Alan Watkins: Downing Street neighbours fall out

The Chancellor's differences with the Prime Minister do not augur well for the Government
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The Independent Online

When James Callaghan was Chancellor of the Exchequer, he did not get on with the Governor of the Bank of England. This was Lord Cromer, a City grandee. In those days there really were grandees, not obscure Tory backbenchers who had appeared on the Today programme. Lord Cromer was known by his friends and all who aspired to an understanding of financial matters as "Roley", spelled with an "e".

What the precise points of disagreement were between Roley and Jim I have now forgotten. It was more a case of general disapproval, even dislike. There was a row of some sort, probably several. Giving an account of the quarrel, Callaghan tapped first his nose and then his coat and said: "I have Roley's resignation in my pocket. And if you have a man's resignation you have him in your power."

I was greatly impressed. In fact Lord Cromer was succeeded by Leslie (later Lord) O'Brien in 1966, when Callaghan was still Chancellor. He finally resigned with devaluation next year, and was persuaded to stay on as Home Secretary by Harold Wilson. That, at any rate, was Callaghan's own story.

Any account of the relations between successive prime ministers and their chancellors would go on for even longer. Sir Geoffrey Howe created Thatcherism, she fell out with him over Europe, and he destroyed her in the House of Commons with the most potent political speech of modern times. Nigel Lawson resigned (contrary to political mythology he was not sacked) because he disagreed with Margaret Thatcher's exchange rate policy and because she insisted on retaining the late Sir Alan Walters as an adviser.

An entire book might be written about the relationship between Mr Gordon Brown and Mr Tony Blair. Indeed, a whole shelf-ful have already been published about what these two got up to in their spare time. We now have another tableau set up before our curious eyes. The Chancellor of the Exchequer and the Governor of the Bank of England have formed an alliance against the Prime Minister.

I am reminded of the occasion when the then editor of the Sunday Express departed for a short break. This was the monstrous Sir John Junor. I think he went off to receive instructions from Lord Beaverbrook in the south of France, for in the normal course of life he did not much like holidays. His brief absence proved relaxing, as people like to say these days. The man he had put in charge rebuked his subordinates: "Just because the cat's away doesn't mean you can behave like a lot of rats."

It would be wrong, incorrect, to describe Mr Brown's Cabinet colleagues in this way. Even so, in the past few weeks there has been a discernible change in the weather. On the Labour benches , there is a certain air of desperation. The idiot cries of "More, more" – a recent importation by the Government Whips, not Old Labour cheering at all – can try to render even Ms Harman a doughty orator.

To be fair to Ms Harman, I think she gives as much as she gets when she is up against Mr William Hague. As Mr Hague pointed out, she is the niece of the Countess of Longford, and therefore must be assumed to know something of inheritance tax.

Ms Harman chose to bring out the

ancient but trusty artillery of the class war. In fact the "millionaires" that she elected to excoriate, continued to be caught by Mr George Osborne's new limit.

Mr Alistair Darling slightly raised the limit and modified the rules to allow for deceased or separate (though not divorced) spouses. The measure was an exercise in panic by Mr Darling, who had carried out Mr Brown's instructions. Mr Brown also cancelled the general election on account of Mr Osborne's activities.

Mr Kenneth Clarke had already disturbed the waters by saying that the new Tory tax might not come about after all. Mr Clarke is unable to resist saying his piece. The Tory line is now, as far as one can tell, more than an aspiration but less than a firm promise for the Queen's Speech in the first session of a Conservative parliament.

Mr Clarke, though he can be tactless, is not a novice in matters political. His object is to draw a contrast between the prudent Conservatives and a Mr Brown who is spending less like J M Keynes than like Ms Viv Nicholson. She won the pools, promised to "Spend, spend, spend", and blew the lot. The difference is that Mr Brown did not even win the pools.

Throughout Mr Brown's period at No 10, there has been a divergence between the opinions of the political class and those of the voters. Apart from a month-long period in 2007, the voters have never taken to Mr Brown. The people who possess a closer interest in politics are, however, more subject to whim and caprice.

Every so often – about once every six months – a play, a musical or a performer from Britain triumphs in New York, or so the London papers claim: "Brits conquer Broadway", that kind of thing. In reality the Americans go about their business in the normal way, without bothering their heads about triumphs or disasters originating in Britain.

It was rather the same with Mr Brown in autumn last year. Even quite respectable papers claimed that Mr Brown had nationalised the banks, when it was perfectly evident he had done nothing of the kind. The Government, those same papers said, had assumed complete control, when Mr Brown and Mr Darling possessed as much control as the clerk of the weather.

Nobel prizewinners and mathematical economists, some of whom might belong to both categories, were displayed before us to testify to Mr Brown's sagacity and courage. Nor were the leaders of the European nations backward in coming forward to pay tribute to the Prime Minister of the United Kingdom.

True, the finance ministers of France and Germany expressed a little more caution, even hostility on the German side. That could not be helped. You could not have everything in this world. As it was, Mr Brown had come back from the edge of the pit and had saved the world. And where was Mr David Miliband and his banana these days?

All we can say is that it is not such a hopeful prospect for Mr Brown as it was six months ago. There are even some MPs (not, as far as I know, members of the Cabinet) who are prepared to contemplate a change of prime minister before the election. This is not serious politics, but Mr Brown endured a similar period in 2007-8 and lived to tell the tale.

It was Mr Mervyn King, Governor of the Bank of England, who coined the phrase "moral hazard" in relation to City activities. Or, if he did not actually invent it – I think it may have been some American – he popularised it in his evidence to a select committee. Mr King had not previously been much of a one for hazards, moral or otherwise. Mr Darling may turn out to be more of a handful for Mr Brown. Six months ago, whoever would have thought that?