THE FALLOUT FROM the Daily Telegraph’s disclosures about the Cabinet’s expenses on the first day of the investigation had caused such resentment in Downing Street that more than two weeks later the newspaper’s entire working relationship with No. 10 remained under threat. In particular, the Prime Minister and his aides had been furious that they had been contacted only at 1 p.m. on that first Thursday afternoon, giving them, they believed, too little time to react to such an explosive story. The Telegraph team was unrepentant, believing that ministers had had plenty of time to respond, and citing the fact that two other newspapers had been tipped off about the Telegraph’s enquiries that day as proof that caution was entirely justified to protect the integrity of the scoop.
Now the Telegraph was preparing to reopen the Cabinet’s expenses files and was braced for further fury to be directed at them from Downing Street. It was a crucial decision and one that needed to be handled with great delicacy.
Christopher Hope had spent several days trawling through the ministers’ office expenses – which in some cases ran to several hundred pages for each year – looking for stories buried among the receipts for staples, headed paper and envelopes. It was laborious work, but Hope was quickly rewarded when he started looking through the office expenses claims of the Chancellor, Alistair Darling. Here he discovered an invoice for £763.75 from an accountant who had provided ‘taxation advice’ and prepared and submitted the Chancellor’s self-assessment tax return for him.
‘Darling’s claimed for an accountant to do his tax return,’ Hope announced triumphantly to the bunker. ‘That’s bloody outrageous!’
Self-assessment tax returns, brought in by the Labour government, had become a bane for millions of taxpayers who had to spend endless hours trying to decipher the lengthy forms and would often be reduced to a state of despair in the process. The fact that the politician in charge of the tax system had had to get an accountant to fill in his forms for him was the height of hypocrisy, and would severely dent the Chancellor’s credibility. For him to have arranged for longsuffering taxpayers to foot the bill for his accountant put the top hat on it. Hope confidently – and correctly – predicted that the story would cause uproar.
Nor was Darling the only minister to have enlisted the help of an accountant, courtesy of the taxpayer. Eight other members of the Cabinet, including Hazel Blears, Geoff Hoon and Jacqui Smith, had done the same thing. A leading accountant consulted by the Telegraph described the arrangement as ‘scandalous’, pointing out that ordinary members of the public were not allowed to claim back the cost of hiring an accountant to fill in their self-assessment forms as a legitimate business expense.
For the first two and a half weeks of the expenses investigation, the Telegraph team had concentrated on the second-home allowance, but this was only part of the story of MPs’ expenses. Their office expenses claims represented a whole new front in the development of the story.
Just as the investigation team had discovered a whole range of scams which the MPs had used to take advantage of the second-home allowance, Hope discovered that some of them had been every bit as creative when it came to their office expenses claims. Some appeared to have subsidized the cost of running their main home by having an office in their house, enabling them to claim for phone calls and utility bills, including heating. They were also able to claim up to £250 every month for ‘petty cash’ without providing receipts, and, not surprisingly, some MPs took full advantage. In addition, the wide scope of the category ‘office equipment’ allowed many MPs to claim large sums for digital cameras, camcorders and iPod accessories. Jacqui Smith, the home secretary, had billed the taxpayer for three digital cameras and a camcorder over the course of three years, saying she needed them to take pictures used in constituency material. She had also claimed £240 for an Apple iPhone for her husband Richard Timney (already in the spotlight for his porn films), who worked as her office manager. James Purnell, the work and pensions secretary, claimed £247 for a set of 3,000 fridge magnets. Purnell and his fellow ministers John Hutton and Douglas Alexander had also claimed hundreds of pounds to promote themselves on pitch-side advertisements at football and rugby matches.
It was the issue of tax, however, which would cause the biggest rumpus. Hope, who had spent virtually the whole week trawling through the maddeningly complex office expenses claims, took a deep breath as he prepared to send out emailed letters to twenty ministers – virtually the entire Cabinet – asking probing questions about their finances. Only a few weeks earlier, it would have been unheard-of for a newspaper to ‘front up’ the entire Cabinet with such serious allegations in the space of a day; but the expenses investigation had torn up the rule-book, and now it was not just a single newspaper, but a single reporter who was doing just that.
The normally exuberant Hope was starting to show the strain, becoming unusually quiet and sitting at one point with his head in his hands.
‘Are you all right, Chris?’ Winnett asked him.
‘Yes, thanks, Rob,’ Hope replied, managing a smile, though the truth was he had butterflies in his stomach as he contemplated the gravity of the task ahead.
By 1.04 p.m. that Sunday, Hope had sent off all of the emails. Gordon Brown’s press aide Michael Dugher said he would try to make sure that ministers replied promptly. But the ministers themselves were rather less positive. Many were incensed at having to deal with a fresh set of enquiries from the Telegraph when they were in the middle of a bank holiday weekend. Some were even more angry when Hope, double-checking their expenses claims during the course of the afternoon, found more questionable items and emailed supplementary questions.
‘Why are you coming back to people at 4 p.m. with new lines of enquiry?’ an exasperated Dugher emailed Hope. ‘This is not on.’
Hope replied: ‘Sorry. These were basic factual points and I wanted to cover all the bases and details.’
Most ministers had sent staff to their offices to check through their expenses claims, a huge amount of work which was particularly soul-destroying when the rest of the country was making the most of the superb May weather. One of the last to reply was Alistair Darling, who sent his answers at 6.59 p.m., via his special adviser. On the key point, he said: ‘Like many MPs, I employed an accountant to prepare tax returns for each of the years in question to ensure that the correct amount of tax was paid in respect of my office costs.’
Hope breathed a sigh of relief. The Chancellor had been caught red-handed. However, his reply had been slightly disingenuous, as he had also claimed for personal tax advice. Arthur Wynn Davies was particularly vexed by the latest revelations. ‘The readers will absolutely hate this,’ he fumed. ‘This really is the last straw.’
Within the hour another attention-grabbing front page had been drawn up, under the headline: ‘How you paid to fill out the Chancellor’s tax return.’
As Hope drove home that night, shattered after one of the most testing days of his career, he tuned in to Radio Five Live and discovered that the MPs’ accountancy bills were already the subject of a heated phone-in, chaired by a host who read out the Telegraph’s story with genuine incredulity in his voice. Arthur Wynn Davies had been spot-on about the public’s reaction; listeners were beside themselves with disgust at the thought that their taxes had paid for ministers to have their wretched self-assessment forms filled in for them (not to mention the issue of whether the accountants had also helpfully told them how to avoid paying capital gains tax). Among the callers was Mike Warburton, one of the country’s leading tax experts and a senior partner at the accountancy firm Grant Thornton, who had patiently explained the tax implications of the MPs’ claims to the Telegraph team, and had been as cross as anyone else about what they had been able to get away with.
As well as opening a new chapter in the investigation, the story about the Cabinet’s office expenses prompted a temporary breakdown in communications between the government and the Telegraph. Many ministers were unhappy with what they saw as the niggardly amount of space given in the paper to the lengthy responses they had compiled on Sunday afternoon, and Downing Street decided to employ a new tactic. From then on, any ministers who were asked questions about their expenses by the Telegraph would first speak to their local paper, then release a statement to the Press Association shortly before 8 p.m. No. 10 hoped the Telegraph would be embarrassed into ending the investigation if rival media organizations were given the story at the same time. Downing Street aides described the new strategy as ‘low level harassment of Telegraph journalists’.
Needless to say, it didn’t work. Other journalists, unfamiliar with the background, could usually not fathom what the statements referred to, and the tactic often served simply to add to the fevered excitement over what would be uncovered in the following day’s Telegraph.
On Tuesday, 26 May the Telegraph revealed that Dennis Bates, the husband of the Labour MP and former foreign office minister Meg Munn, had been paid more than £5,000 via parliamentary expenses to give personal tax advice to at least five ministers, including David Miliband, the foreign secretary. Bates had even been paid out of the public purse to give tax advice to his own wife.
The taxman was taking an increasing interest in the Telegraph’s disclosures, and the following day, Wednesday, the newspaper reported that dozens of MPs could face an investigation by HM Revenue & Customs over their claims for accountancy bills. In a highly unusual move, a spokesman for HMRC told the Telegraph that MPs were not exempt from tax laws and should have paid tax on their expenses claims for accountants.
‘It’s a general principle of tax law that accountancy fees incurred in connection with the completion of a personal tax return are not deductible,’ the spokesman said. ‘This is because the costs of complying with the law are not an allowable expense against tax. This rule applies across the board.’
Wednesday, 27 May saw yet another bold new phase in the expenses investigation. William Lewis had decided that the only logical, and fair, way eventually to bring the investigation to a conclusion would be to feature the expenses claims of all 646 MPs in the Telegraph. The bunker team took the news in their stride – with around 200 MPs already covered, it become increasingly obvious that every MP would have to be written about in the end. So on day twenty of the investigation, the Telegraph featured the first part of an A to Z of the MPs who had not yet been covered (and whose claims did not merit a major story) with sixty MPs covered in a double-page spread.
While the tax affairs of government ministers had enraged many members of the public, it was MPs’ second-home claims which continued to cause the most problems with constituents. Following the resignation of the Speaker, people power was ending the careers of an increasing number of MPs. Some, like Sir Peter Viggers, the duck house man, had gone swiftly; others clung on, only to suffer a slow, agonizing demise. One of these was Julie Kirkbride, the Tory MP for Bromsgrove whose husband, Andrew MacKay, had earlier announced his decision to step down as an MP at the next election, following his earlier resignation as an aide to David Cameron over the couple’s ‘double-dipping’.
MacKay’s decision to quit politics altogether had been interpreted as a last-ditch attempt to save his wife’s career, but two weeks after their his’n’hers expenses claims for two separate houses had been exposed, Kirkbride’s constituents were making it increasingly clear that she, too, was surplus to requirements. Local activists had started a ‘Julie Must Go’ campaign, collecting five thousand signatures calling for her head. As the days wore on, more and more stories about her expenses appeared both in the Telegraph and in her local paper: she had paid her sister to work as her secretary, even though she lived 125 miles away from either the constituency or Westminster; she had claimed £540 for a flattering set of photographs of herself posing in front of bales of hay; and she had used taxpayers’ money to fund a £50,000 extension to her second home so that her brother did not have to share a bedroom with her son.
On Thursday, 28 May, Kirkbride had been due to conduct a walkabout in her constituency, but when she woke up that morning to yet more revelations about her expenses in the Telegraph she realized the game was up. What had made the Telegraph’s persistence particularly galling for her was that before she had become an MP she had been a political correspondent on the paper; having left in 1996, she still knew many of the longer-serving staff.
Kirkbride, who was staying in Plymouth at the time, rang David Cameron to tell him she had decided to step down at the next election. Cameron was at the Said Business School in Oxford when he took the call, being interviewed, appropriately enough, by the Telegraph’s William Lewis and Andrew Porter. Cameron, who had agreed to grant the Telegraph his first newspaper interview since the expenses story had broken, had been passionately expressing his view that MPs who claimed for ‘phantom’ mortgages should face fraud charges when he had to excuse himself to take the call from Kirkbride. Together with his communications chief Andy Coulson, who had accompanied him to Oxford, Cameron walked outside into a courtyard, where he spoke on the phone for five minutes before returning to Lewis and Porter.
The Tory leader told the two journalists about the latest resignation, and the strained expression on his face left them in little doubt that Cameron was finding it difficult seeing so many of his MPs falling by the wayside. Lewis and Porter agreed to abide by an embargo on the news of Kirkbride’s resignation until it had been announced via the Press Association, and Cameron carried on with the interview, saying he was ‘ashamed’ of the Tory MPs who had claimed for swimming pools, duck houses and moats.
Kirkbride wasn’t the first MP to quit that day as a result of the irresistible pressure of people power. Precisely one minute before her resignation was announced, Margaret Moran too finally bowed to the inevitable after being hauled over the coals for three solid weeks by her constituents in Luton over her £22,500 claim for dry rot at her husband’s home in Southampton. Moran had shown remarkable stubbornness in refusing to quit after the public airing of her own wrongdoing, but ran for the hills when she was faced with an altogether more formidable foe: Esther Rantzen. The consumer champion and TV presenter fancied her chances of toppling Moran by standing against her in a general election, and began charming the voters of Luton, who became hugely excited at the prospect of having an MP they’d actually heard of. Moran threw in the towel, saying the controversy had caused her ‘great stress’ and affected her health, while claiming for the umpteenth time that she had done nothing wrong. The contempt of her constituents was summed up by one of them who took a can of red paint to her constituency office and, with a nod to Esther Rantzen, daubed the words ‘That’s Life’ on the door.
Esther Rantzen’s overtures towards the voters of Luton started something of a trend, with a whole host of well-known names considering taking a tilt at vulnerable expenses claimants. They included the author Robert Harris, who was eyeing up Alan Duncan’s seat; the consumer journalist Lynn Faulds Wood; and David Van Day, the former singer with Dollar, who hatched an unlikely plot to oust the Tory maverick Nadine Dorries. Even the Daily Telegraph’s own Simon Heffer threatened to enter the fray, warning his own local MP, Sir Alan Haselhurst, that if he didn’t pay back £12,000 worth of gardening claims for his country house in Essex he would have ‘The Heff’ to deal with come the next general election.
The voters, meanwhile, had had enough of the endless talk of reforming ‘the system’. They wanted to reform the MPs themselves – by getting rid of them. Six out of ten voters questioned in a YouGov poll for the Daily Telegraph said they wanted an early general election. The electorate knew Gordon Brown was presiding over a lame duck parliament which was likely to remain in a state of paralysis for almost a year, until Brown was finally forced to go to the polls by the expiry of the five-year maximum term.
The opinion polls certainly weren’t encouraging him to go earlier. As the expenses investigation entered its fourth week, Gordon Brown’s approval rating was down to 17 per cent, making him even more unpopular than Michael Foot, who led Labour to a disastrous general election defeat in 1983. Politicians, of course, always dismiss opinion polls as meaningless when they contain bad news, but on this occasion Brown couldn’t bat away the numbers so easily. Ominously for Labour, the country was just days away from getting a chance to deliver its verdict on Labour’s performance by voting in the European and local council elections. Thursday, 4 June would be election day, but for Gordon Brown it was looking increasingly like Doomsday.
The most alarming number to come out of the opinion polls was one which placed Labour virtually neck and neck with the Lib Dems and the UK Independence Party (UKIP) in a three-way tie for a distant second place behind the Tories in the Euro elections. That meant there was a very real prospect that the governing party could come fourth. The polls also suggested Labour councillors would become virtually extinct across swathes of England by the time the votes were counted.
For the first time since the expenses story had first broken, there were dark murmurings that the Prime Minister’s own position might not be safe. When he was interviewed on Andrew Marr’s television show on Sunday, 31 May, he faced questioning about whether he would stand down if senior Labour figures told him the party would be better off without him. He said he would not. At the time, the question was more an attempt to make mischief than a serious suggestion that Brown’s time might be up, but within a matter of days events would take such a sudden and unpredictable turn that Brown would be in the fight of his political life.
The first week in June would begin, as the previous week had begun, with a front-page story in the Daily Telegraph about Alistair Darling’s expenses. The bunker team had decided to go through the Cabinet’s second-home expenses claims for a second time, conscious that they had been checked at such speed the first time around that things might have been missed. The team had also gained a huge amount of experience in the intervening weeks and had become aware of yet more scams to look out for. Holly Watt, tasked with going through Alistair Darling’s second-home allowance claims, discovered that Darling had claimed expenses for a flat that he let to tenants while he was also claiming living allowances for his grace and favour home in Downing Street. In July 2007, ten days after he became Chancellor, he had submitted a £1,004 invoice for a service charge on his south London flat. It covered the six-month period to the end of December 2007; but Darling had, in the meantime, switched the designation of his second home to Downing Street, where he was also making claims.
Holly Watt set out the allegations about Darling’s expenses in an email to the Chancellor’s special adviser, Catherine MacLeod, at three o’clock on Sunday afternoon. By now Darling’s forbearance was starting to wear thin. Instead of resorting to the usual ‘all within the rules’ explanation, Darling went on the attack, authorizing MacLeod to brief broadcasters that the Telegraph was intending to print a story which was ‘wrong’. At 9.30 p.m. MacLeod sent Watt a formal reply, denying that the Chancellor had claimed the allowance for his private flat while designating Downing Street as his second home. At 11 p.m. that same night a ‘spokesman for the Chancellor’ denied any breach of the rules in an official announcement.
But Watt, and the Telegraph, were sure of the story.
‘Darling billed us for two homes at the same time,’ pronounced the front page the next day.
Gordon Brown began Monday morning by backing his Chancellor, telling listeners of the Today programme: ‘I don’t think there is any substance in these allegations.’ Among those listening was Holly Watt, who began to feel sick as she lay in bed listening to the Prime Minister’s denials. Surely the Downing Street press operation would have checked Darling’s version of events before allowing the Prime Minister to deny the Telegraph’s story to millions of listeners?
By the time she got into work, Watt was feeling so nervous that if she had been asked her own name she would have checked before answering. Winnett was already at his desk when she arrived, and welcomed her with a smile – but both were privately thinking how catastrophic it would be for the Telegraph to have to correct a front-page story at this point.
News editor Matthew Bayley was also in the bunker. ‘You’re sure your maths is better than the Chancellor’s?’ Bayley asked before she sat down.
Watt was close to panicking. ‘Yes, absolutely,’ she said, but it was only when she checked the figures for a fifth time that she felt completely able to relax.
At around the same time Darling returned to his office, double-checked his claims, and realized that the Telegraph knew more about his expenses than he did. At 10 a.m. he performed the perfect U-turn, announcing he would be repaying £350 to the taxpayer to avoid ‘ambiguity’ (he later had to admit he had got even that sum wrong and would actually be repaying £668).
The Chancellor, just like his expenses claims, was all over the place. Brown was furious. Less than two hours after he had publicly backed his fellow Scot, he was being made to look a fool. He had supported Darling over his home flipping, and over his accountancy bills, but now the Prime Minister’s patience had finally run out. In an interview with Sky News at 2 p.m., he said that ‘where a mistake was pointed out to him, and I think it was inadvertent, he acted immediately’. It was what Brown didn’t say, however, that appeared to seal Darling’s fate. Asked three times if Darling would still be Chancellor in ten days’ time, Brown refused to back his friend. On three occasions he spoke of Darling’s job in the past tense, saying: ‘Alistair Darling has been a great Chancellor.’
Darling’s punishment, in traditional New Labour style, was to be wheeled out in front of a succession of television cameras to say that he wanted to apologize ‘unreservedly’ for his actions. Not for the first time, the bunker team watched transfixed as a politician was forced to appear on live TV to admit the Telegraph had got its facts right and they were in the wrong. Darling looked like a man who had given up the ghost. Asked if he was about to lose his job, he replied: ‘It’s up to the Prime Minister. He’s got to decide the team he wants to be the next government. Gordon and I work very, very closely together, but at the end of the day it’s his call.’
‘God. He looks like he’s given up,’ said Rosa Prince. ‘Where’s all this going to end up?’
One thing seemed certain: Darling was finished as Chancellor. Parliamentary journalists were being briefed that Gordon Brown’s closest ally, the schools secretary and former Treasury adviser Ed Balls, was being lined up to replace him, with Baroness Vadera, another former member of Brown’s Treasury team, playing a prominent role by his side.
The subject of Darling’s future dominated the next day’s headlines, relegating to the inside pages the news of the previous day’s Air France tragedy, in which five Britons had been among 228 lives lost when Flight 447 crashed into the Atlantic en route from Rio de Janeiro to Paris.
With the European and local elections looming, and Alistair Darling’s career seemingly over, Westminster was preparing itself for what was clearly going to be the biggest test of Gordon Brown’s premiership.