Nicola Hughes (NH): Could we start with when you first came into government, what was that experience of coming in as a minister like?
Lord Myners (LM): I came into government about a fortnight after the collapse of Lehman Brothers and I came into the Treasury specifically to work with the Chancellor of the Exchequer and the regulators on addressing the behavioural threats faced by the banking system and individual banks. So perhaps unlike other new ministers, I was confronted with a single item agenda: the banking system. I had nothing else to do really over the first six months except work on that. The issues involved were very similar to the ones that I had confronted throughout my business career: the adequacy of capital, oversight, governance, approach to risk, etcetera. So, it was quite an unusual first period in government for a minister.
Peter Riddell (PR): Just two things on that. How much forewarning had you had of the appointment?
LM: I had given the Government some forewarning in that I’d been to see both Gordon Brown and Alistair Darling when they were chancellors of the exchequer to share with them my concerns about what was happening in the financial markets – again, from both my business experience and also from my role on the Court of the Bank of England. I’d specifically gone officially to the Treasury to record my concern that the Bank of England was a monetary ivory tower which was not alert to what was going on in the banking system. I went to see amongst others, Nick Macpherson, the Permanent Secretary at the Treasury, to say words to the effect of ‘There are bad things happening and we need to be alert to that.’ I really had no warning then until I got the phone call from Number 10 Downing Street on about the 28th September asking me if I would become a minister.
I’d specifically gone officially to the Treasury to record my concern that the Bank of England was a monetary ivory tower which was not alert to what was going on in the banking system.
PR: You’ve said, for the first six months you were using all your business experience and so on. How much of that was as a minister or a ‘super adviser’? What difference did it make actually being a minister?
LM: I think that’s a very interesting question, because of course we did have advisers. We had the Civil Service and we also had the Bank of England and the Financial Services Authority and we had external paid advisers, who were frequently from the very same institutions that we were rescuing or had been involved in business with those we were rescuing. I was exercising ministerial authority, but I was under no illusions that I would not have been invited to be a minister for anything other than this role. I was brought in, in Gordon Brown’s words, ‘to be able to speak with the bankers eye-to-eye’, and not to be intimidated by them, and not to be drowned in data and industry terminology. I was the first House of Lord’s Treasury Minister for about 30 years. The Treasury had never really featured in the House of Lords and had been covered by a whip. I think you’d have to go back to Lord Cockfield to find my predecessor as a full-time Lords minister in the Treasury.
PR: Did anyone say anything about what you’d have to do in the [House of] Lords?
LM: No. Gordon said ‘You will have to go to the Lords, but it won’t take up much of your time and I will make sure that that is the case.’ That was not the case, because this was a very hot subject and therefore lots of questions were being put down in the Lords. I was given no preparation for the Lords at all and I found the whole experience quite difficult. At first I had to take a bill through the Lords very early on, I think it might have been related to Iceland. I rushed in and I made my speech and there was a hubbub going around in the House and I looked over and somebody was standing up on the other side. Nobody briefed me on what to do! [laughter] I was breaking all the rules about protocol and terminology, I’m sure. But I thought if somebody is standing up, I better sit down. It was Lord Forsyth and I think he interrupted me about four times during my speech until the Whip stepped in and said, ‘My Lords, I think we should allow the Minister to complete his statement’ – which was the same as having the towel thrown in! [laughter] And I then went off to have some food, because it was a debate that was taking place over several hours. Nobody told me where I could eat. I went into a room where people were eating and somebody beckoned me in and said ‘Come and sit with us.’ And I sat with these people and I realised after a while I was on a table which was for the Conservative members of the House of Lords! So I realised by the end of this evening that it had been one of the most humiliating days of my life. There was a lot I had to learn. [laughter]
Gordon said ‘You will have to go to the Lords, but it won’t take up much of your time and I will make sure that that is the case.’ That was not the case
Then, over time, I became more comfortable in the Lords, and I absolutely understand why ministers should be accountable to Parliament and why it was important that there should be a Treasury minister during a time when the Treasury was so involved in issues of national importance, which nevertheless stood outside the normal protocol that the Lords doesn’t get involved in matters relating to tax.
NH: You said that some of the issues you were dealing with when you first started were quite familiar from business, but what were the big surprises or the big differences about being in government as compared to the corporate world?
LM: I think ministers make decisions more frequently and at a lower level of importance than you would expect business people operating at the top of large corporations. I was struck by the number of files that came to me in which I was having to make decisions; and by the speed with which decisions had to be made. Material often came to the minister very late in the day, and while in theory there was an opportunity to reject, there could frequently be consequences which meant that rejection would be an extreme event. I was struck by the number of letters I had to write: I inherited over 1,500 unanswered letters from my predecessors. My private office said that when a minister believes that they are likely to lose their job, they ceased answering correspondence. I was also struck by the fact that nobody worked for me. There were characteristics of ministerial life which appeared to be very similar to business life, in that a director of a business will have a team of people working for them, but it took me a while to realise that the team of people who I thought were working for me, were working for the Treasury.
NH: You mean your private office?
LM: My private office. This came home most clearly when my excellent private secretary said she would be late the following morning because she had her annual appraisal. I said, ‘Nobody has asked for my input’, and she said ‘I don’t work for you. I work for the Permanent Secretary.’ That to me was quite a mind opener. I was also struck that being at the very bottom end of the ministerial ladder at the Treasury meant there were an awful lot of things that came to me because nobody else wanted to do them. My advice to one other businessman who later became a minister – after it was known he was going to be a minister – was amongst other things: ‘Make sure you have full control of your diary, because otherwise you will find all sorts of monkeying about, because you’re suddenly asked to make a speech on behalf of somebody else.’ In fact, I used to joke that about a quarter of my speeches started with ‘Firstly, can I say Alistair Darling apologises for not being able to be with you this evening.’ [laughter]
I used to joke that about a quarter of my speeches started with ‘Firstly, can I say Alistair Darling apologises for not being able to be with you this evening.’
PR: You gave a basic description of the Treasury working for Nick Macpherson. How did they view you as the guy who knew about the City and finance at a time when their own capacity had been pretty battered after Northern Rock a year before – so you were supplying expertise that they didn’t have?
LM: I was very fortunate that the people I worked with in the Treasury were extremely good. I knew a number of the civil servants, in particular Thomas Scholar and John Kingman, and I already had a very high regard for them and had developed a good working relationship with them both. So I don’t think it came as any surprise to them that I was appointed… it may have come as a surprise that Gordon had decided he needed a minister specifically to do this, but I don’t think my choice caused them any discomfort, because I had worked with them on various projects previously. I’d done a number of reviews for the Treasury and so I was a familiar face. I think early on they began to appreciate there were some things which I could do, which they as officials couldn’t – perhaps in being forthright. Fred Goodwin [then CEO of RBS bank] said that negotiating with me was less of a negotiation and more of a drive-by shooting! I don’t think a civil servant could have been as forthright as I was. Alistair [Darling], who was very much in charge of the whole thing, had a horrendously heavy diary. That’s why the junior minister then had to be the person who was in the very lengthy meetings with advisers and bankers.
I don’t think a civil servant could have been as forthright as I was.
NH: You mentioned being forthright as being one of the things that you could really bring, what else did you see as the main roles and duties of being a minister, particularly in that job?
LM: To give advice to the chancellor and the prime minister. To ensure that the decisions we took were consistent with the public statements we had made about protecting the stability of the financial system. To make sure that where public money was spent – and I still find it extraordinary that the whole programme, the support for the banking system required no parliamentary approval – it was spent sensibly. In this context we were making decisions that involved huge amounts of money on the basis of pretty inadequate information and a fair amount of sticking a finger in the air and guessing what would be approximately right. Looking back on it, I would say that almost every decision we took could have been better – but in aggregate it worked. We avoided the worst outcome, which was a complete collapse of the banking system, with all the consequences for society and the economy that would bring. I think I also was able to play a role in developing a joint line between Number 10 and Number 11, which proved to be a little more difficult than I had imagined it was going to be.
…we were making decisions that involved huge amounts of money on the basis of pretty inadequate information…
PR: Because that’s the time when the strain is beginning to open up between Gordon and Alistair?
PR: And then they got worse over your period?
LM: Well, I think the problem there is a classic one in the business world – we don’t on the whole think it is a good idea for the chief executive to remain on the board and become chairman. We don’t, because it inhibits the freedom of the new chief executives. In this particular case, Gordon’s knowledge of the subject was greater than Alistair’s, at first. Alistair impressed me enormously through his capacity – no doubt developed as a lawyer – to pick up a brief the night before and show a very good understanding of the issues the following morning. But Gordon was impatient, time was limited and at times Gordon was intemperate with Alistair.
PR: This is interesting, what you learned about where authority lay. Because reading all about it, it’s often a confusing mixture of where and how decisions were taken in that period. And you know, Gordon, Alistair, you had the Treasury people, you had the bank, you had the FSA, you also had Shriti Vadera [ex-banker, then a Cabinet Office minister] floating around too.
LM: Yes. Shriti was floating around a great deal. She was very well intentioned and she had her own contacts, well I think some people would describe it as back-channels, but there was so much going on that it was quite difficult for everybody to be operating on the basis of a common understanding and a common line. The authority ultimately lay with the prime minister. And our task was to ensure that the advice we gave him was good and would meet his challenges, and that the decisions, once made by the prime minister, were properly implemented in accordance with our understanding of what had been decided. I didn’t go to Cabinet. I was a member of the ‘New Economic Council’ set up by Gordon, which met in the Cobra war-rooms [Cabinet Office Briefing Rooms used for emergency committees] – which as a lay person was fascinating, but one visit would have been sufficient! [laughter] The New Economic Council was really just to manage external perceptions. There were a lot of people wanting to get involved or make sure their particular issues were properly taken into consideration from other ministries, as well as a wish from part of the Treasury to stay focused on the big issue. But, I mean, where did the real power lie? In many ways I think it lay with the civil servants. I think that they were the ones who worked out what needed to be done and they were the ones who then took that to the prime minister, the chancellor and myself. But it was collective decision making; collective, but informal.
PR: You mentioned the first six months were very focused on the crisis over that winter of 08/09. How much did you, looking in retrospect, think there was a kind of shelf life for outsiders coming in? You were brought in as an expert, someone who they knew already because you had contact as you said earlier with the Treasury on both reviews and also a member of the Court of the Bank [of England]. But there was a specific shelf life for Lords ministers – outsiders as opposed to the politicians who had been in the Lords for some time?
LM: Yeah. The general election certainly came at a good time for me. I would not have gone on after the election if Labour had remained in power. If there had not been an election, I think I would have probably gone to Gordon at about that time and said ‘I think I’ve done what I have to do.’ I was increasingly doing things which were outside my skill-set. Interesting things: I was going to Ecofin [Economic and Financial Affairs Council] meetings when Alistair couldn’t go. Occasionally I was doing press conferences on things which I didn’t understand – they were small incidences which the chancellor decided he shouldn’t have to address the media on, but I was whisked off to the Millbank Studios to do a round of interviews on this and that, general things going through the House of Lords. But I don’t think I was particularly well skilled to do that. I think I was reasonably well skilled to do what I did in the first six months.
So, I don’t know how long one should go on in a ministerial job. Do you say ‘I think this is a big issue, do we need ministers with specialist skills?’ We did in this particular area, because the risks of getting it wrong were very large, but we have very specialist issues relating to the environment, to climate, to health, to education, too. If we rely on the House of Commons to feed all those ministerial offices then we generally fill them with people who are experienced politicians, but not particularly experienced in the subject matter. And I think you wouldn’t organise anything else on the basis of having lay people decide upon these quite technical issues.
PR: You mentioned the advantage of you being a minister as opposed to an adviser, in the sense of you had authority, so you could eyeball. Often in the past the Treasury brought in people like yourself as advisers. But obviously your public role expanded as you just said. What was the importance of being a minister as opposed to you being made, say, a contracted adviser?
LM: I think you could have brought in an adviser and in many ways that was a significant part of what I was doing, Peter, but you then wouldn’t have been able to account to Parliament. And that, I think, was probably the critical trigger point in why it was a ministerial post. There was a recognition, even though Gordon had downplayed this point, that the whole issue was going to take up a lot of time in the Lords and they needed to have somebody who could speak at the dispatch box in the Lords and there was nobody on the Labour benches at that time who could have done it. Mervyn Davies [then Minister of State for Trade, Investment and Small Business] could have done it. He came a little bit after me. Mervyn and I used to meet occasionally for coffee and tear our hair out or laugh out loud at some of the complexities of working in government. It’s not an easy task. It’s not altogether surprising that the record of business people in government – over a very long period, going back to Sir John Davis [British businessman] – is not particularly good. And that’s for a number of reasons: one, I think we don’t understand the model of the way that government makes decisions. Secondly, we believe rather naïvely that all ministers are working to a common agenda with a common purpose, whereas in fact they are not colleagues at all, they are frequently competitors and there is little in the way of esprit de corps in politics, in government. Finally, we have a habit of telling the truth, which is known in the world of politics as a gaff! [laughter] So for those reasons, one observes that ex-business people have not been particularly good ministers.
…there is little in the way of esprit de corps in politics, in government.
NH: On the more positive side of that – so you said you brought the knowledge and the connections within the sector and you had the experience of it. Do you think there are particular skill-sets that business people bring as well?
LM: This is a very high-level generalisation, but I think business people tend to have a very structured way of making decisions and tend to try and work out what the best answer is. In politics, the measure and definition of success is far more complicated. So, for instance, throughout the Northern Rock issue, where I had been involved as a potential acquirer of Northern Rock, I had taken a leave of absence from the Bank of England in order to work on one of the proposals to acquire Northern Rock. It was very clear to me that one of the options for Northern Rock, nationalisation, had been ruled out for political reasons. It was the right thing to have done. In hindsight it would have been right to have nationalised RBS as well, but nationalisation was politically not acceptable to the Prime Minister. If we had nationalised RBS, we could have split it into a good bank and a bad bank and we could have spun the good bank back into a more conventional bank quite rapidly. That was ruled out even though the logic would suggest that was the right thing to do, because politically it wasn’t acceptable.
…business people tend to have a very structured way of making decisions and tend to try and work out what the best answer is. In politics, the measure and definition of success is far more complicated.
PR: That was the point I wanted to touch on. In your list of three things, you said decisions are taken in a different way. Is it just – very curious – well how much is it the way decisions are being taken different?
LM: I think it’s both. If you’re a business person, in the end, it all comes back to the share price. Incidentally, I think that’s wrong, but nevertheless that’s how most businessmen articulate the ultimate goal that defines their decision making. The mechanism by which decisions are made is also rather clearer in business – there is a clear and respected hierarchy. In government, there are ministers who in theory are more senior than others, but in practice they’re clearly not. I’m not bigging myself up in any way, but there were certainly ministers in the Cabinet who had less sway and less access to the Prime Minister than I had during that six-month period. There was hardly a day when I didn’t see the Prime Minister, generally with Alistair. I think a lot of decisions were being made on the hoof. That may well have been the circumstances. I have been involved in companies in crisis as well, and at that point the formality of decision making does tend to move to one side. If you’re in a crisis you have to move very rapidly. So my experience as a minister must always be seen in the context of the environment in which I was operating. It was non-standard. I think if you speak to some of my successors in the Treasury – because they then maintained the Lords minister in the Treasury – you will find that their work experience has been very different from mine.
NH: And what was the achievement you were most proud of during that time?
LM: Actually, I don’t know. I was a director of NatWest and I used to say my greatest achievement at NatWest was to move the alarm system testing from 10 o’clock on a Monday morning to 4 o’clock on a Friday afternoon, because it made people feel good when they heard it on a Friday, as opposed to debilitating when they heard it on a Monday, knowing they had another four and half days to go! [laughter] I mean, I think I made no lasting impact. There is nothing that’s happening in the Treasury now that they will forever say, ‘That was Myners’ idea’. I think I just rest my case on the fact that the building was alight, but it didn’t burn down. And I don’t for one minute regret having become a minister. I do question whether one should become a member of the House of Lords forever. I haven’t got a good answer to this, I don’t tend to go to the House of Lords very often, but I have not asked to retire. But I think maybe we should not have life peers alone, maybe we should have peers, who are – this is a radical change to the House of Lords – peers who are appointed in. If they are appointed as ministers, perhaps they should just be peers for a period of time.
…I don’t for one minute regret having become a minister. I do question whether one should become a member of the House of Lords forever.
PR: That might make it more difficult at reshuffles.
LM: Yes. Yes. I used to say to people, when they said ‘Why did you become a minister?’, that it was a moment of national crisis and there is a moment in all of our lives when a call is made, and we have to respond. People’s eyes glazed over when I said this. So I now say ‘I wanted to be a Lord.’ [laughter] – and they nod in immediate agreement, ‘I fully understand, well done, very clever.’ I don’t use my title, so that’s my own way of saying that that’s not terribly important to me. My business cards just have ‘Paul Myners’ on them.
NH: We usually ask people at this point how they dealt with crises, but you obviously came right into the centre of the storm and you had more than most. We’ve touched on some of this, but how did you feel that the machine worked in that crisis situation and what could you bring to it specifically as a minister?
LM: I thought the machine worked very well. The tripartite system, which had been established by Gordon, of the Bank of England, Treasury and the FSA had not been properly tested for a long period of time. And the individual characters did not have particular close relationships, so I think the tripartite had only met twice, in 10 years, at principal level. It was always held at deputies’ level. There was quite a lot of tension between the individual players over what their responsibilities were, particularly in areas where there was either an overlap or an underlap, and some areas which were being supervised by all three entities and some which we now recognise were not being looked at by anybody. But I think that when the bell went, when the crisis started, the three groups worked together extremely well. I would say in particular because there were new people at the FSA, so some of the ill feeling of the past had fortunately gone. And at the Bank of England, the Governor retreated into his private office and left things in the hands of more practically minded people, like Andrew Bailey [then Executive Director]. Likewise in the Treasury, I can’t imagine we could have had a better team of senior civil servants: not only [John] Kingman and [Tom] Scholar, but people like Nick Gilraty were just extraordinarily good. I was also very, very impressed by the quality of mid-level, fast-moving civil servants in the Treasury. We were constantly in meetings with investment banks where the investment bankers were earning millions of pounds a year and I had two young civil servants with me, who would consistently pick up the weaknesses in their proposals and who were earning probably £40,000 or £50,000 a year. And I can’t believe that those civil servants weren’t offered serious sums of money to leave the Treasury after the crisis quietened down, and they didn’t because they were dedicated to public service. I think this was absolutely tremendous. I can only speak of the Treasury, and people say the Treasury and Foreign Office are different, but I can only speak in the highest possible terms about the people who I worked with.
NH: And you said you were doing lots of firefighting, responding to the major crisis and then all the opportunities that came from it, did you have any chance to pause and think and to set in place long-term policies that would prevent further crises and those sorts of things?
LM: We did. We began to focus on a number of areas which have actually been largely implemented by the Coalition Government. We were committed to the old tripartite model. The Coalition Government was able to break up the FSA into the FCA [Financial Conduct Authority] and the PRA [Prudential Regulation Authority]. I don’t think that made a great deal of difference. I think that if tripartite didn’t work as well it should have done, it was because of the people. The answer wasn’t architectural, it was about behaviours. But we started work on capital structures, on living wills, on resolution procedures and I think there was very little that the new government did which we probably wouldn’t have done, had we remained in office. It suited the new government to emphasise the fact that the tripartite had failed and that they were bringing in a new structure and that for political reasons was a good argument, but not really as significant as they made it out to be. I got involved in a number of other policy areas, like housing. I was very concerned about housing and lending to housing, house prices. I was concerned about both the risk of the banking system as a result of reckless lending and reckless borrowing, but also about some of the underlying dynamics in the housing market, particularly the balance of supply and demand. However, at that point I ran up against the Department for Communities and Local Government who had their own view on these things and then fortunately the general election came, so I was relieved of responsibility.
NH: I was a housing campaigner at the time, so I won’t say any more about that! [laughter]
LM: I set up something called the Housing Council or something and I had regularly monthly meetings.
NH: Yeah I think that was the Home Finance Forum?
LM: It was something. Yeah.
NH: During the repossessions crisis.
LM: Yes, a massive number of people were struggling with mortgages.
NH: Working with outside groups beyond the immediate banking sector, how was that?
LM: Well, I found in dealing with lobbyists that there were people who were persistent in their pursuit of meetings, and in the end you could manage it by just having a very short meeting. All they really wanted to be able to do was to go back to their council and say ‘We’ve had a meeting with the minister.’ So sometimes it was convenient to play the game with them, and just say ‘We’ll have a coffee, 10 minutes’ – and I suspect that when they returned to their council this was made up into a rather more substantial ditty!
PR: And ‘The Minister’ having some kind of special authority!
LM: Yes. In fact, towards the end of my period in government we had a cocktail party or reception for the press at the Treasury and somebody from The Sunday Times said ‘Well, I suppose you are going to go back and line your pockets as a businessman, with all the contacts you’ve got.’ I said ‘I’m actually giving serious thought to doing a degree in theology.’ And so The Sunday Times ran it as ‘Minister to become Minister’. [laughter]
NH: Anything you found frustrating about the job?
LM: During the crisis period it couldn’t have been avoided, but what was frustrating was the constant intensity of focus on what you were doing. I was struck by how hard politicians work. I have talked about the quality of civil servants, I am not talking about the quality of politicians, but it’s an obsessive career, it dominates their lives. They have little downtime. And that blasted red box that used to come. I had a wonderful personal secretary who I stayed in contact with. At first I didn’t, my first private office was made up of people who nobody else wanted. And again that’s what my advice to Stephen Green [ex-banker and Minister for Trade and Investment 2010-13] was, ‘Make sure that when it comes to your private office, Stephen, you don’t just accept a team.’ You interview people, you say ‘For my private secretary I want three candidates’, whereas the tendency is for the permanent secretary to give you a ‘Here’s something I prepared earlier’ sort of candidate.
I found the red box very frustrating. That fear and anxiety that there was something in that box that you weren’t going to bother to read properly, you’d just initial it. And if we didn’t initial it, they’d bring back the paper immediately and say ‘Minister, you haven’t initialled it’ – and you think ‘Gosh, in 30 years’ time or so, somebody is going to find this initial!’ So this again would fall into the category of ‘In business, this didn’t happen’. I was chairman of Marks and Spencer, I wasn’t given a red box every night. I wasn’t asked to initial things to prove that I had read them and agreed them. I was shown big things and I wasn’t shown very many, but they were matters of considerable substance, whereas as a junior minister I was being invited to do things like approvals relating to investigations into money laundering, which required ministerial approval. I remember the first time I was given one of these, I said I didn’t feel the paper made the case and I needed more information. Then somebody from the intelligence services came to brief me. And what happened after that? I think the fact that I queried that one meant they all felt the need to put more detail in – the message gets back quite quickly ‘The minister will not accept a single page’. So I got more information, but I still didn’t really feel that I had enough to exercise the authority which was placed in the minister. Clearly, Parliament expects a minister to exercise his authority with considerable care. The reality of life was: it was in the box, it was about halfway down and it had to be signed, because it had to be signed. They would say ‘It needs to be done today’, because of a 28-day limit or whatever. And you would say ‘You knew that 14 days ago, why didn’t it come earlier?’ In business you wouldn’t accept this.
I found the red box very frustrating. That fear and anxiety that there was something in that box that you weren’t going to bother to read properly, you’d just initial it
PR: But just finally what would your advice be, you literally talked to Stephen Green, what’s your advice to a business person approached to work in government?
LM: Be clear what your role is and your reporting line. Be clear that you are able to sign up for what the government is doing – specifically in the area for which you are responsible, but also the general programme, because you will be required to speak on behalf of the whole government. Take control. Make sure, if you have the luxury of time, that you meet the senior civil servants with whom you will be working and also to have an involvement in selecting your own team.
I wouldn’t actually say getting to know the other ministers in the department was particularly pressing, because they are here today, gone tomorrow. They will not be your colleagues. We used to have what were called ‘ministerials’, which were weekly meetings with the chancellor, in which we sat around in his office and we told the chancellor what we were doing. He never told us what he was doing, and that was the only time the six Treasury ministers would get together and the meeting was frequently cancelled. Whereas in business, if we’d been the Childrenswear department in Marks and Spencer – which we then subdivided into babies, toddlers, school-aged children, male, female, outdoor, indoor – we would have got together every week, we would have had a general plan, we would have been coordinated. We would have been working to what we were going to do in the run-up to the new school term, what are we going to do pre-Christmas etcetera. We would have had – just a general coordination. I spent very little time with Yvette Cooper [then Chief Secretary] or Stephen Timms [then Financial Secretary]. We had one junior minister, and the permanent secretary could never remember their name! [laughter] He used to wave his hand and point in that direction!