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ONE
First Night in Downing Street
11 May 2010
‘Snap out of it: we have a job to do,’ barks Jeremy Heywood, Number 10’s permanent secretary, the senior official, the top dog. It is 7.55 p.m. on Tuesday 11 May. Outside, dusk is descending. Staff are still dazed from Gordon and Sarah Brown’s deeply emotional departure moments before.1 They stand around the departed PM’s open-plan office torpid, drained. Many have tears in their eyes. ‘The prime minister will be here in half an hour.’ Heywood’s piercing voice urges them back into action.2 Tom Fletcher, Brown’s (and now about to be David Cameron’s) foreign policy adviser, changes his red and yellow striped tie to one with blue and yellow stripes. Ever the diplomat, he wants to shift emotional and political gear before his new boss arrives in the building.3 Dirty mugs and plates are spirited away, out-of-date papers removed, computer screens cleared. Here is the British Civil Service at action stations. The king is dead. Long live the king.
Just after 8 p.m., Brown delivers his farewell statement to the media circus outside Number 10. His former staff are too busy inside to notice. Three hundred yards down Whitehall, a similar riot of activity is taking place in the Leader of the Opposition’s office in Parliament in the Norman Shaw building. Ed Llewellyn, Cameron’s chief of staff, receives a call from the American ambassador: ‘It looks like you guys are going across the road. The president wants to be the first to talk to your man when he gets there.’4 Coalition conversations with Liberal Democrat leader Nick Clegg are still ongoing, though they are close to reaching an agreement. Cameron’s wife, Samantha, is caught off guard by the fast-flowing action. She is called in the early evening by Kate Fall, Cameron’s gatekeeper and senior female aide, at the family’s London home in Notting Hill: ‘You’re going to have to come down soon. David is about to form a government.’ ‘I don’t have to get dressed up, do I? I’m at home with the kids.’ ‘Er, not yet,’ Fall replies. Minutes later, Fall calls her back. ‘Get ready. You’ll need to put your dress on quickly.’ With moments to spare, Samantha arrives at Cameron’s office.
David and Samantha are bundled into a car to Buckingham Palace for the Queen to invite him to become prime minister, Britain’s youngest for nearly 200 years. Their hands touch in the back of the car. Their lives are about to change forever, but the short journey gives them final moments of peace. The car sweeps through the open gates. Cameron, still calm, ascends the wide stairs to where Her Majesty awaits him. He listens with barely concealed pride as she invites him to form a government. Audience over, and now in the official prime minister’s car under police escort, they are driven the half-mile to Downing Street.
His team have been advised by Heywood to enter Number 10 by the Cabinet Office entrance on Whitehall. Most of them have never been inside Downing Street. They walk down its long central corridor from the Cabinet Room to the front lobby in awe, before heading outside. Standing in front of the door to Number 11, they observe the lectern that Brown has just spoken from still standing on solitary duty outside the black front door of Number 10. Liz Sugg, who organises Cameron’s trips, wants to tell him not to use the lectern and where to stand for his first speech as prime minister. She knows he is on his way back from the Palace, but is unable to get through. ‘So this is what it’s going to be like now he is prime minister,’ she thinks to herself, ‘he won’t be able to take my calls.’ Then her mobile rings. It is Cameron. ‘Sorry, I was ringing my mum,’ he tells her as if they are old friends sharing a latte at Starbucks. She tells him – she is nothing if not emphatic – exactly where his car is to stop, and where he is to speak.5
At 8.42 p.m., the prime minister’s small convoy drives into Downing Street. He steps out beside a visibly pregnant Samantha, and delivers the statement he has put the finishing touches to just moments before:
Her Majesty the Queen has asked me to form a new government and I have accepted … our country has a hung Parliament where no party has an overall majority and we have some deep and pressing problems – a huge deficit, deep social problems, and a political system in need of reform. For those reasons I aim to form a proper and full coalition between the Conservatives and the Liberal Democrats … I believe that is the best way to get the strong government that we need … This is going to be hard and difficult work.
Huddled on the pavement in front of Number 11, his aides watch anxiously. ‘I’ll never forget that evening. The sun was setting. It was twilight, adding to the magic. While he was speaking, crowds in Whitehall were shouting. Helicopters were hovering overhead. It all seemed surreal,’ recalls Cameron’s political private secretary, Laurence Mann.6 The new prime minister and Samantha walk to the front door. An official removes the microphone. Cameron poses with Samantha on the front steps, hugging her awkwardly. As the door is opened, he gives a final wave. A few chants float in from the streets: ‘Gordon out!’ vies with ‘Tories out!’ before the sounds of the outside world fall away with the closing of the door. He has arrived.
Staff line up along the long corridor from front door to Cabinet Room, clapping him and Samantha. His small team follow on behind. One looks down at his shoes in embarrassment, overcome by the occasion. Another notices the smell of newly cleaned carpet. Cameron turns round at the end of the line and says a few words to his new staff who less than forty-five minutes before had been tearfully clapping out Gordon and Sarah. Samantha is peeled away. Kate Fall goes with her, dividing her time that first evening between looking after both of the principals.
Inside the Cabinet Room, Cameron greets Cabinet Secretary Gus O’Donnell and Heywood. Britain’s two top officials brief him about his most pressing tasks – some, such as procedures in the event of nuclear threats, are held over to the following morning.7 His staff are shown to their offices. They are amazed to be presented with appointment cards showing the PM’s diary neatly typed up. ‘I realised then that this is the Rolls-Royce state in action,’ recalls one.8 Cameron is escorted through the double doors at the end of the Cabinet Room into his office, which Blair used and called his ‘den’, at almost the furthest possible point in the Downing Street warren from Brown’s office in Number 12. He looks around, disconcerted to see doors on each side, the other leading on to the long room where his aides and officials will work. He wonders about having people constantly entering his office from both sides.9 Number 10 has no ideal room for a prime minister; nothing like the Oval Office. Unlike the White House, it was not purpose-built, but evolved from history. Discussions have taken place in the preceding weeks whether, should Cameron win, he would occupy the space Brown had chosen in Number 12, move upstairs in Number 10 to the office Thatcher had worked from, or use the den.10 Cameron briefly flirts with the idea of using the White Room, one of the state rooms on the first floor, with views across to St James’s Park and Horse Guards Parade. Heywood, Fall and Llewellyn later persuade him to use the den, for practical and security reasons.
Discussions had taken place also about Heywood in the preceding weeks. Should he stay? He had been very close – perhaps too close – to Labour’s operation under both Blair and Brown. Was he a Labour man? He had been intimately involved in all Labour’s decisions for the previous few years, bar a period (2004–7) when he left the Civil Service for the private sector. Some of these decisions under Labour Cameron and George Osborne thought were disastrous. They knew Heywood believed passionately in capitalism, but was he enough of a free marketeer, enough of an enthusiast for competition and the small-enterprise initiatives they wanted to see? But it was decided before the election that Heywood, one of the most omni-competent officials since 1945, was too important to lose.
Present in the den at nine o’clock that first evening are Llewellyn, Cameron’s chief of staff since 2005; Osborne, his master strategist; Steve Hilton, his exuberant and intellectually brilliant thinker; and Andy Coulson, his worldly-wise head of communications. It had been felt by some observers that tension between them had seriously hampered Cameron’s election campaign, but tonight their feelings are temporarily put aside.
The den clears suddenly at 9.10 p.m. when Fletcher enters to announce the Obama call is coming through. ‘Here I am, just us in the room, less than half an hour after he’s entered the building, with the American president waiting to speak,’ Fletcher thinks to himself.11 The two national leaders barely know each other. The White House are aware they mucked up the relationship in the president’s first year by being brusque to Brown, who they found needy. Obama thus wants to get off on the right foot with the new prime minister. ‘Congratulations,’ he booms down the secure line. Cameron has not used the apparatus before and has just been briefed that officials will be listening to his every word, taking careful notes. The prime minister is businesslike, savouring the moment when he says ‘I’m speaking from Number 10’ for the first time. When he does so, he winks to his aide. ‘Come over and see me in the White House,’ Obama says. This is a big deal, and very welcome news to the team. They are delighted to hear him utter the totemic words ‘special relationship’ between the US and Britain. The call is short and to the point. As the line goes dead, Coulson is agreeing the lines to brief about it with Robert Gibbs, White House press secretary. Coulson is anxious to get it right, and not hype it beyond what the White House wants. Cameron’s team are now playing in an altogether new league.
Llewellyn and Fletcher decide which foreign leader talks to the PM and when. Next on his list is the German chancellor, Angela Merkel. ‘Your job is to defend UK interests and my job is to defend German interests,’ she tells a dazed Cameron, who has just been given a briefing on hedge funds, an issue between both nations at the time. Her tone is polite but formal. The chancellor is still cross that he withdrew the Conservative Party from the European People’s Party (EPP) in May 2009. Their call gives no hint of the warmth that will develop after the first few months, though she invites him nevertheless to visit her in Germany. From France, President Sarkozy – always anxious for the limelight – is pressing to speak to Cameron. He will have to wait. The team debate whether Cameron should visit Germany or France first. Stephen Harper, Canadian prime minister, gets in with a quick call: ‘Take it all in and pace yourself,’ he tells the new prime minister.12 This sounds better, Cameron thinks, sensing here is someone with whom he will be able to relate.
He is enjoying his new toy. He looks up from the telephone to see aides anxiously pointing to their watches. He is running late for his address to the Conservative Party. He is driven the short distance to the House of Commons accompanied by the special protection officers who have been at his side in the weeks leading up to the election and will now accompany him for the remainder of his premiership, and indeed the rest of his life. His new escorts follow him up the stairs to the Grand Committee Room where he is greeted with wild cheering from Conservative parliamentarians. The chief whip, Patrick McLoughlin, calls for silence with the words ‘Colleagues, the prime minister.’ ‘I can honestly say that I was the first person to call him prime minister in public,’ McLoughlin recalls.13
It is 10.06 p.m. The atmosphere in the cramped room is near hysterical with excitement. After the long election campaign, MPs have endured a further five days of uncertainty until it becomes clear only a couple of hours before that Cameron will be prime minister. Aides recall ‘a ferocious cheer, banging of desks and wild excitement’ after he makes a short speech about events during the historic day.14 It will not always be this cordial when Cameron meets his party’s MPs. Farewells over, the team repair to Cameron’s former office in the Norman Shaw building. Osborne’s team join them and together they tuck in to pizzas in celebration.15
Cameron relaxes in his old haunt among old friends, but becomes aware that Llewellyn and Fall are telling him he needs to go back to Downing Street. Once there, Cameron returns to the phone, absorbing the quickest of briefings between calls. Sarkozy will be his ‘best friend and biggest rival’. ‘I need you to tell me when I get it wrong,’ Cameron says to his officials. A respectful conversation with Manmohan Singh of India follows while calls stack up with the Japanese and Chinese. Meanwhile, calls are still being put through from Number 10 to Gordon Brown, who is being driven to the airport to head north to Scotland. Obama and other leaders are keen to bid farewell to the former prime minister. At one point, Brown rings Number 10 to thank Fletcher for his assistance with the calls. It is a surreal moment. Foreign leaders would have been surprised if they knew that their words to Brown a few hours before – ‘It’s a pity you are having to leave because you were so good’ – were being noted down by the same official who heard them say to Cameron, ‘We always wanted you to win. It’ll be great and we can now reset this relationship in a much better way.’
William Hague is present at Number 10 for much of the evening. Hillary Clinton, US Secretary of State, wants to congratulate him, but officials decide that the call should wait until the following morning as he is yet to be formally appointed Foreign Secretary. Hague, ever philosophical, accepts their advice with a smile, and walks through to Brown’s old office in Number 12 where more pizza is being shared by Cameron’s small team. With amazingly few exceptions, here are the team who will carry him through the entire five years. They are his four closest Cabinet colleagues: Osborne, Hague, fixer extraordinaire Oliver Letwin and close friend and colleague Michael Gove. His aides are Llewellyn, Hilton, Coulson, Fall, Oliver Dowden (a senior party aide), and Laurence Mann. Present too are the officials, Heywood, Fletcher, James Bowler, the PM’s principal private secretary, and Rupert Harrison, Osborne’s heavyweight economist and multi-talented chief of staff who is still only in his early thirties.
The new incumbents notice the pen marks on the table and ask officials, ‘Is this where Gordon stubbed his pen? Is this where he threw his phone?’ Their questions are not driven by point-scoring, but more by awed curiosity: ‘There was no gloating,’ notes one. Officials’ first impressions of Cameron that night are that he is more level and composed than they had expected. Already they detect a calmer and more orderly tone to Downing Street. Cameron’s team start drifting away from 1 a.m. The adventure for which they have worked tirelessly since Cameron became party leader four and a half years before is about to begin. Llewellyn leaves at 3 a.m. ‘It was the most exciting night of my life,’ he recalls.16
TWO
Origin of ‘Plan A’
September 2008–February 2010
The most important decision to be taken by the Cameron government of 2010–15 was made before it even got into power. The decision had three distinct phases: the autumn of 2008, June 2009 and the autumn of 2009. Together they formed the building blocks of what became known as ‘Plan A’: placing deficit reduction at the very heart of their economic strategy. It provided the coalition government with its core narrative and principal claim to success, and it gave a coherent platform for the Lib Dems to sign up to and their rationale for remaining in the government. But these very decisions in 2008 and 2009 were also to cleave Cameron’s team right down the middle, to contribute to him losing his stride in the 2010 general election, and almost certainly cost the Conservatives an overall majority. It is important thus to examine this history.
The first plank in the Plan A platform was put in place in the autumn of 2008. On 15 September, Lehman Brothers, the 158-year-old investment bank and the fourth largest in the United States, filed for bankruptcy. The shockwaves triggered the global financial crisis. Jon Cunliffe, a senior official in the Cabinet Office, sent an email around Whitehall: ‘If we don’t do something now the whole system is going to go down. We have to act.’1 That week, the survival of British banks RBS and HBOS was at stake. As Prime Minister Gordon Brown and the Labour Party gathered in Manchester for their annual conference on 20 September, Brown was brought a note to say that Goldman Sachs, the bluest of blue-chip banks, might be on the verge of going under. The British economy was in dire danger. Cameron and Osborne regarded Brown as the principal architect of the economic position the country found itself in. But it was the PM who held the initiative, and was about to absolve himself of any blame.
Brown took the unusual step of addressing the Labour conference on the opening Saturday, speaking without notes and with gravitas about the profound problems in the global economy. It underpinned his own position in the party, as well as in the country, as the leader uniquely placed to handle the grave predicament. His main speech on Tuesday 23 September was preceded by a masterstroke. The conference expected him on the podium, but his wife Sarah walked on to the stage. ‘Every day I see him motivated to work for the best interests of the people around the country,’ she said, concluding her two minutes by introducing ‘my husband, the leader of your party, your prime minister, Gordon Brown’. It was a coup.2 He remained on a high throughout the speech. His most effective line was that it was ‘no time for a novice’, referring not only to Cameron, but also to Brown’s would-be challenger, David Miliband. The most powerful of his three conference speeches as prime minister, it further underwrote his credentials as saviour of the nation. Brown left Britain on 24 September on a much-hyped trip to New York and Washington, leaving Cameron and Osborne behind at their conference desperately trying to find a way to make an impact. As PM, he had found a role.
Unlike Brown, whom they disliked, and the chancellor, Alistair Darling, whom they quite admired, the two leading Conservatives had neither the power of office, nor the boon of the advice and information from the Treasury, Cabinet Office and Bank of England. They were very young and inexperienced, as they were painfully aware. Cameron had more understanding of economics than Osborne. He had studied it as part of his politics, philosophy and economics (PPE) degree at Oxford, and had worked in the Treasury as a special adviser in the early 1990s.3 Osborne, who studied modern history at Oxford, had been appointed shadow chancellor in May 2005 at the age of thirty-three. Though he served briefly as shadow chief secretary, Osborne had much to learn in his new brief. ‘As shadow chancellor, my first and biggest political task was to establish economic credibility,’ he later said. ‘I did that by being a small “c” conservative and saying that I wouldn’t promise unfunded tax cuts.’4 Like Cameron, he looked to the example of Margaret Thatcher rather than her 1980s contemporary, President Ronald Reagan, ‘who ran big deficits to pay for big tax cuts’.5 The totemic event for Cameron, as for Osborne, was Geoffrey Howe’s Budget of 1981, which raised taxes despite Britain being in a recession.6
After Cameron was elected party leader in December 2005, seven months after Osborne’s promotion to shadow chancellor, they rapidly became the closest of allies: the closest indeed that British politics has seen at the top since the Second World War. They both yearned for credibility at a time when their youth and inexperience provoked so many questions. So in September 2007 they took a decision deliberately to imitate what New Labour had done before the 1997 general election, when Blair said he would match Tory spending plans, and promised to maintain Labour’s spending plans if elected. Osborne’s predecessor as shadow chancellor, Oliver Letwin, said Osborne ‘took the decision early on deliberately to avoid an argument with Labour on public spending, in an attempt to neutralise the issue’.7
When the financial crisis hit, Osborne and Cameron were wrong-footed. They thought they were dealing with a failure of the banking system rather than a more general economic crisis. Osborne criticised Brown’s government for creating ‘an economy built on debt’, saying of the public finances that ‘the cupboard is bare’, but he deliberately eschewed using the word ‘austerity’, because of the negative connotations of the term for the Conservatives.8 He released a document called Reconstruction: Plan for a Strong Economy, which outlined his thinking, although it was soon to be overtaken by events.9 The Conservatives held their annual 2008 conference in Birmingham. On 1 October, Cameron announced he would work with the Labour government ‘in the short term to ensure financial stability’. During the conference, Osborne travelled to London with his aide Rupert Harrison to meet Alistair Darling and Financial Services Authority chief executive Hector Sants. He also spoke by phone to governor of the Bank of England Mervyn King and bank leaders in the City, realising he faced a fast-moving situation where only the authorities really knew what was happening.10 Brown and the Labour government held the initiative and knew it. On 8 October, they announced a £500 billion bank bailout package to restore market confidence. Just days before, the Bush administration in the US had announced the Troubled Asset Relief Programme (TARP), allowing for $400 billion to purchase troubled assets.11
Yet Cameron’s and Osborne’s relationship was cemented during these difficult weeks. A close team had begun coalescing around Osborne, consisting first and foremost of Rupert Harrison. Harrison began working for the shadow chancellor in 2006, recruited from the respected independent think-tank the Institute for Fiscal Studies. He is an intriguing character. Eight years younger than the chancellor, he is the possessor of a powerful and capacious mind. After having been head boy at Eton, at Oxford he switched from Physics to PPE, excelling at both. He went on to complete a PhD in economics at University College London. Harrison’s influence on policy grew steadily in Opposition and his role would be pivotal when he became Osborne’s chief of staff in 2010. He dislikes the comparison, but his relationship with Osborne is uncannily similar to Ed Balls’s with Brown. Balls and Harrison have the much profounder technical understanding of economics and both are more intellectually assured than their masters. They are trained economists and highly effective operators in the Treasury and Whitehall at large. Both spend much time talking to Treasury officials before and after their chancellor has expressed his opinion, and both are skilled drafters of their speeches. They liberate and empower their bosses. There are differences. Harrison is a silky courtroom barrister where Balls is a backstreet fighter. Balls dominated the Treasury because of Brown’s dysfunctionality; under Brown, it was a cliquey and conspiratorial place. The Treasury under Osborne is more open, collegiate and empirical. Osborne, unlike Brown, is happy to be challenged in front of officials, and Harrison for one does so regularly. Osborne, like Brown, is an historian, but unlike him, never claims to be an economist. Balls and Harrison are the principal éminences grises of the Labour and coalition governments respectively. Brown had tried hard to make Balls chancellor in June 2009, while Osborne would come to rely equally heavily on Harrison at the Treasury.12
Matthew Hancock was another key member of Osborne’s team, serving as his chief of staff until 2010. A former Bank of England economist, he joined shortly after Osborne’s appointment as shadow chancellor: ‘I can do the politics, I want someone to do the economics,’ Osborne told the young aide.13 They were joined in April 2006 by Rohan Silva, a Manchester and London School of Economics-educated former Treasury policy analyst, and in 2009 by Paul Kirby, a partner at KPMG. This high-powered team also included Eleanor Shawcross, another economist. Letwin remained a constant source of counsel to them all, self-effacing and intellectually brilliant. A group of former Conservative chancellors – Geoffrey Howe, Nigel Lawson, Norman Lamont and Kenneth Clarke – were only too happy to provide discreet ballast and experience to the young team. They were to prove notably important in the decision Cameron announced on 18 November 2008, to ‘decouple’ the Conservatives from their decision fourteen months earlier to match Labour’s spending plans, which Brown was using, Keynesian-style, to drive the country out of recession. ‘Matching Labour’s plans seemed a very smart move at the time,’ admitted an Osborne aide, ‘but by late 2008 they were anything but sensible.’ Letwin felt strongly: ‘For Labour to be going on a spending spree in response to the downturn, deploying fiscal not monetary tools, was a basic strategic error. I felt deeply it was a terrible decision for Labour.’14
Six days later, on Monday 24 November, Labour delivered its Pre-Budget Report (PBR), as the Autumn Statement was then known. The top rate of income tax for those earning over £150,000 was raised from 40% to 45%, ditching Labour’s manifesto pledge not to do so. A temporary cut in VAT from 17.5% to 15% was to come into effect on 1 December, in time for Christmas shopping, to stimulate the economy. This was to form the centrepiece of a £20 billion fiscal stimulus package to last for thirteen months. Bigger shocks followed. Darling announced that the £43 billion borrowing requirement forecast in his March 2008 Budget had been revised upwards, to £118 billion. He said the Budget would not be brought back into balance until 2015, that the economic situation was even worse than had been feared, and that public sector debt would rise from 41% to 57% of GDP by 2013/14. These figures did not even take into account the bank bailouts. To Osborne, Darling’s statement was the opportunity to regain the initiative. ‘I knew we were right to focus on the rapidly rising deficit. He just read out these numbers and everyone was completely stunned. That’s when we felt we were on the front foot and picked the right issue.’15 He decided to oppose the stimulus and made a series of increasingly strong statements in late 2008 and early 2009 damning Labour for its response to the recession. By Christmas 2008, confidence in the Conservative camp was rising as it became clear that Labour’s package was not giving the British economy the stimulus that it needed. Cameron and Osborne had now committed themselves against spending their way out of recession. They had yet to say that spending had to be cut. This was to come.
The second plank of Plan A was put in place in the spring and early summer of 2009. Cameron was planning to give a speech at the Conservative Spring Forum a few days after Darling’s Budget on 22 April. The speech, on spending plans, had already been written. But he was so incensed by what Darling said, he came back up to his office ‘extremely angry, thrashing around the place and kicking the buckets. He suddenly realised how everything was going to be fucked up because of the figures. I’d never seen him so angry at the way that Labour had mucked up the spending,’ an aide recalls. He sat down to work almost immediately rewriting his forum speech. ‘He’s rarely happy talking about economics,’ says the aide. But on this occasion he produced a draft which he regarded as really important. In his words can be traced key parts of what was becoming Plan A.
Osborne and Cameron had yet to announce if they were prepared to make cuts if they won the general election, because they were fully aware of the damage it could do to the Tories if they became known as the party of cuts. But for much of the first half of 2009, they goaded and taunted Brown and Darling into saying whether Labour would introduce cuts (known as the ‘c’ word). In his April Budget, Darling announced that income tax for top earners would rise again to 50%, and that borrowing would rise to £175 billion in the next two years.16 But on cuts, not a word.
On 10 June, shadow Health Secretary Andrew Lansley went on Radio 4’s Today programme and admitted that, if the Conservatives were elected, 10% cuts might be necessary to all departments except Health, International Development, and Education. Fatally, he omitted to mention that the Conservatives would just be matching what a leak suggested Labour would itself be doing.
‘That’s it! We can beat them on this,’ a jubilant Brown yelled out to his team in Downing Street when he heard what Lansley had uttered. At last he thought he’d found a clear Labour agenda for the future, a ‘eureka’ moment. Brown thundered across the despatch box at PMQs later that day: ‘This is the day when [the Conservatives] showed that the choice is between investment under Labour and massive cuts under the Conservative Party.’ Brown claimed that ‘wide, deep and immediate’ Tory cuts of 10% would be introduced ‘in order to fund a £200,000 tax cut for the 3,000 richest families’, a reference to the inheritance-tax reform Osborne had unveiled to wide acclaim at the Conservative annual conference in 2007.17 Brown’s team were deeply torn about the honesty of this claim, as well as the gulf opening up with his increasingly disillusioned chancellor, whom the Conservatives thought Brown had appointed as a mouthpiece, only to discover he had appointed a heavyweight with a mind of his own.18 His discovery further fuelled Brown’s desire to replace the independent-thinking Darling with his right-hand man and protégé, Ed Balls.