Prime minister and chancellor are convinced they will remain firm friends even amid tensions over slow economic growth
Share 5
inShare0
Email 
David Cameron and George Osborne, who are godfather to each other's children, are convinced they will remain "in it together". Photograph: Graeme Robertson
It is a rule of thumb that prime ministers and chancellors, in the modern era at least, tend to fall out.
David Cameron and George Osborne, who are godfather to each other's children, are adamant that they will not succumb to the Downing Street disease. In the past week their aides have dismissed speculation that they have fallen out over the poor rate of growth in the British economy after last week's GDP figures showed growth of just 0.2% in the three months to June.
It is certainly true that Cameron and Osborne are, in the prime minister's favourite phrase, "in it together" on the coalition's central economic objective – the elimination of the structural fiscal deficit by 2015. But Iain Martin noted in his Daily Mail column on 23 July that the phone hacking and euro crises have highlighted differences between the pair. An aide told Martin there had been "not a chilling, but a change in the dynamics of the Cameron-Osborne relationship".
I wrote last week that Britain's sluggish economy recovery is not helping as Nos 10 and 11 differ over their growth strategy. No 10 was keener to focus, as the prime minister did in his speech to the CBI last October, on what he called "new, young, high-growth, highly innovative firms". Some Cameron aides have been sniffy about what they call the "traditional view" of the Treasury and the business department which champion, in their eyes, established industries.
So you can see the tentative beginnings of a blame game if Britain continues to experience what Ed Balls described in his Bloomberg lecture a year ago as "sustained slow growth". And that is how disputes between chancellors and prime ministers tend to begin as the conflicting demands of their two jobs collide. Prime ministers are impatient for action while chancellors tend to find the constant political pressure from their neighbour an annoying distraction.
Here are the disputes Osborne and Cameron will have noted:
Margaret Thatcher and Geoffrey Howe, 1979-83
Thatcher and Howe fell out after he had moved on from the Treasury in June 1983 when Cameron was 16 and Osborne was twelve. The rot set in during the 1986 Westland crisis, according to the Observer's great historian of chancellors William Keegan. This eventually poisoned their relationship and led to Howe's famous "tragic conflict of loyalties" resignation speech in 1990 which triggered Thatcher's downfall.
Margaret Thatcher and Nigel Lawson, 1983-89
Seen by Thatcher as one of the great revolutionaries of her government, Lawson succeeded Howe after the 1983 general election. But relations fell apart when Lawson objected to the presence of Thatcher's economic adviser, the late Sir Alan Walters, who famously described the European Exchange Rate Mechanism (ERM) as "half baked". Thatcher refused to back down and so Lawson resigned in October 1989.
Relations had started to sour a little earlier. Andrew Neil tells a great story of how, as editor of the Sunday Times, he informed Thatcher of the central plank of her government's economic policy – that Lawson was shadowing the Deutschmark, a first step towards joining the ERM. Lawson explained to Keegan in 2007 why he supported the ERM but not the European single currency.
Margaret Thatcher and John Major, 1989-90
Thatcher helped Major secure the premiership after her resignation, though that was mainly to stop Michael Heseltine. But she was wary of Major's decision to take Britain into the ERM. He did so in October 1990, a month before her resignation. When Thatcher decided her successor was unsound on Europe she turned on Major.
Major insists that while Thatcher had ruled out ERM entry in the 1980s, she was keen to join by 1990 because she saw the benefits of tackling inflation. The former prime minister said this in a discussion with Elinor Goodman at the LSE in 2007, an event reported by Steve Richards. William Keegan says Thatcher changed her mind on the ERM in June and July 1990 when inflation reached 9.8%.
John Major and Norman Lamont, 1990-93
The new prime minister rewarded Lamont for managing his leadership campaign with a job that was probably a few notches too high for Lamont. Relations were completely poisoned when, in Lamont's eyes, Major ignored his warnings about the ERM from 1991. Lamont said matters were compounded when, on Black Wednesday on 16 September 1992, a cabal of pro-European cabinet ministers dismissed his warnings that Britain should bail out of the ERM early in the day. It was only after interest rates were jacked up twice* that Lamont's view prevailed and Britain crashed out of the ERM that night. Cameron had a ringside seat as Lamont's special adviser.
Lamont offered to resign. It took until the following spring before Major effectively sacked Lamont by offering him a more junior cabinet post as environment secretary. Lamont showed his anger when he uttered these famous words in his resignation speech:
We give the impression of being in office but not in power.
John Major and Kenneth Clarke, 1993-97
Major wrote in his memoirs that he rarely disagreed with Clarke despite his "more enthusiastic pro-Europeanism". But some of Major's supporters believed that the pro-European's Clarke's position on the single currency boxed in the former prime minister.
Tony Blair and Gordon Brown, 1997-2007
Blair and Brown are the nearest equivalent to Cameron and Osborne. They became close after entering parliament in 1983, four years after their party had lost power, just as Cameron and Osborne entered parliament together in 2001. Blair and Brown were both impatient modernisers, as Cameron and Osborne (eventually) became.
But there is an important difference. The rot set in for Blair and Brown three years before they entered government when Brown felt that Blair deprived him of his inheritance when the future prime minister won the Labour leadership in 1994. Osborne happily acted as Cameron's campaign manager in the 2005 leadership election, though there were times when he wondered whether his friend had the stomach for the fight.
Osborne has leadership ambitions. But he is happy to wait his turn, unlike Brown.
Gordon Brown and Alistair Darling, 2007-2010
Darling faced a tricky task in June 2007 as he succeeded the longest serving chancellor of the modern era who, at that stage, still appeared to be wedded to Prudence. But Darling quickly spotted danger signals, most notably the abolition of the 10p tax rate in Brown's last budget as chancellor.
Relations never really recovered when Brown gave Darling what was described as the hair dryer treatment in August 2008 after a famous Guardian interview. Darling had said that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". A month later Lehman Brothers collapsed.
David Cameron and George Osborne, 2010-
Osborne probably has a better memory of all this (relatively) recent history even though he was seven when Geoffrey Howe was appointed chancellor in May 1979. Cameron was twelve at the time. This is because Osborne has more anorak tendencies than Cameron.
As a decent Oxford historian, Osborne showed a keen interest in opposition in learning from his Tory predecessors. But the chancellor and prime minister are dismissive of Marx and do not believe, in their case at least, that history will repeat itself, either as tragedy or farce.
* John Major says about the interest rate increases on Black Wednesday:
• Yes they were increased twice in one day, from 10% to 12% and then to 15%. But the latter rate, due to be introduced the following day, never came into effect after Britain left the ERM.
• Interest rates had been at 15% before Britain joined the ERM. They came down one point (to 14%) on entry and had been cut to 10% by the time of Black Wednesday.