Quiet fury of the fallen BBC boss

GAVYN Davies can barely conceal his anger when he talks about the Hutton report. Nothing in his life had prepared the former Goldman Sachs investment banker, with an estimated worth in excess of £100m, for the public assault on his integrity.

There is no mistaking who Davies blames. 'I resigned about three hours after the report was made - shortly after Mr (Alistair) Campbell accused me of lying and suggesting there should be resignations at the BBC,' Davies said in his first interview since departing from the chairman's job in January.

'After I saw what Campbell was saying, I realised that staying at the BBC long term and negotiating a charter with the Government was not feasible after Hutton.

'The report had criticised everyone at the BBC from top to bottom. The person at the top should take the responsibility,' Davies said.

The rift between Davies and Downing Street was devastating for the 53-year-old financial guru. Over the decades, the Goldman Sachs economist had been a long-term supporter of the Labour Party, both a donor and an adviser.

His wife Sue Nye is Gordon Brown's political secretary and has been at the Chancellor's side since before Labour came to Government in 1997.

'It was very difficult for the two of us at the height of the Hutton problem,' he confessed. 'Sue, I am sure, felt some split loyalties between her husband and her employer. But that's all gone away now.'

Davies, having made his fortune at Goldman Sachs, always wanted to work in public service. When Labour came to power, the world looked to be his oyster.

He is one of the country's most respected economists, renowned for his work on the public finances and monetary policy.

Conflict of interest

HE could have easily been the next Governor of the Bank of England when Sir Eddie George departed from Threadneedle Street last year. But he recognised a potential conflict of interest between his wife's role at the Treasury and the possibility of him leading an independent Bank.

So he chose the path to the top of the BBC instead, with the subsequent calamitous consequences. Now it sounds as though a man with a fine mind and huge amounts to contribute to public life is totally alienated.

'I can tell you, right now, my interest in public policy is as close to zero as it's ever been,' he said.

Setbacks do not come easily to Davies. He is the son of working class parents born in South Wales who worked their way through university and emigrated to Rhodesia.

It was there they made their mark on the world, founding the first black African school. Gavyn was born in what is now Zimbabwe in 1950 and received his early education at a girls' convent school before the family returned to Britain in 1961.

The young Davies, like many of the power elite of his generation, benefited from going to grammar school, winning a place at St John's College, Cambridge, where he took a first in economics. From there, he moved to the most intellectually-privileged of Oxford colleges, Balliol, working alongside the Left-wing economist Andrew Graham.

When Labour won the 1974 General Election, Davies was catapulted into the hothouse of the Downing Street policy unit, working first for Harold Wilson and then Lord (Jim) Callaghan, before taking flight to the City in 1979, as the Labour Government was being undone by industrial strife.

In the Square Mile, he moved seamlessly to Phillips & Drew as an economist, then on to Simon & Coates as chief economist before finally landing at Goldman Sachs as chief UK economist in 1986.

By 1988 his reputation was so established that he became a partner, sowing the seeds for the creation of the family fortune when Goldmans finally floated on the stock market in 1999.

Luckiest generation

EVEN now it seems as if Davies cannot believe his good fortune.

'My perception is that my generation of Goldman partners is the luckiest. We know that we have an opportunity to do things outside the firm,' he said.

On the other side of the Atlantic, several of Davies' partners opted for politics with Jon Corzine becoming a US Senator and Robert Rubin rising to become Treasury Secretary in the Clinton Administration.

Now Rubin has been earmarked to become next chairman of the Federal Reserve, should the Democrats win back the White House.

A big regret for Davies is that he has had to leave behind the extensive work he had been doing on the renewal of the BBC's charter.

He makes it absolutely clear that he is not a great fan of Ofcom, the media super-watchdog established by Labour, and he wants regulation of the Beeb to remain with the governors.

'Hutton clearly raised questions about whether the governors are properly supported,' he said. 'I would respond by saying that I think the governors need more independent sources of support.

'But I hope and trust that the Hutton report will not lead to the governance of the BBC being handed over to Ofcom. I think that would be a big error.

'The BBC needs to be independent not only of Government and commercial pressure, but it also needs to be independent of outside regulators.'

Davies argues that viewers benefit from having 'an independent BBC, which serves only the licence payer'.

'One of the good things that came out of last year was that we re-established in the minds of the public the very large difference between the BBC and the Government. And I don't want that muddied.'

Traditional values

IN HIS period at the Beeb, the former chairman believes that he and his fellow governors tried to return the corporation to its traditional values. They were turning the clock back following attempts - partly encouraged by former director-general Greg Dyke - to compete with the commercial channels.

'Greg (Dyke) and the executive were very focused on audiences, more so than the BBC had been in the past,' he said.

Davies changed that. 'The governors definitely shifted the BBC in a more public service direction over the last couple of years. They have done a lot of things on the arts, on the content of BBC2, on the news and current affairs in general which has shifted the corporation to the public service end of the spectrum.'

'I don't think I made that clear enough as chairman to Westminster and Whitehall. I am sure Michael will not make that error,' he says, referring to new BBC chairman Michael Grade.

He carefully lists three areas in which he believes he made an impact. Firstly, in the arts the Davies regime was responsible for putting more serious programming back on the terrestrial channels and not just BBC4.

Secondly, it restored ' mainstream, plain vanilla politics' back to their place at the centre of broadcasting.

Thirdly, it restored BBC2 to the traditional high ground in documentaries and serious current affairs.

'The changes on BBC2 will find the middle-class audience happily satisfied for the next two to three years,' he asserted.

Since leaving the BBC, Davies has not been idle. There has been more time for his three children, one now a teenager, who go to State schools in Wandsworth, South London, where he now has his main home.

Hedge fund service

TIME off is spent at his modernist holiday mansion on the Devon coast.

Aside from spending time with his beloved Southampton Football Club and indulging himself on the golf links, he has started to actively manage his own fortune - although he is curiously shy about saying how large it is and how it has grown.

He invests money through a venture capital fund called Active Private Equity which has already invested in a technology company helping public-sector procurement, another working with local authorities and soon will branch out into a food enterprise, reportedly a door-to-door gourmet service, called Deliverance.

He has also joined ex-Goldmans inmates in New York forming a hedge fund advisory service called Prisma. With billions of investment pounds and dollars now pouring into unregulated hedge funds, his enterprise is extremely timely.

The bearded Davies, his once red hair now turned to gray, has rejoined Goldman Sachs in an advisory capacity. But for the Goldman partner who sought to make it in public service, none of this is likely to be as challenging as running the BBC or the Bank of England.