Darke Mission (15 page)

As she was dozing off she was evaluating her decision to leave the USA for the UK. There didn't seem much for her career-wise in America, especially since she was still sometimes recognised when she was out and about. She had spent long enough bemoaning her lot and thought that a change of scenery and a less eventful job may do her convalescence of mind and body some good. Kevin Morgan had approved a change of identity. Though she wasn't a witness protection-like candidate who often needed whole new lives, her name and image were fresh enough in the minds of media ferrets on both sides of the Atlantic that she wanted to go for disguise-lite. Bai Ling had her hair cut and coloured a bit lighter which was sufficient to change her appearance quite a lot. She changed her name to Gilian Haning, after that CERES Connection honor student, since that was the last time she remembered having a smile on her face. Brits tended not to either have or use their middle initials with the passionate frequency that Americans do, so in her fake passport produced by Jane Hayden she left out the Baz middle name of the student. It also meant that her new name wasn't either the description of a small planet or a direct anagram of her real name and, thus, less likely to be uncovered by intrusive paparazzi.

Now all she had to worry about was her new life in London, working for her old mentor and finding out more about somebody called Joe Ford. JJ Darke, she thought, ready or not, here I come.

“We need a spook with a brain,” said Chancellor Jeffrey Walker, with confidence and intent, as befitted an Eton and Cambridge man.

“We do indeed Chancellor,” replied Neil Robson, not batting an eyelid as to their needs, mainly because it was he who had sown the seed of this outrageous idea in Jeffrey Walker's consciousness a few hours ago. “I have just the one in mind.”

Britain's finances were in an unholy mess. The much vaunted recovery of 2013 seemed to have fizzled out. ‘Green shoots', the government's catchphrase of that and previous summers, had not developed into luscious green plants or even real grass.
The Guardian
had headlined the latest public sector borrowing figures and what they meant for the economy as a damp squib. Given that it was
The Grauniad
, as the typo prone broadsheet was known, at least they hadn't called it a damp squid, that being perfectly reasonable in the daily life of the fast moving cephalopod.

The UK's overall public sector net debt was around 80% of Gross Domestic Product (GDP). That seemed like a lot, and indeed it was a lot, being well over £1 trillion. It was not out of line with some other countries being a little more than America's net debt as a % of GDP and a lot less than Italy's. Chancellor Walker would stand up at the dispatch box in the House of Commons later in the day, defend the numbers articulately and make verbal mincemeat of the Shadow Chancellor, Arthur Molloy as he laid into the hapless Labourite. That wasn't the problem. The problem was deeper and multi-facetted. The first issue, as many households in the UK and elsewhere discovered after 2008, is that there is a difference between your stock of outstanding debt and your cash flow's ability to pay the interest on that debt. Mortgage payments, credit cards, and personal loans can add up to a very tidy sum, but if your cash flow can handle the monthly payments then bobby bailiff will not darken your doorstep. Jeffrey Walker's bind was partly because the government's cash flow was drying up.

The annual budget deficit had risen to 10% of GDP or around £150 billion. The cost of interest payments on years of accumulated debt had risen very sharply in the past two years, were already over £50 billion per annum and rising exponentially. The budget deficit had been funded by selling UK government bonds, aka gilts, to the private sector, the Bank of England and overseas investors, the latter accounting for about one third of the funding. Normally, there would be no real problem with funding the budget deficit. Walker had hosted several private meetings in recent weeks with leaders of banks, building societies, and pension funds both home and abroad. Unfotunately, they indicated that their bond holdings were completely full on a prudential risk measurement. The Governor of the Bank of England also indicated that they would not voluntarily increase their bond buying program or quantitative easing as it had become well known. That only left fickle foreigners, thought Walker, and not enough of them at that, certainly not with the required readies.

Jeffrey Walker had witnessed the demise of Greece, Cyprus and Portugal. Their economies were dud, their government finances virtually non-existent or totally supported by the International Monetary Fund (IMF) and European Union (EU). There were prolonged catastrophic riots in their streets. With unemployment over 30% what else was there to do? Spain was on the brink and even France looked to be in trouble. The Chancellor had been confident that this would not occur in Britain. The English didn't riot much he thought, unless it was too hot, the Scots were too involved with their independence, the Irish too tired of fighting and the Welsh too oblivious to most things. That thought, unfortunately, did not seem to have much of a half-life as he sat today in his office in number 11 Downing Street with his Financial Secretary to the Treasury.

“Remind me Neil…” enquired Walker “… what's the annual budget for the cost of the police force?”

“Taking everything into account, and estimating the cost savings for this financial year, around £14 billion,” replied Neil smartly.

“The armed forces?” continued Walker.

“About £10 billion excluding equipment,” said Robson.

“And the public sector's wage bill?” asked Walker once more as his silvery haired head sank deeper into his pudgy white hands.

“That would be in the region of £15 billion this year,” said Robson. The Chancellor wished, on occasion, that Neil Robson didn't have all these facts and figures to hand, but he did.

“When are we going to be unable to pay the police and most of the NHS, Neil?”

“We're basically £3 billion short, Sir. With income tax, VAT, and other tax structures that we have in place we'll be out of cash in around six months.”

There was to be a general election in just over a year's time. Walker knew that there was absolutely no chance of legislating a tax hike on the population before then. The Prime Minister, John McDonald, had no idea the country's finances were as dire as they were, mainly because his Chancellor had deliberately concealed from the PM what had been staring him in the face for several months. Even if he had known, the Coalition's majority did not look robust enough to withstand the probable number of seats lost as a direct result of any tax increase.

The UK had run out of borrowing options too. The EU would not lend any money to the UK without extracting commitments that were unrealistic and unacceptable. They would split the Coalition government and turn the voting public against both parties. That route was an election loser if ever there was one. The IMF, in times gone by, would have been an option even though the last time Britain went there cap in hand, the media made it seem like the end of the world as we knew it. No, any money from the IMF would trigger the same electoral result as begging from the EU. In any event the Fund didn't have any money. The financial drain of Greece, Portugal, Cyprus, Spain, Eastern Europeans and Africans to name but a few meant that the UK was firmly last in the queue, begging bowl out but nothing to put in it.

So there it was, the UK could not sell the necessary amount of gilts to raise the funds to plug its financing gap, it couldn't raise taxes so close to an election and it couldn't borrow from abroad. If this perfect storm intensified and rendered the government unable to pay the police, NHS staff and the army, then widespread rioting would no longer be off the agenda. A Coalition victory at the next election, by contrast, surely would. Bereft of a single workable idea in his Chancellor head, Walker turned to Robson, with desperation written all over his face.

“Does anybody owe us any money?” he asked.

“Well…” began Robson who had been doing his research. ‘Well' wasn't ‘no', Walker registered instantly, his head and his ears now perked up somewhat from their slumped position.

Robson continued. “In 1984 North Korea defaulted on their government bonds, the main overseas holders being ourselves, West Germany and Switzerland. In nominal face value the DPRK bonds held by us amounted to around £460 million.”

“That's a lot of money Neil,” interjected Walker. “But it's way short of the £3 billion pounds we bloody well need.” Chancellors of the Exchequer rarely used the F-bomb, unless they were from the west of Scotland, so ‘bloody' was an accurate gauge of Walker's grievous angst.

“The power of compound interest Sir,” resumed Robson.

“What?” said the Chancellor impatiently.

“The DPRK bonds had a yield of just over 6% per annum. That was quite high by international comparison but clearly included a risk premium, which was justified, on the possibility of a North Korean fiscal meltdown, or as it turned out, default. Now, £460 million of nominal bonds yielding 6% per annum over 30 years amounts to—”

Walker interrupted. “Tell me it's close to £3 billion Neil, please tell me that,” the Chancellor pleaded.

“It is indeed Sir,” confirmed Robson. “£3.6 billion to be exact.”

Chancellor Walker felt instant gratification but was also puzzled. “Why haven't we pursued this before, Neil? It must have surfaced in a previous government's tenure?” asked Walker, not allowing himself to believe that there was such an easy way out of his financial straightjacket.

“The Germans and Swiss kind of let it go…” responded Robson “… and we followed suit. There were some negotiations regarding payment in the early 1990s but then the Argentinian debt mess and default of 1999 – 2002 and the emerging markets balance of payments crisis of 1998 were regarded by North Korea as some kind of precedent. So they told all and sundry to bugger off, so to speak, and we haven't really tried to bugger back in since.”

The Chancellor motioned to ask another question of his Financial Secretary but Robson indicated he had more information to divulge.

“I've enquired discretely of our international lawyers and our embassy in Pyongyang,” continued Robson. “The lawyers confirm we are, under international law, still owed the money in the amount I indicated. Freddie Wycliffe, our man in Pyongyang, disappointingly said that the initial discussions with his counterpart in the DPRK were unfruitful.”

“Unfruitful!” exclaimed the Chancellor. “What does that mean?”

“Freddie says the official North Korean position is that if we want our money, then come and get it, I believe was the literal translation.”

“A lot of bloody good that is,” said Walker, visibly infuriated again. “We can't just gaily waltz into Pyongyang and demand £3 billion or whatever the won equivalent is.”

“No we can't,” confirmed Robson. “North Korea have not paid one paltry bean of the debt they owe to any government who holds their defaulted bonds. They're not going to start now. Under Kim Jong-un, they're militarily stronger and even less inclined to be accommodative than ever before to any friend of the United States. We are not going to get what we need through normal political channels, Sir,” continued Robson. “Freddie Wycliffe says he is 100% certain that the DPRK government will not entertain any further discussion on the matter. In any event, even if we could go that route, the Prime Minister would then know, the Opposition would know and the media and voting public would know. Too much information I fear in too many hands. If it got out that we went begging to North Korea, we'd lose the election anyway and maybe any support we still have from the USA. We could emphasise that the money was rightfully ours and that we weren't begging. That might work but then the media, financial journalists and City economists would dig and dig into the government's finances until they uncovered the time bomb we have kept quiet. Again, we'd be dead in the water.”

Chancellor Walker knew all this but he had switched off a few of Neil Robson's sentences ago. “Neil,” said the Chancellor, indicating that he wanted to ask a question. “You said we were not going to get what we needed through
normal
political channels. Does that mean that you have some abnormal channels in your mind that will get us a result?”

“Yes Jeffrey…” replied Robson with a smirk on his face that had illegality written all over it.

* * *

JJ Darke had no real idea why he had been summoned to Neil Robson's office in HM Treasury. Sure they had had a drink a week or two ago and Robson had said he'd be in touch, but the email he had received yesterday from his old MI5 colleague seemed a bit more formal and had urgently requested today's meeting. JJ was in a decent mood. Cyrus had come top of his class in computing and JJ had the results of his first post-radiotherapy PSA blood test. The score was good, down to 0.8, a far cry from the 23 that had triggered his whole cancer fighting protocol.

JJ was met at the security desk on the ground floor by Neil Robson's PA, a 5ft 7in, twenty something, unnatural blonde called Becky. She was agreeable enough, both in manner and appearance. Becky seemed somewhat uncomfortable though in her figure hugging hot pink top, high heels and tight black skirt. Indeed, the young lady was a little bright all round for the dingy interior of the Treasury. Maybe she was appealing to Robson's basic instincts in the hope of swift social climbing, or even some other sort of climbing. They went up the stairs to Robson's office on the second floor, engaging in the usual small talk as they went.

“Come in JJ,” said Neil Robson, his expression in neutral. “Sit down, some tea or coffee?”

“No thanks, Neil, I've just had breakfast and I've a full day ahead. What's the urgency?” asked JJ, anxious to get this unappealing start to the business day over with.

Neil Robson sat in his dimpled green leather chair and pulled a file from the right hand drawer of his antique and large leather topped desk. “This,” began Robson, as he held aloft an enclosed document in a blue cardboard folder, “is a file which does not cast you in a good light, my friend.”

JJ's decent mood had instantly evaporated. Even before knowing what was in the file, the mere fact that Robson had called him friend meant he was in trouble. They weren't friends and they both knew it. JJ was expressionless and said nothing. Robson looked as if he couldn't contain himself.

“I have a report from the FCA, specifically from Tom Watts and Rachel Woodhouse of the FCA,” continued Robson. JJ's face remained unperturbed but his innards and his brain were already in the formative stages of turmoil. “Seems you have been a naughty boy, JJ,” said Robson, smug and condescending. “Greek bonds, dodgy phone calls, in the office in the middle of the night to unravel toxic positions. It's got insider trading written all over it,” Robson blurted out, with some glee.

“I had a meeting with the FCA team, Neil, I think they were satisfied with my explanation of that night's events,” said JJ, hoping beyond hope that Robson's mention of dodgy phone calls was just one generic element from a gallimaufric collection of possibilities that could be involved in an insider trading event.