Tough at the top: interview with Danny Alexander

8 Dec 10
Only five years ago, Danny Alexander was working for a national park. Now, after a rapid ascent, he is second in command at the Treasury and is vital to maintaining the coalition. He talks exclusively to Public Finance about the highs and lows of the job
By Judy Hirst

8 December 2010

Only five years ago, Danny Alexander was working for a national park. Now, after a rapid ascent, he is second in command at the Treasury and is vital to maintaining the coalition. He talks exclusively to PF about the highs and lows of the job

Danny Alexander has been called quite a few things during his brief time as chief secretary to the Treasury, not all of them flattering. Beaker from the Muppet Show is one. George Osborne’s water-carrier is another. Then there was that ill-judged description of him as a ‘ginger rodent’, made by Labour’s deputy leader Harriet Harman; an unacceptable slur on Scots, squirrels and redheads everywhere.

None of which appears to have fazed the 38-year-old Alexander, who has had something of a meteoric rise since becoming a Liberal Democrat MP in 2005. Sitting in his cavernous Treasury office, under a glowering portrait of William Gladstone (‘he inspires me with his iron-willed prudence’), we discuss how he came to be chosen for the job.

Unlike his short-lived LibDem predecessor David Laws, Alexander has no direct experience of the City or the business world; his pre-parliamentary résumé is largely confined to PR work for European pressure groups and, latterly, the Cairngorms National Park. Nor, despite his philosophy, politics and economics degree from Oxford, is he considered to have quite such a forensic brain – or killer instinct – as the previous incumbent.

But, as recent accounts of the coalition negotiations confirm, he is no slouch when it comes to political cunning and acumen. Having astutely backed the right horse in the LibDem leadership elections, he was rewarded with the job of Nick Clegg’s chief of staff, authorship of the party’s 2010 manifesto and, ­subsequently, a pivotal role in sealing the Lib-Con deal.
‘Send for Danny,’ David Cameron is reported to have cried, at a critical moment in the coalition negotiations. And when a vacancy unexpectedly arose for the second most powerful job at the Treasury, he swiftly sent for Danny again. By all accounts, he was seen as loyal and collegiate; a safe pair of hands.

Six months into the role (he had barely opened his Scottish secretary red box when the call came) Alexander swats away all talk of his inexperience as ‘utterly irrelevant’. He is finding the Treasury job ‘fascinating’, he tells me, especially under such extraordinary economic and political circumstances. As the only chief secretary, bar Laws, to have served under a coalition or to attempt a fiscal consolidation on this scale, the job has certainly taken on a higher profile.

‘Yes, in that sense the role is a very significant one,’ he says, ‘particularly when we need to make sure that all parts of the coalition are going forward together.’ That need was never greater than during the recent Comprehensive Spending Review round. With the government looking to cut £81bn in spending, and heated exchanges over the welfare and defence budgets, Alexander’s brokering skills – and background as a work and pensions ­spokesman – must have come in handy.

‘The process we established in the so-called “quad” – the quadrilateral meetings between the PM, the deputy PM, myself and the chancellor – became the forum in which a lot of the key decisions were directed and debated,’ he says, very carefully. And he declares himself well satisfied with the outcome. ‘The chancellor and I delivered what we promised in the Budget, in a way that was pro-growth, that is fair, and is driving very significant reform.’ In the Spending Review – his personal responsibility – they took ‘good decisions, wise decisions. I’m content to be judged on that basis’.

So, I ask him, does this level of confidence extend to the macroeconomic assumptions on which the Spending Review is based? An awful lot of very smart economists question the wisdom of cutting so much, so fast, with the economic recovery still fragile and the banking crisis, post-Ireland, evidently far from over.

The Organisation for Economic Co-operation and Development has downgraded the UK’s growth prospects in the light of the government’s austerity measures, and the International Monetary Fund suggests the chancellor needs a get-out-of-jail-card ‘contingency plan’ in case it all goes belly-up. Even taking into account the revised forecasts from the Office for Budget Responsibility in the Autumn Statement, the outlook is hugely uncertain. The Treasury needs ‘a Plan B, if not a Plan C’, says the Institute for Fiscal Studies’ acting director Carl Emmerson, who thinks a ‘mini-Spending Review’ is likely in two years' time.

Not that long ago (May 5 to be precise) the LibDems – especially the perspicacious Vince Cable – would have agreed with this precautionary approach. In the election campaign, they insisted that fiscal consolidation should only happen when the ‘timing is right’ and not out of ‘political dogma’. But that was back in the day.

Alexander claims that much of the criticism of his party’s change of heart is ‘based on a misreading of our manifesto’ and ‘an assumption that somehow we have a choice between reducing the deficit and economic growth. But what we found when we came into office was a situation where by far the biggest risk to the country was, and I think remains, lack of financial discipline and an insufficiently well-developed plan to tackle the deficit.’

Alexander did not personally receive the famous ‘sorry, there’s no money left’ note from Labour chief secretary Liam Byrne. But he does becomes quite animated on the subject of the last government’s track record. ‘It ideologically believed it had ended boom and bust, and so it didn’t need to worry about the deficit it had built up well before the financial crisis,’ he says indignantly.
‘Least responsibly of all, in the months running up to the election, the previous government was making promises about public spending it must have known it couldn’t possibly afford.’ Labour’s legacy left the country ‘on the brink of bankruptcy’, Alexander recently told a slightly incredulous Treasury select committee.

If the narrative sounds familiar, it is. The chief ­secretary’s take on the deficit is barely distinguishable from that of his colleague down the corridor, George Osborne. And as an instinctive Orange Book Liberal – economically and fiscally conservative according to those who know him – that meeting of minds should not have been hard to achieve. But what of the coalition’s broader objectives, such as a fair and progressive agenda for sharing out the pain? Has that been a more ­awkward political fit?

Both the emergency Budget and the Spending Review have come under fire – notably from the Institute for Fiscal Studies – for having a regressive impact on income distribution. Clegg has called the IFS’s analysis ‘distorted’ and ‘a complete nonsense’. So does Danny agree with Nick?

The chief secretary uses more temperate language, and stresses his ‘great respect’ for the IFS and its former director, Robert Chote, now head of the OBR. ‘But,’ he says, ‘I do think their analysis of the Budget was partial, and therefore did not give a full picture of the impact of the Spending Review.’ It didn’t take into account Treasury analysis of how focusing spending on the most disadvantaged, through the pupil premium and other measures, affects life chances, he says. ‘The IFS analysis just doesn’t capture that at all.’

Emmerson says it makes no difference. ‘Ninety per cent of the package is regressive,’ he insists. As for the impact of future spending decisions, ‘the Treasury analysis is really provisional, as they themselves admit. It’s very hard to know the distributional effect on households of cutting spending on, say, GPs and schools, as against defence and international aid.’

Opaque debates about methodology aside, as the cuts kick in there will be an undeniable impact on households, jobs and services. So how fair is the distribution across departments – particularly for local government, which has not only taken one of the biggest hits, but is having its savings front-loaded?

Alexander recognises the problem, but believes the new ‘freedoms and flexibilities’ in the Localism Bill will change the game for councils. ‘If we were just saying here’s the budget profile but not providing any other freedoms, then I think this criticism would be valid. But with the new flexibilities – the de-ringfencing and the place-based budgets – I think this does give an ­opportunity to get much greater value for money at local level.’

In that case, why didn’t the Spending Review go a lot further and broaden the Total Place policy initiated by the previous government? A relatively small number of ‘community budgets’ seems a bit of a let-down, I suggest. Was the problem a lack of buy-in from departmental silos nationally? Alexander admits it was an issue. ‘There has been some entrenched opinion in government departments that the man in Whitehall knows best, and that by devolving power and budgetary responsibility they somehow lose control. It’s a long-standing problem.’

But the coalition is already taking serious strides towards a greater degree of localism, he stresses. And by localism he means giving money and power to head teachers, GPs and patients, just as much as to councils. ‘Philosophically it all hangs together,’ he says.

The Local Government Association, staring at the prospect of 140,000 council job cuts next year, might not entirely agree. But Alexander, while eschewing the confrontational style of, say, an Eric Pickles, is proving a lot tougher about defending unpopular coalition decisions than his generally understated style might suggest.

Asked about his party’s U-turn on tuition fees – the subject of so much opprobrium right now – he launches into a detailed defence of the proposed new system, on the grounds of both affordability and fairness. And while refusing to confirm reports that, ahead of the election,  he proposed dumping the LibDems’ fees policy, he declares himself ‘completely unapologetic’ about having planned ahead for that eventuality.

Nor did he hesitate, back on home ground before the Scottish finance committee, to reprimand Holyrood for doing what, until recently, the LibDems advocated – delaying their deficit cuts by a year.
This dogged determination does not surprise Mark Littlewood, director of the free-market Institute of Economic Affairs, and an old friend from Alexander’s Oxford days. Despite fond memories of him hanging out mainly in student meetings and the union bar (‘he was not crushingly academic’), the future chief secretary was, according to Littlewood,  always ‘hugely ambitious, politically wily and quite ruthless when necessary’.

He is also very much a family man – Alexander is married, with two young daughters. But he has otherwise  ‘always put most of his passions and energies into his political career’. And, notwithstanding that unfortunate incident with the OBR figures in the back of a ministerial car, he is ‘fantastically well organised’, ‘a real details person’.

That side of Alexander comes to the fore as we wind up the interview. He is genuinely excited, he tells me, by the way the government’s new Transparency ­Framework will allow for proper comparisons of input costs – unlike the ‘impenetrable set of data’ that ­Topshop boss Philip Green discovered in his recent efficiency review.

‘It’s just absurd that one government department is spending ten times more on photocopying paper than another,’ he says. The Efficiency and Reform Group, which he co-chairs with Cabinet Office minister Francis Maude, is driving through these issues, and ‘finance professionals across the public sector are going to have to play a critically important role’.

So is the country’s top finance director. Is he up to the task?  Is he thick-skinned enough to take all the flak and the name-calling, while – to coin a phrase – squirrelling away the savings he is so intent on making?

‘Yes, completely. I’m in this job to do the best I can as chief secretary, and make sure the country gets though this financial mess we’ve inherited.’ Or as he put it, a little less formally, on Twitter: ‘I am proud to be ginger – and rodents do valuable work cleaning up mess others leave behind.’

From the Cairngorms to Horse Guards Road...

Born in 1972 in Edinburgh, Alexander grew up in the Highlands and Islands of Scotland. He was educated at a comprehensive in Fort William, and went on to read philosophy, politics and economics at Oxford.

Alexander worked in public relations for the Scottish Liberal Democrats, the European Movement and the Britain in Europe campaign.

In 2003 he became head of communications for the Cairngorms National Park Authority. He was elected MP for Inverness, Nairn, and Badenoch & Strathspey in 2005.

In 2007 he was appointed LibDem spokesman for work and pensions, and in 2008 became chief of staff to the party leader, Nick Clegg.

Alexander played a key role in negotiating and drawing up the coalition agreement for the new government. He was initially appointed secretary of state for Scotland. At the end of May 2010, he was promoted to chief secretary to the Treasury. 

He is married to Rebecca, and has two young daughters, Isabel and Isla. The family live in Aviemore.
He lists his hobbies as hill-walking, fishing, travel and sports of all kinds.

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