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Is Danny Alexander a stand-in Chief Secretary?

Last Updated: Tuesday, August 10th, 2010

Dear Intelligence Subscriber,

Is Danny Alexander a stand-in Chief Secretary?

When Danny Alexander succeeded David Laws, some commentators raised their eyebrows at the replacement of an economics graduate with a double first from Cambridge, who’d been a Vice-President of JP Morgan in his twenties, by a former press officer for the Cairngorms National Park.

Others countered that the Treasury Chief Secretary doesn’t need to be an economist, let alone one with first-rate academic qualifications – but simply a hard-working politician who can control Departmental spending.

In any event, they argued, Alexander has a good relationship with George Osborne, with whom he negotiated when both were part of their respective Parties’ negotiating teams, charged with coalition negotiations.

This view is technically right – but misses a bigger political point.

It’s true that Alexander’s presence at the Treasury, like Laws’, ties the Liberal Democrats into the coming spending cuts programme. But Laws was a more powerful piece on the Coalition chessboard.

While Alexander’s likely to negotiate competently with other Departments, Laws would have had a sharp eye for potential reductions and strong opinions on broader economic policy – views likely to dovetail neatly with George Osborne’s, who’s also an economic and social liberal.

As probably the most right-wing Liberal Democrat MP, Laws was a pivotal Coalition Minister, as well as a gifted one. No wonder it’s been reported that he’ll continue to offer the Treasury advice.

So no wonder, too, that David Cameron’s response to Laws’ resignation letter showered praise on the former Minister, and said that: “I hope, in time, you’ll be able to serve again”.

And no wonder, finally, that it’s reported that the Standards and Privileges Committee’s report into Laws affairs will be swift and sharp – paving the way for his rapid return to government, if the MP for Yeovil decides to stay in public life.

Had a big figure with economic expertise – Vince Cable, David Laws – been shunted to the Treasury to replace Laws, it would be hard to move him out again. It would be less difficult to shift Alexander. That’s part of the explanation of why he’s there.

George Osborne will throw concessions on Capital Gains Tax to Redwood and Davis

On Wednesday morning, Nick Clegg, the Deputy Prime Minister, said of Capital Gains Tax reform that “it is impossible to start picking off whether you believe in tapering, whether you believe in indexation… all these things will be considered”.

In other words, he didn’t rule out watering down the Coalition’s proposed CGT increase – which will see the tax rise from the present rate of 18 per cent to perhaps as high as 50 per cent.

But only last week, Vince Cable, the Business Secretary – and Clegg’s Deputy in the Liberal Democrat party hierarchy – dismissed the suggestion of a taper, arguing that this was tried in 2007, and ‘didn’t work”. A CGT rise, he said, is essential, in the interests of “fairness”.

This difference suggests a Liberal Democrat “split” on the issue. But the disagreement isn’t so much between Cable and Clegg as between the former and George Osborne, the Chancellor. To understand why, it’s important to trace the recent history of Conservative backbench reaction to the proposed CGT hike.

John Redwood, the ex-Cabinet Minister and Conservative leadership contender twice over, has been running a campaign against the move ever since it was announced as part of the Coalition agreement.

Redwood, the Chairman of the right-wing backbench No Turning Back group, remains a bellwether figure on the Conservative right. Shortly after he began campaigning on the issue, he was joined by David Davis – the former Shadow Home Secretary, and also David Cameron’s main opponent for the Conservative leadership in 2005.

The London-based media pack leapt on Davis’ intervention. They saw it not only as a narrow disagreement with the Coalition over one tax plan, but also as part of a pattern of tension between the Prime Minister and the Right of his Parliamentary Party – following Cameron’s unsuccessful intervention in the 1922 Committee elections, which aimed to prevent the election of Graham Brady, the right’s Chairman candidate.

But the Cabinet member most affected by the ramped-up reporting of Conservative unrest over CGT isn’t Vince Cable, Nick Clegg, or even David Cameron. Rather, it’s the Chancellor himself.

This isn’t simply because Osborne will have to carry any CGT increase through the Commons as part of a Finance Bill. There’s also – as so often with the Chancellor – a political angle. Good Parliamentary relations with his colleagues matter to Osborne.

He was careful, for example, to look after the MPs who worked as part of his Shadow Treasury team. After the Coalition was formed, Mark Hoban, the former Shadow Financial Secretary, and David Gauke, the former Shadow Exchequer Secretary, moved straight into the corresponding roles in Government.

Justine Greening, a former Shadow Economic Secretary, was also brought back. She’d been replaced in Opposition by Greg Hands. But Osborne made sure that Hands was kept on side, too – by making him his Parliamentary Private Secretary.

So the Chancellor won’t want to have a public falling-out with Davis, Redwood, or Conservative backbenchers unhappy with a big CGT rise – a group extending far beyond “the usual suspects”. It’s reasonable to expect Osborne, therefore, to adopt some of Redwood’s and Davis’s ideas about tapers and indexation.

Such a move would allow Redwood/Davis to proclaim victory, the Chancellor graciously to say that he’s listened to their concerns, and the Finance Bill to make its way through the Commons with less trouble than would otherwise be the case. The likelihood of such a development explains Clegg’s caution earlier this week.

Cable, in the meanwhile, would have to swallow any discontent. This wouldn’t necessarily displease the Chancellor. After all, the two men enjoy notoriously difficult relations. Cable, though mooted as a possible Chief Secretary, didn’t go to the Treasury. And although he got his own Department at Business, Osborne’s kept control of the banking reform review.

The Defence Review

In the section above, the moving by George Osborne, the Chancellor, of his Opposition Treasury team into government is described.

Liam Fox, the new Defence Secretary, hasn’t been able to preserve the same degree of continuity. The new Government’s much-anticipated Defence Review will be carried out by a largely new team of Ministers.

Fox has lost Andrew Murrison, whose main brief was the Army, and Julian Lewis, who covered the Navy. Nick Harvey, the Liberal Democrats’ Shadow Defence Secretary in Opposition, comes straight into the team as Minister of State for the Armed Forces.

Andrew Robothan, previously Cameron’s Deputy Chief Whip, is an Under-Secretary with responsibility for personnel, welfare and veterans. His move represents a victory for the old guard in the Tory Whips Office, headed by Patrick McLoughlin, the Chief Whip, and John Randall, Robothan’s new replacement. Robothan, who did the numbers for Cameron when the latter stood successfully for the Conservative leadership in 2009, was regarded by the Whips’ establishment as an imposition on them by Cameron – his “eyes and ears” in the office.

But the most telling appointment is that of the Under-Secretary with responsibility for Defence Procurement. Originally, the post was marked down for Gerald Howarth – the Tories’ RAF spokesman in Opposition and a man with long-standing defence contacts.

The blogger Paul Staines, better known as Guido Fawkes, leapt on the appointment, and ran a string of critical stories. And last week, Peter Luff MP was abruptly drafted into the MOD as Minister for Defence Procurement. Howarth will now mind international security strategy.
Luff’s late move indicates that he wasn’t first choice for the job. Names punted included Lord Drayson, formerly one of Gordon Brown’s GOATS and holder of the post under Labour, and Bernard Gray, a Labour adviser with critical views of the MOD’s procurement record.

The new Minister, a long-standing senior figure on the centre-left of the Party, was Chair of the Business Select Committee during the last Parliament. Formerly a senior figure at the PR firm Good Relations, Luff’s also well-connected in the business world – though recent editions of the Register of Members’ Interests suggest little recent personal involvement.

Fox and Luff face one of the new Government’s major headaches. On the one side of them, they have the Treasury, demanding a 25% reduction in running costs. On the other are the Service Chiefs, campaigning for higher budgets – often through clandestine media briefs, sometimes openly in public.

And behind them are the massed ranks of Conservative backbenchers, many of whom have a special interest in defence. A Conservative Intelligence survey during the last Parliament found that out of 141 Conservative candidates, 35 gave top marks to “strengthening Britain’s military” – a larger number than, for example, gave the same to “the establishment of new schools”.

And a CI assessment of what would happen if the Tories had a small majority noted that “the whole cuts agenda [would become] particularly difficult. MPs opposed to cutting infrastructure or defence projects within their constituencies will be empowered.”

This analysis still applies. There are a number of easy defence “wins” for the Conservatives – such as the increases in operational allowances, greater rest and recuperation leave, and education scholarships for the children of servicemen killed on duty promised in their manifesto, and woven into the Coalition’s programme for Government.

But to complete the review by October, with only Trident spending ring-fenced, is tight timetabling against a hazardous background – not to mention the war in Afghanistan. During the last week alone, there’s been speculation about the future of the MOD’s air-to-air refuelling plane replacement programme, the number of F-35 Joint Strike Fighter Jets, the final tranche of Eurofighter Typhoon Jets, the purchase of three Rivet Joint aircraft, a General Dynamics contract to build reconnaissance aircraft and a Boeing order for extra Chinook transport helicopters.

Israel and The Coalition

During the recent general election, a text message spread like a virus on the mobile phones of Britain’s Muslim voters. It warned them not to vote Conservative – claiming that the Party is controlled by “Zionist Jews”.

The incident was an extreme demonstration of the legend of the Party’s pro-Israel bias. Dispatches, Channel 4’s provocative documentary programme, claimed in 2009 that half the members of the then Conservative Shadow Cabinet were members of Conservative Friends of Israel – the main organisation connecting that country and the Tories.

Dispatches alleged that donations “from all CFI members and their businesses” – a broad form of wording – “add up to well over £10m over the last eight years”, reporting further that CFI had funded visits to Israel by over 30 Conservative Parliamentary candidates.

The reaction of David Cameron’s Coalition in general, and of William Hague, the Foreign Secretary, in particular, to the MV Mavi Mamara incident helps to put the legend in perspective.

In his first-ever session of Prime Minister’s Questions on Wednesday, David Cameron, though careful to deplore the loss of life rather than condemn Israel outright, said that “what has happened is completely unacceptable”. He also stressed the importance of UN Resolution 1860, which calls for Israel to end its blockade of Gaza.

Significantly, the Prime Minister gave no weight either to Israel’s rationale for the interception of the MV Mavi Mamara by commandos or to its defence of their actions once aboard. William Hague, the Foreign Secretary, took the same line, stressing that “there is real, understandable and justified anger at the events that have unfolded”. Both men will of course have been mindful of Israel’s detention of British citizens after the incident.
All this helps to show the relationship between the new Government and Conservative Friends of Israel in a more accurate light.

CFI is certainly influential. Stuart Polack, its Director, was named the 61st most influential Conservative in a 2009 Daily Telegraph survey. After Hague described Israel’s 2006 incursion into Lebanon as “disproportionate”, many Conservative supporters of Israel reacted angrily. He noticeably didn’t deploy the D-word during Israel’s engagement in Gaza in 2009.

Furthermore, Alistair Burt, one of CFI’s former officers, was appointed as a Foreign Office Minister in the new Government. His responsibilities include the Middle East – a fact picked up swiftly and commented upon adversely by domestic anti-Israel lobbies.

However, CFI is far from being the only Conservative Party player with an interest in the Middle East. The Conservative Middle East Council, which has excellent links with many Arab countries in the region, gains less publicity than CFI. None the less, it’s also a significant force. Crispin Blunt, its former Chairman, came in at number 93 in the Telegraph’s 2008 study of influence. Furthermore, Polack strongly disputes Dispatches’ figures, claiming that CFI has given the Conservatives only £10,000 in five years – not millions of pounds.

All in all, the Conservative backbenches are better disposed to Israel than Labour’s – as a careful study of Commons Foreign Office questions or statements would demonstrate. But the balance seems to be changing. Of the ten Conservative questions to Hague after his statement, seven were critical of Israel, two critical of Hamas, and one neutral. Senior CFI members, such as James Arbuthnot, its Chairman – also a candidate for the Chairmanship of the Defence Select Committee – were absent.

The hostility to Israel of much of the international community, mirrored in Britain’s urban-based Muslim communities, appears to be having an effect in a Parliamentary Party more representative of Britain’s cities and suburbs than it was previously.

This will in turn make a mark on Hague’s Foreign Office – and it should be noted that Burt’s Commons interventions on the Middle East during the last Parliament stopped well short of cheerleading. The new Minister has privately been critical of Israel in recent years.

But, above all, the new Foreign Secretary’s Middle East policy looks to be defined by continuity. At one point during his statement, he said in relation to Gaza that “it has long been the view of the British Government” – as though the Coalition had been in place for years rather than weeks. And he will of course be mindful of the view of the Conservatives’ Liberal Democrat partners’ view on the Middle East – which is more critical of Israel than that of the two bigger parties.

In the light of all this, it will be interesting to see whether or not the Government goes ahead with plans to change the law on universal jurisdiction – after attempts by anti-Israel activists, during the last Parliament, to obtain arrest warrants for senior Israeli politicians, such as Ehud Barak, the Deputy Prime Minister.

Last weekend, the Guardian reported William Hague as saying that the Coalition is examining the law in detail: “We cannot have a position where Israeli politicians feel they cannot visit this country,” he said.

As always, please call me on 0771 726 1570 with any questions.


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