They didn’t do budgets, never knew when there would be money for a £1 million monthly salary bill and ran on the basis that it’ll turn out all right. ‘Don’t worry’, the finance director was told. But he did – about the staff and the £13 million of private loans they could not pay the interest on every month and the dread that lenders would take fright and demand repayment. Bankruptcy and the ever-present threat of going into Administration kept him awake at nights.
So who were these people? Answer – The Labour Party and they were running the country. But, it was all right because nobody knew, not the Party Treasurer Jack Dromey (Harriet Harman’s husband), The National Executive Committee or John Prescott.
The Finance Director had newly taken over and he had no experience or qualifications in financial management.
A male nurse and Labour activist he had left nursing to take up a job as an organiser with the Labour Party in London. He quickly rose through the organisation and was appointed Finance Director in 2005 ‘a job I had never wanted and would probably have run a mile from accepting had I known what it would entail.’
His doubts about whether he was equipped for the role were real and he had no idea about the portfolio of financial anguish he had inherited. His name is Peter Watt and we are taking a fuller post-publication look at his book – ‘Inside Out: My story of betrayal and cowardice at the heart of New Labour’.
To be fair to Watt he knew he needed help and that he would need to take charge of an impossible situation.
‘Right from the start, it was obvious to me that we had to cut jobs. However, Matt [the General Secretary] would not hear of it. You can make redundancies when you are General Secretary, but it’s not going to happen on my watch.’
According to Watt, the Labour Party had spent more than it had raised in nine out of the previous 10 years: ‘…for years we just spent and spent as if we had a credit card with no limit.’
There seemed no appreciation in the NEC or MPs or amongst Ministers that the credit card debt would have to be paid sometime.
At the end of 2005, Watt took over as General Secretary. He set about putting the organisation in order with a programme of massive redundancies, setting budgets, public transport not taxis and even cut the sandwiches when the NEC met.
He was within £500.000 of closing the budget when the ‘cash for honours’ scandal erupted and all donations vanished like snow off a wobbly dyke.
Angus McNeil, the SNP MP for the Western Isles, had started asking questions and made complaints to the Metropolitan Police and the Director of Public Prosecutions. Lloyd George had been caught at this before and a 1925 act making the ‘sale’ of peerages an offence was supposed to deter its happening again. People were questioned then arrested including Lord Levy the party’s main fundraiser.
Brown goes ballistic and Blair is prepared to take the shit
Meanwhile relations between No 11 and No 10 were going from bad to ballistic. Brown is supposed to have roared at Blair ‘I’ll bring you down with sleaze.’
Brown was clearly uncomfortable about donations from business supporters and found it difficult to relate to Labour’s big donors. A handshake and saying thanks was not on his agenda, but he was also concerned about the influence over policy from the union block vote and union financial muscle. Yet he was not going to support Blair in reforms because that might upset a key section of the party before he became leader.
Tony Blair is reported as saying despairingly ‘I don’t know why Gordon doesn’t just let me get on with it and I’ll take all the shit. We have to do it, we have to reform.’
After 18 months the Hayden Phillips review into party funding was over. The unions had won and cross-party talks collapsed.
Peter Watt had made it very clear to everyone that Labour Party finances were in a perilous state – a £30 million debt burden.
You might expect the Chancellor to have taken an interest, offered some advice, but his answer was ‘It will all be fine once I take over – millions of pounds will come in.’
Brown’s main concern was that he had money in HQ to conduct his own polling and pay for his own projects. ‘Gordon went to some lengths to insulate himself and the Treasury from our financial troubles, setting up his own personal pot of cash at party HQ.’
His only concern seemed to be that he was protected and could carry on polling. No question of relying on polling information from No 10. That would mean sharing resources and imply a degree of trust between Brown and Blair.
According to Watt, the money was out of bounds to HQ and he did not know how it was spent. But it must have appeared in the Party’s accounts somewhere.
In September 2006 things were coming to a head. Brown was becoming more agitated that Blair would not set a date for the long promised handover dating back to the 1994 agreement between them. Blair’s ratings were failing and PPPs (Parliamentary Private Secretary) started to resign.
No one was in any doubt that Brown was behind these resignations. Media speculation increased as further PPPs resigned. Blair knew he was vulnerable.
Peter Watt met with Blair and asked for 2 hours to conduct soundings. He phoned regional organisers to report on opinion on the ground and asked the call centres for feedback on issues being raised. Opinion was swinging firmly back to Blair as the resignations were seen as deliberate destabilisation of the government.
Watt delivered his report to Blair early that evening. Another coup attempt had failed. Brown backed down leaving Blair strengthened and able to choose the time of his going but he did now announce that the autumn party conference would be his last.
Excruciating moments
Brown knew he had fences to mend with staff at HQ. He arranged a visit and Watt writes-
‘It was all going quite well until he decided to do a tour of the office. He wandered around the big open plan office with a weird fixed grin on his face shaking hands with the staff and saying ‘Thanks for everything you do’, – over and over again.
‘…. As he approached people’s desks, they would stand up, accept the handshake and they would wait for him to say something else. Each time there was an excruciating moment while they waited for him to speak and he just stood there staring back at them, before moving on to the next person…’
‘…It was all very wooden and embarrassing, especially when he forgot who he had met and ended up shaking some people’s hands twice’.
Watt makes comparison with Blair’s easy style. ‘He seemed so stilted with none of Tony’s easy charm. By contrast, the Prime Minister was very skilled at making everyone who worked for the party, no matter how lowly their position, feel important.’
So Blair got the exit he had wanted and, after much manipulation, no one stood against Brown. ‘Gordon’s coronation was scheduled for Sunday 24th June 2007.’
Next came ‘The election that never was’ which we covered in an earlier pre-publication article on 12th January.
In the chapter, Fall Guy, Watt recounts the story that ended his £100,000 a year job. It was Thursday 22nd November 2007 when he heard a story was circulating about donations from David Abrahams. Rather than give directly, Abrahams channelled his donations through others using an accountant to ‘legally gift’ the money to his associates. Over a five-year period four named individuals collectively gave £600,000 and the money had all been declared. ‘Nobody at HQ ever thought these donations were anything other than lawful,’ writes Watt.
Harriet Harman phoned ‘Peter, do we have a problem?’ One of the four ‘nominee donors’ had also donated to her Deputy Leadership campaign. Watt checked again on the legal position and was advised that as technically the donors were giving their own money it should not be a problem.
That weekend the Mail on Sunday ran ‘Labour’s third largest donor: he lives in a council house, drives a beaten-up van – and said he knew nothing about the £200,000 the party received from him.’ Roy Ruddock, whom Labour HQ had understood to be a director of Abraham’s company, later ‘remembered’ that he had made a donation.
Later the party lawyer phoned to say ‘I’ve just discovered an obscure clause regarding so called “agency arrangements.” It’s possible the law has been broken’.
‘Prime Minister has just called me a criminal’
Monday morning and Watt arrived to find a meeting in progress – Dianne Hayter, (NEC member), Harriet Harman and Jack Dromey. He was called to Downing Street, then Brown changed his mind and he was summoned back to HQ. Dianne Hayter said ‘I am going to have to accept your resignation’.
After 11 years working for Labour, Watt was on the street. Next day Brown was taking flak at his monthly press conference. Watt, listening in a London taxi, noted that the Prime Minister seemed to have turned into a legal expert. ‘The money was not lawfully declared so it will be returned’, Brown pronounced.
Watt had wanted Labour to refer the matter to the Electoral Commission but was overruled. He might have expected – ‘ the matter was under investigation and it would be premature…’
Watt dryly noted, ‘The Prime Minister has just publicly called me a criminal.’
Later Watt learned that an attempt had been made to falsify the minutes of the meeting he had with the NEC before his resignation suggesting he had admitted wrongdoing. One of those present insisted the minutes were corrected before being given to the police. Watt writes, ‘It was clear No 10 badly wanted me charged.’
Peter Watt had clearly been too close to Blair for Brown to trust. He was gone in just 2 months after Gordon’s coronation.
Watt’s first thoughts were for his wife and family, He phoned Vilma and asked her to take the children down to Poole where his mother lived. He would delay the announcement till he knew they were on their way and out of reach of the press pack.
He still had some friends. On the train later to Poole he checked the messages on his phone. Jack Straw had sent a voicemail on the fateful day at 1.00pm telling him he might be able to help and not to quit. It was too late.
In the days that followed Cherie Blair phoned and spoke to him for an hour. ‘We’ve spoken to other people who want to help,’ she told him. Watt felt a little less isolated.
Paul Kenny of the GMB told him “I can’t believe the way Gordon’s treated you. I am so angry and I’m going to bloody tell him. It’s a disgrace.’ Then he reminded Watt that he was a member of the union and he would do anything he could to help.
In January 2008 Watt was interviewed under caution. He stated his case explaining that 25 people worked on the return to the Electoral Commission to ensure it was right; that the donations had been coming in under the two previous General Secretaries; and that they had no reason to question that they were other than above board.
Fifteen months later in the spring of 2009 the CPS confirmed that there would be no charges.
Labour press office had heard there was to be a statement from the CPS and contacted Watt who told them ‘If I’m cleared I would be making a statement.
I’m angry about how I have been treated, and my statement will reflect that.’
Biteback time!
Fusion or fission – it’s nuclear
Inside Out is an easy read. The chronological order tends to weave backwards and forwards with an absence of dates making it more difficult at times to place events in sequence. Peter Watt’s personality comes through and with co-author Isabel Oakeshott’s contribution, the book is well presented with captivating insights into the Labour Party political machine. Fusion or fission – it’s nuclear.
As you would expect Watt comes across as a highly effective and motivated political organiser working round the clock to save his party from itself. He has a good word for many of his former colleagues and even at times for Gordon Brown – but only at times.
Brown pronounced him guilty of an offence he was subsequently cleared of and which there was no evidence he had committed, at the end of the day. It was a vicious attack that ended Watt’s career as General Secretary by a son of the manse with no compassion for another whom he considered expendable for his own greater good.
Peter Watt did not keep a diary unlike most political figures. Fortunately he has an excellent memory.
Inside Out is co-authored by Deputy Political Editor of The Sunday Times, Isabel Oakeshott.
Isabel started her journalism career in Haddington with the East Lothian Courier, moving on to spells as a staff reporter with the Daily Record and the Edinburgh Evening News. Then she went on to political journalism with the Daily Mail in Scotland, covering the Scottish Parliament. She is now based at Westminster and is a member of the parliamentary lobby.
Russell Bruce, Books Editor
Inside Out: My story of betrayal and cowardice at the heart of New Labour by Peter Watt with Isabel Oakeshott is published by Biteback Publishing. 210pp ISBN 978-1-84954-038-4 Hardback £16.99
The photograph, top right, of the back cover of Peter Watt’s book, shows Tony Blair patting Peter Watt’s head while Hazel ‘rocking the boat’ Blears smiles on. Vilma (Watt’s wife) had given Peter a bad haircut day. The two cover photographs are by the copyright holder, Jeremy Young of the Sunday Times /NI International.
The photograph embedded in the text is Troubled Waters by copyright holder Russell Bruce and captures something of the maelstrom in which Peter Watt found himself in the dysfunctional world of the Labour Party at this time.
All the latest comments (including yours) straight to your mailbox, everyday! Click here to subscribe.