NC: Is it fair to say that one reason why we're in such a mess now is precisely because, as you were saying, the Treasury wasn't doing its job? It wasn't doing its job in controlling public spending, or in regulating the markets, because Brown was off trying to do the work of the Home Office or International Development Department. Also, if you look at how public spending got out of control, is that because Brown didn't want to be too tough on public spending in the boom years because it might lessen his appeal as a future Labour leader and increase the likelihood of a contender arising?

AR: Yes, I think both are true. I talked to Sir Steve Robson, who was a very senior civil servant at the Treasury under Gordon, and generally a great admirer of his, but he said to me that he didn't think Brown was interested in financial regulation. Once he'd set up his new system after 1997, because he was so powerful, his priorities shaped those of the civil servants around him. The things he was interested in — global poverty, child poverty, welfare reform — civil servants became interested in, because that's what the master was interested in. Gordon wasn't interested in financial regulation so they didn't take much interest either. Meanwhile, the Bank of England was taking less interest, especially once Mervyn King turned up, because Mervyn's forte was the control of inflation, not financial regulation — he's an academic, not a markets' man — and they'd been weakened anyway because their powers had been deliberately diluted. So everybody started to ignore systemic risk and not scrutinise it properly. 

One of the extraordinary things is how few war games they ever did on this, and when they did, nobody acted on any of the dangers that came out of them. Everybody bought into this Greenspan consensus and of course the longer the bubble went on, the more Gordon could say no more boom and bust and everybody bought into it, including the Tories — remember their first economic policy was predicated on endless growth, to share the proceeds of growth. So although they ridiculed it when it all went bust, the Tories bought it as well. 

NC: The second point is, it does strike me that the Conservatives have a very strong point when they insist that at the end of the longest boom in capitalist history the budgets at least ought to balance, for God's sake. But I was wondering, do you think Brown by the end was just so desperate to be leader and fight an uncontested election that he didn't want to start restraining spending, or raising interest rates in his final years as Chancellor, because that might weaken his position to be uncontested leader?

AR: Yes, there are two legs to it. We hit that low of 36 per cent of GDP in 1999 and then spending starts going up, they open the taps a bit, particularly at the beginning of the second term, for things like the NHS. The first phase of public spending takes it from the near post-war low of 36.3 per cent to a higher 41.3 per cent in 2005/6 and it is basically level to 2007/8. I think that's fair enough, because that's basically what Labour had been elected to do: spend more on social justice and public services. The big mistake, which meant we weren't very well placed to cope with the crunch when it came was after that, which you're right, he times to coincide with his premiership — it was done to get his premiership off to a great start. That is what proved to be the big mistake and why we're stuck with a big problem. He hated anybody who ever pointed it out. There was an embarrassing scene when some FT journalists had been questioning his policies and Gordon goes absolutely bonkers with them at a private breakfast.

DJ: Can we also talk about the war and foreign policy because this was not, famously, what Brown wanted New Labour to be about, it was very much Blair's thing. Yet, in a sense Brown, too, as you suggested over Greenspan, always looked to America for his models, was intellectually rather dependent on them. You're very critical of the way Blair became dependent on Bush in the book, but the fact that both these men have found themselves in the same position suggests there wasn't really a very obvious alternative. Would a Conservative Prime Minister have done any different?