownership, steadily increasing consumer prices, and little improvement in consumer service. The latter two seemed to some extent to be linked to the new companies' acquisitive focus overseas, often in America or developing markets, neglecting the domestic business. The railways quickly became unsafe as private contractors botched work, and several rail crashes followed until the government cut financial support to Railtrack, effectively bankrupting the company, and replaced it with a non-profit called Network Rail. British Airways used dirty tricks to limit competition from new rivals, clashed with staff in high-profile strikes and bribed all parliamentarians with free first-class tickets and donated funds to the Tory party until Virgin was granted new air routes. Ultimately its market value fell below that of budget airline RyanAir. British Aerospace, becoming BAe Systems, remained the largest arms manufacturer in the UK, and managed to retain the support of the army and the Foreign Office in closing foreign deals, whilst questions about the credentials of its customers were answered by the foreign secretary, BAe being largely beyond parliamentary scrutiny. The company has routinely been involved in scandals involving bribery of foreign officials, and is (like many of the privatised companies) increasingly foreign owned, involved in foreign partnerships and targeting foreign consumers, particularly the lucrative American market.
The chapter contains an individual history of each of the largest twenty corporations not covered in the previous chapter.29)
The largest trend over the last half-century is the internationalisation of British (especially English) business and management. The globalisation of business is not unique to Britain, but that is only one component of the trend. Another is the takeover of boards and upper management by foreigners, which is substantially more marked in England than elsewhere: Britain has twice as many foreign chief executives amongst the top twenty than France, four times as many as Germany, and even the term 'chief executive' is an Americanism that has firmly replaced the British 'managing director'. Throughout the world, foreign executives have proved more able to take 'tough decisions': to launch programmes of restructuring or downsizing, due to their lack of sensitivity to the claims of their employees and consumers, but this seems to be particularly acute in Britain:
I have found it hard to escape the well-worn explanation that they have continued to suffer from their traditional class divisions, which provided over-confident amateurs at the top, with a lingering dislike of trade and commerce, separated from the professional managers and technicians further down — whilst foreign businessmen arrived unimpeded by social inhibitions, and ignored or bypassed the tribal distinctions.
Although there has been relatively little change to the formal structure of corporate governance, this trend has nonetheless made boards less responsive to consumers and employees, and severed traditional modes of accountability to society more broadly.
Despite the retreat of the old families that had traditionally controlled large English industrial combines until after the war, the current establishment of British executives is not significantly more diverse, drawn from an incestuous pool of talent that has risen through the same few large corporations, educated in a handful of business schools, with a highly homogeneous background and outlook and less intellectual rigour than, say, their French equivalents.
The most significant failures, notably the chemical combine ICI and the electrical company Marconi (formerly the General Electric Company), can be traced to a disinterest in the actual business in which the companies were engaged — directors seemed more interested in juggling the sale and acquisition of business units in which it was assumed that a detailed knowledge of their particular markets or an interest in long-term investment in an industry were superfluous:
Britain's two leading manufacturing companies at the beginning of the nineties — ICI and GEC — where both wrecked by a process of meta fund management: the role of the corporate executive was to be the buyer and seller of a portfolio of businesses, just as the investment manager sees himself as a buyer and seller of a portfolio of stocks.
—John Kay, 2003, p301
The most notable change in the backgrounds of chief executives has been the triumph of accountants. Some 41 per cent of the chief executives of the top hundred companies in 2003 had risen up through accountancy or finance, compared to only 24 per cent in 1996.
An accompanying trend has been the ongoing reduction of competition at a global level: from eight firms dominating the global industry in 1990 to five in 2000, and then four following the inevitable collapse of Arthur Anderson after that firm took the blame for their failure to effectively audit both Enron and WorldCom. After Arthur Anderson, the only major American firm in the market, collapsed, the remaining firms, all having originated in the UK were as follows:
|Company||Fee income||No. of UK partners|
|Ernst & Young||£722 million||411|
Although failures in the UK were less serious than Enron and WorldCom, and the British accountants themselves were less aggressive and bound by more substantive rather than mechanistic regulations,30) nevertheless the growing influence of accountants in corporate life was accompanied by a worrying rise in corruption and an ironically diminished accountability. Accounting firms that audit corporations are supposed to represent shareholders against corporate management, but in reality auditors are chosen by management and rubber-stamped by shareholders and there are various conflicts of interest. The same accountancy firm is permitted to sell advisory services to the same corporate client at the same time as auditing on behalf of shareholders, and due to the chronic lack of competition, the same accountants frequently provide services to both sides in a transaction. This became a particular problem for the private finance initiatives (PFIs) under New Labour:
In 2002 the big union Unison found forty-five cases where an accounting firm was both advising a public body and auditing a member o the consortium which won the PFI contract. “We live in a brave New Labour world”, said the union's general secretary Dave Prentis in September 2002, “where the Big Four accountancy firms, involved in PFI schemes worth billions, make millions from their consultancy work advising government, advising the consortium bidder and auditing bids.” It was, he said, “a web of deceit bordering on corruption. Some senior accountants, I found, were also shocked that the government should allow such an obvious conflict of interest.
So far British firms have been successful in resisting attempts to prevent the same firm from providing audit and non-audit services to the same company at any one time.
With 250,000 qualified accountants, Britain has more accountants than the rest of the EU put together, and one of the highest numbers of accountants per capita in the world. This unparalleled investment in economic surveillance has failed to deliver better corporate governance, company accounts, audits and freedom from frauds of scandals. Yet the ranks of accountants continue to swell.
—Prem Sikka, professor of accounting at the University of Essex, 2002, p325
The image of company directors has changed radically in forty years, from being disliked, attacked or ignored to wooed and flattered — even a media critical of their increases in pay is a lot more attentive and flattering of success than previously. However, they are emerging as a new establishment: isolated from those outside their group, remunerated with ever-increasing extravagance, and impervious to outside accountability.
The new members show the ability which characterises any successful establishment, the ability to look after their own. They can reward failure no just with money, but with continuing reputation and alternative employment. When a member fails in one job, he can soon turn up in another. When Sir Robert Horton was fired as chief executive of BP, he took over Railtrack. When Gerald Corbett failed as chief executive of Railtrack, he became chairman of Woolworths. Directors associated with industrial failures, such as Charles Miller Smith of ICI, John Mayo of Marconi or Peter Job of Reuters, soon pick up other directorships. The familiar British pattern, of closing the circle at the top, has re-emerged in the boardrooms.
Directors have become more self-contained and interlocked with other companies, inhabiting a narrow world of their own — as many of them admit. In November 2002 the head-hunters Bird & Co. interviewed a hundred directors including chairmen and chief executives, who gave their own devastating picture of their colleagues. They said that too many were cronies, lazy, too busy or incompetent, and that they were often part of an old-boy net with too narrow a 'gene pool'. Too many lacked independence, whether because they favoured the existing management or because they needed their fees. Many of the directors complained about 'grandees' on boards with 'a fistful of non-executive directorships who tend to be well regarded by the establishment'.
The failure of non-executive directors has played an important part in the trend of directors overcoming all constraints to their actions and remuneration. Non-execs are intended to be outsiders, independent of the management of the company, representing shareholders and providing a fresh perspective. But increasingly non-execs are drawn from within the same ranks as executives, and are beholden to their chairman and chief executive for their appointment. Non-execs were often retired military, diplomats, ministers or lords, but all except the last have proved ineffective in the role (right-wing pro-free-market politicians deserving special mention for their failure in the business world: “The New Statesman warned shareholders: 'Steer clear of the hangers, floggers and swivel-eyed free marketers.'”31)). A couple of hundred lords retain directorships, but many were in business before they became lords.
Directors' recklessly spiralling pay is one of the strongest indications of their ability to resist critical power centres within society, of which there are many, and will be the source of any future challenge to their power should one materialise.
By 1998 the average pay of the highest-paid director (according to the TUC) had gone up from £204,000 to £313,000 (excluding fringe benefits and incentive plans) over the previous three years — sixteen times the pay of the average employee. 'A company director who takes a pay rise of £50,000 when the rest of the workforce is getting a few hundred is not part of some general trend,' said John Edmonds of the GMB union. 'He is a greedy bastard.' In fact Edmonds soon turned out to have underestimated the gap between top and bottom. By 2003, according to the Association of Chartered Certified Accountants, the heads of the top hundred companies were receiving eighty times the salary of their workers.
The only serious report proposing significant changes was written by a respected banker, Derek Higgs, at the request of Gordon Brown. Based on interviews of 700 outside directors he found
they were 'narrowly drawn': almost half… were recruited through personal contacts and friendships, and only 4 per cent had had a formal interview… He was concerned about the number of 'ageing white men'… among the boards of the top hundred companies in the FTSE fewer than twenty were under forty-five; only 6 per cent were women; and only 1 per cent came from ethnic minorities.
He advocated strengthening the role of outside directors, making them entirely independent of the chair and chief executive, answerable to shareholders, including a 'senior independent director' that would provide a point of contact for disgruntled shareholders. They should meet once a year without executives present. Chief executives should not be allowed to be chairmen and nobody should chair more than one large company. The proposals were angrily criticised by directors and show little possibility of being implemented.
When I talked to Higgs a few months later he retained a sense of humour about his battering, but he did not conceal his impatience with the lack of political awareness and restraint among his noisier colleagues. 'They're unseemly — they're trying to wreck it. I tell them: “There are only ten thousand directors of major companies, facing a whole elected government.” And he was distressed by the self-deception of so many directors: 'When they've reached the top of the greasy pole, they all like to think that they deserve the money, that they're real entrepreneurs. They behave as if they're the owners, and forget that the company belongs to the shareholders.'
The new upper class, or the 'Super Class' as Andrew Adonis called them, still contain a number of aristocratic families, but the majority are self-made fortunes: “corporate directors, bankers, brokers and the top lawyers and accountants.”32) Their attitudes are somewhat different to those of the old upper class, in particular that they are less philanthropic, less bound to their communities, and they view themselves as a “genuine meritocracy, who have acquired their wealth and advantages through brains and hard work.”33) In several respects, the new century has more in common with pre-1914 Britain than the intervening period.
The first world war had undermined the immunity and confidence of the rich. Between the wars their lifestyle had been diminished by higher taxes and economic crises, while the progress of global capitalism was halted by protection and recession. After the second world war they faced continuing austerity, still higher taxes and constant fears about socialism and communism. But by the 1980s lower taxes gave them much greater scope, while the end of the cold war in 1990 brought a sudden expansion of the global market-place which allowed investors to benefit from the world's resources, on a scale which the Edwardians could only dream of.
One indicator of the trend was the exhaustion of supply of country mansions in the home counties. A few decades earlier, traditional country houses, in a state of continual disrepair, had been sold for rock-bottom prices, but were now selling for millions and lavishly restored. John Gummer, the last conservative environment secretary before 1997 passed legislation permitting “mansions of architectural distinction” to be built in areas of countryside where no other residential buildings would be permitted (a law that Blair's government did not revoke).34)
The most striking architectural monuments to the years of New Labour were not public buildings or housing estates, but rich men's mansions, a giant gherkin in the City and an empty dome in Docklands.
At the start of the twentieth century the Liberal party were threatening higher death duties and income tax peaked at 95 per cent after the second world war, but the political and economic threat to the Super Class is much diminished. Income tax is limited at 40 per cent, the tax system bias against unearned income has been largely reversed and death duty is much diminished (the conservatives considered abolishing it), enabling the rich to establish their children and grandchildren as a viable rentier class as has not been possible for several generations.
Unlike the pre-1914 upper class, and also unlike their American equivalents, the British Super Class shows little interest in philanthropy. The poor give a proportionally larger share of their income to charity than the rich, although Americans given more to charity than the British in general (2 per cent of income compared to 0.6 per cent). Perhaps this is partly due to the different perception of the role of the state, with the British government playing a far greater role in providing health and education, but this attitude may already be outdated as the welfare state itself is in decline.
Above all they feel much less need than their predecessors to account for their wealth, whether to society, to governments or to God. Their attitudes and values are not seriously challenged by politicians, by academia or the media, who have become more dependent on them. The respect now shown for wealth and money-making, rather than for professional conduct and moral values, has been the most fundamental change in Britain over four decades.
Over the last forty years, there have been fundamental shifts in the centres of power in Britain. Blair followed previous leaders closely in taking up several crusades, including the push for 'democratising' reform and a continued attack on the Establishment. But the results were somewhat different to what might have been expected.
After New Labour promised to democratise Britain the House of Lords was more dependent than ever on patronage, while its average age went up by two years. The old aristocracy was richer than ever, while ordinary British people were less socially mobile, not more. The public schools were more dominant — and much more expensive — while state education had declined further. Tony Blair, who had campaigned against Thatcher's policies, was now reckoned to have produced a more Thatcherite younger generation.
The decline of the traditional Establishment (and the rise of its successor) was more or less complete by 1970, and yet the attack on the idea of the traditional Establishment continues to this day. “In journalism, art and literature no newcomers could make their mark without showing themselves to be anti-Establishment”35) — and yet in so many cases, these 'anti-Establishment' voices were firmly rooted in the new elite (such as media barons). And despite critics' depiction of the Establishment as a “close-knit conspiracy, bound together by the same schools, colleges and family connections”36), it had nevertheless performed a more benign function that has not been inherited by its successor.
As Henry Fairline, the journalist who first popularised the word ['Establishment'], argued: 'Men of power need to be checked by a collective opinion which is stable and which they cannot override: public opinion needs its counter; new opinion must be tested. This the Establishment provides: the check, the counter and the test'. In fact the heads of Britain's established institutions were far from cohesive, and common backgrounds often concealed deep rivalries and differences. The old universities, the law lords, the Lords, the Commons and the Church all inhabited very separate worlds with different interests; and many people saw this diversity and pluralism as providing the sturdiest shield for British democracy, perpetuating an informal separation of powers…
The law lords could deliver devastating judgements on the government's abuses of power, which no minister could suppress. The House of Lords, for all its natural conservatism, could still produce original and independent views to compel the House of Commons to think again. The prestige of the monarchy, with all its pomp and ceremony, prevented the prime minister from acquiring too much splendour. The 'wise men' of academia could provide a much longer historical perspective than short-term politicians. Civil servants were bound by their own professional standards to resist party-political corruption.
Whether ideal or not, these institutions were able collectively to represent alternative interests and provide a counterweight to the power of government and the prime minister, and the continued assault on 'the Establishment' that had largely succeeded in reducing these institutions' power by the 1970s created a vacuum that the 'anti-Establishment' voices had no idea how to fill (not wanting even to admit that the Establishment's power was in decline, too useful a rallying cry was it proving).
Blair was determined to reform old-fashioned institutions, but he seemed less sure of what to put in their place. He expelled the hereditary peers from the House of Lords, but opposed an elected chamber. He announced the abolition of the lord chancellor but had not worked out an alternative. He made an issue of top-up fees for students, but gave no clear picture of what kind of universities he wanted. The old guardians of institutions, with their self-serving rituals and resistance to self-regulation, were easy targets, like fox-hunters, for any politician in need of a popular vote. But working out a more democratic alternative was more difficult.
The result during the reign of Thatcher and Blair was accelerated centralisation, with the prime minister's office and treasury exerting ever-greater power over Whitehall, and Whitehall exerting greater power in turn over public services and local authorities.
At the heart of this exertion of centralised power was the concept of 'accountability'. The project aimed to make public services more accountable to the public by measuring their performance with systems of targets and budgets, more like private sector enterprises. But the new system failed. Firstly, the new controls undermined those institutions' sense of responsibility, handing yet more power over to the centre. But more fundamentally,
It could not measure all professional standards through statistics, and awarding marks for productivity — to hospitals, schools or universities — could easily ignore the problems of doctors or teachers struggling with impossible local problems, or the long-term achievements of researchers or could not show immediate results. 'If we want a culture of public service,' Onora O'Neill complained in her Reith lectures in 2002, 'professionals and public servants must in the end be free to serve the public rather than their paymasters.'
These crude systems of accountability could easily undermine existing trust in the institutions to which they were applied, and it is notable that the institutions that have retained public trust are those that were most impervious to these 'democratic principles': the armed forces, the BBC, the judges and law lords, the Bank of England and even the monarchy — all are much more highly respected and trusted than politicians and businessmen.
'The more open a system is,' wrote [Fareed] Zakiria [in The Future of Freedom in 2003], 'the more easily it can be penetrated by money, lobbyists and fanatics.'
The new elite, in overthrowing the old Establishment, developed closer ties within itself than the old Establishment had ever possessed — and emerged with a much more homogenous ideology.
'The establishment,' wrote Hugo Young in 2002, 'whether in politics, in business or in intellectual life, is all of one colour. There is little point in being anything else.'
The colour is the colour of money. The new elite is held together by their desire for personal enrichment, their acceptance of capitalism and the need for the profit-motive, while the resistance to money-values is much weaker — and former anti-capitalists have been the least inclined to criticise them, once in power. It was a change among Tories as well as socialists. Harold Macmillan had kept his distance from bankers — 'banksters' he liked to call them — and Ted Heath talked about the 'unacceptable face of capitalism'. But Margaret Thatcher's government was full of bankers, and Tony Blair said nothing about the greed in boardrooms or the abuses of corporate power…
George Orwell had characterised England in 1941 as 'a family with the wrong members in control.' The new Establishment had not necessarily produced the right members, but they were still in control; and it remained ironic that it had been left to New Labour to embrace the business world more warmly than any of its predecessors.
The conflict between influences from America and Europe has been a long-standing feature of the British political landscape. The increase of European influence has been curiously inexorable, with remarkably little deliberate support from the public (as in many other EU member states). Not only will the future of agriculture and industry largely be shaped by European forces, but the little-known Convention of Human Rights, conceived in 1950 before the European common market existed and through which British judges' decisions could be overruled by a court in Strasbourg, became even more influential with the 1998 Human Rights act, binding British courts themselves to the Convention's rules. Traditionally, British premiers had walked a fine line between the two powers, avoiding making any overt choice (the principal exception being Ted Heath, who doubted that Britain gained anything from its special relationship with America). However, Tony Blair dramatically broke with that tradition, siding with the US on the basis of a fanatical personal trust in the leadership of George Bush, effectively handing over the strategic determination of British foreign policy and defence to Washington:
It's a strange paradox in today's world that in some respects governments are less powerful, but at certain critical moments government are very, very powerful indeed, and the personal relationships between people are of fundamental importance, far more so than people can ever guess from the outside. You need to be able to know that you can trust the other person.
—Tony Blair, cited in Blair's Wars by John Kampfner, London: Free Press, 2003, p128
A rift emerged. “The Ministry of Defence and the intelligence services were pulled towards Washington; the Foreign Office towards Brussels. The City was increasingly linked to America, while many industrial corporations were coming closer to Europe.”37) But most politicians, as well as Blair, are drifting more towards the US than Europe.
The institution that must be re-strengthened if the current imbalance of constitutional power in Britain is not to persist is parliament. At present it is a marginalised institution that can barely attract sufficient talent to form a government, and its persistent failure in holding the government to account is periodically highlighted by enquiries such as Hutton and Scott who, like the Denning enquiry38) before them, exposed “the secretive workings of Whitehall which had made a mockery of the government's promises of more openness”39) far more effectively than parliamentary committees.
Looking back on the landscape of power which I have surveyed in this book, whether in the regions of government or of business, I find it hard to recognise it as belonging to the British democratic tradition, with its small clusters of self-enclosed, self-serving groups on the peaks and the populace on the plains below. The retreat of both the old Establishment and the rebels on the left has left a vacuum which has been filled by the masters of the market-place who can evade personal responsibility and pass the buck to each other. They can invoke polls, sales figures, ratings, circulations or profits, without reference to ethics or the society they are helping to create, and they can keep their heads below the political parapets, while the values of public interest and public service have been eroded by the emphasis on individual competition.
Shell had traditionally been seen as a paragon of managerial excellence; its more recent failures and decline in standards are attributed by one Shell personnel manager to[T]he two giant oil companies, for all their corporate power, could not in the end wield a decisive influence over British foreign policy. As Blair prepared for war in Iraq, both Browne [chief executive of BP] and Watts [board chair of Royal Dutch/Shell] were deeply worried about the consequences for their business, for much of their oil still depended on Arab countries, and they dreaded a return to the instability of the 1970s. Yet they could not prevent Blair going ahead.
overcautious recruitment, after the student revolts in 1968. “We didn’t get the best graduates. We were too arrogant, and we didn't understand the attitude shift.” The consequences were clearer thirty years later.