by Sue Corbett
Inevitably the longer that Thatcher remained in office, the more she became a significant figure on the world stage. In Europe she continued to battle successfully for reductions in Britain’s net contributions to the Community. She presided over an improvement in relations with Spain, which led to an agreement over Gibraltar in 1985, and she brought to a successful conclusion discussions with the Chinese over the future of Hong Kong. The Sino-British Joint Declaration, which was ratified in May 1985, represented the pragmatic side of her foreign policy.
The same could be said of the Anglo-Irish agreement concluded at Hillsborough in the same year with Dr Garret Fitzgerald’s Fine Gael-Labour Party Government. On October 12, 1984, at the Conservative Party conference in Brighton, Thatcher had almost been killed by an IRA bomb at the Grand Hotel.
In her autobiography, The Downing Street Years (1993), she recalled: “At 2.54am a loud thud shook the room. There were a few seconds’ silence and then there was a second slightly different noise, in fact created by falling masonry. I knew immediately that it was a bomb — perhaps two bombs, a large followed by a smaller device — but at this stage I did not know that the explosion had taken place inside the hotel. Glass from the windows of my sitting room was strewn across the carpet. But I thought that it might be a car bomb outside. (I only realised that the bomb had exploded above us when Penny, John Gummer’s wife, appeared a little later from upstairs, still in her night clothes.) The adjoining bathroom was more severely damaged, though the worst I would have suffered had I been in there were minor cuts. Those who had sought to kill me had placed the bomb in the wrong place.”
Characteristically, she was determined that the conference should continue and she hastily rewrote the speech that she was due to deliver that day.
“I knew that far more important than what I said was the fact that I, as Prime Minister, was still able to say it. I did not dwell long in the speech on what had happened. But I tried to sum up the feelings of all of us.
“The bomb attack… was an attempt not only to disrupt and terminate our conference. It was an attempt to cripple Her Majesty’s democratically elected Government. That is the scale of the outrage in which we have all shared. And the fact that we are gathered here now, shocked but composed and determined, is a sign not only that this attack has failed, but that all attempts to destroy democracy by terrorism will fail.”
Five people were killed in the blast and 34 were injured. Among the dead were Sir Anthony Berry, an MP, and Roberta Wakeham, whose husband John was Tory chief whip. Margaret Tebbit, whose husband Norman was a former Trade and Industry Secretary, was left paralysed and confined to a wheelchair.
The Anglo-Irish agreement of 1985 improved relations between the UK and the Republic of Ireland, increased nationalist acceptance of the institutions of Northern Ireland and enhanced understanding and co-operation over Irish policy — not least in relation to terrorists in the US and elsewhere. However, the agreement was criticised by Unionists who refused to accept that its references to the principle of consent served to confirm the constitutional status of the Province. Thatcher, who had been in many respects the most Unionist of Conservative prime ministers, never much cared for this agreement and was to disavow it in her retirement.
But it was as an influential and outspoken western alliance leader that she played her most prominent international role. She remained a loyal ally of President Reagan and the US, and earned Washington’s warm approval for her politically brave decision to allow US military bases in Britain to be used for bombing raids on Libya in 1986. Her loyalty to the alliance earned her the right to express forcefully to the US Administration European concerns about disarmament and the Strategic Defence Initiative before and after Reagan’s summit at Reykjavik with the Soviet leader, Mikhail Gorbachev. She journeyed herself to Moscow to meet Gorbachev in March 1987.
In the wake of this visit Thatcher faced the prospect of an imminent election with quiet confidence. She had made a major mark on the international scene and, despite a muddled record of domestic reform, she was seen to have presided over a steady economic recovery. Public spending had been increased in the autumn of 1986, taxes were cut in the spring Budget of 1987, and shortly afterwards the Conservatives did well in the local elections. Thatcher asked for a dissolution of Parliament in May.
With a comfortable lead in the polls, a Conservative victory never seemed in doubt, but the Conservative campaign was not a happy one. Labour fought with a new vigour and confidence, and the Conservative team was divided and mutually suspicious. Thatcher had become increasingly concerned that Tebbit, whom she had made party chairman, was trying to promote himself not her, and she inserted her trusted ally, Lord Young, into Conservative Central Office to keep an eye on its chairman. The result was predictable. Backbiting and indecision exploded into a full-scale row on “wobbly Thursday”, a week before polling day, when anxieties about the election’s outcome led to unnecessary expenditure on advertising.
On June 11 the Government was returned with a majority of 102 seats over all other parties. Thatcher was the first leader since Lord Liverpool in the 1820s to score three successive general election victories. She was granted a prospect given to no other 20th-century prime minister — a third full term and a clear parliamentary majority. She seemed to be more dominant than ever.
Her fall from this political peak three years later had three principal causes. First, learning from the mistakes of the previous Parliament, the new Government embarked on a sweeping programme of reform; yet the flagship of this programme — the launching of the poll tax — was to prove the single most unpopular domestic policy initiative taken by any postwar government. Secondly, Thatcher’s own concerns about developments within the EU, and particularly about moves towards monetary union, put her increasingly at odds with many of her own ministers and MPs. Thirdly, her style of political management brought her into collision with two senior ministers, and after his resignation following illness in 1988 she no longer had her loyal and politically astute deputy Willie Whitelaw to rescue her from the consequences of high-handed rashness in personal dealings.
The new Parliament was remarkable for the radicalism of the Government’s domestic programme. There were privatisations of steel (1988), water (1989) and electricity (1990-91), and the ailing Rover car firm was sold to British Aerospace. Of the core utilities only rail and coal remained in public ownership. The privatisation measures were largely responsible for extending share ownership from seven per cent to 21 per cent of adults.
At Education, Kenneth Baker was responsible for a far-reaching Education Reform Act (1988), which introduced a core or national curriculum in schools, permitted schools to opt out of local authority control and provided for the local management of school budgets. Thatcher, as a former Education Secretary, took a close interest in the policy. In higher education the number of students was significantly expanded and student loans were introduced.
Thatcher also headed a working group, based in Downing Street, to explore ways to improve the working of the NHS and contain the constant demands for more public money. The final policy was influenced by Kenneth Clarke, whom she had appointed Health Secretary in July 1988. In spite of the opposition of doctors, he imposed a new contract on them, relating payments to work done, and created an internal health market within the NHS.
The Government fought bitter battles with the professions. Earlier reforms had already produced far-reaching changes in the trade unions and local government; now the universities complained of niggardly public funding, teachers and doctors objected to the changes to their work practices, and barristers protested at the proposals of the Lord Chancellor, Lord Mackay of Clashfern, to extend competition in the legal system and give solicitors the right of audience in higher courts. The culture of the Civil Service was affected by the emphasis on managerial skills, value for money and the Next Steps programme, which transferred much Civil Service work to independent agencies.
In 1990 That
cher achieved a long-held ambition when household rates were replaced by a community charge or poll tax (which had been introduced in Scotland the previous year). The scheme had been concocted by Kenneth Baker and William Waldegrave in 1986 and she backed it enthusiastically. The original proposal had been to phase in the introduction of this tax, but, spurred by the enthusiasm of a Conservative conference, the new Environment Secretary, Nicholas Ridley, decided to bring it in without any phasing. This “big bang” proved disastrous. The tax had never enjoyed much more than lukewarm support from Cabinet members, and some — notably the Chancellor, Nigel Lawson — strongly opposed it. Lawson set his face against any measures substantial enough to ameliorate its effects, arguing not unreasonably that only huge expenditure could soften its inherent unpopularity.
The principle behind the reform was that every adult should pay something for local services, and that this would produce the sort of democratic accountability which would rein in big-spending local authorities. But the size of the tax made its regressive nature ever more obvious and obliged the Government to cap the amounts that councils could charge. So the link between spending decisions and their political consequences was lost, and the perceived unfairness of the measure meant that the blame for high bills was mostly laid at central government’s door.
While Thatcher had always been very careful about the impact of any measures on the household accounts of the average family, her dislike of local government and other preoccupations blinded her to the poll tax’s effect on the living standards of many formerly loyal supporters. The political fallout was devastating.
Meanwhile, problems began to occur on the economic front as well. The boost to public spending and the tax cuts before the 1987 election were followed by a further tax-cutting Budget in 1988. Moreover, after the stock-market crash of October 1987 interest rates were also cut. For the moment Lawson was a Conservative hero, but inflationary fears soon began to arise as a serious difference on policy emerged between Thatcher and two of her senior ministers.
In her first two terms she had enjoyed good relations with her Chancellors but during 1989 tensions grew between No 10 and No 11 and the strains became semi-public. Since 1985, in an attempt to stabilise the value of sterling, Lawson (and Howe) had wanted Britain to enter the European exchange-rate mechanism (ERM), something that Thatcher would not entertain. Her vague promise to join “when the time is right” was a cover for “never”. As a substitute, Lawson arranged for sterling to shadow the mark, and the Bank of England dipped heavily into its reserves to maintain the target value.
When Thatcher learnt of the scale of the Bank’s intervention and of her Chancellor’s defiance, she was furious. Her opposition to this policy was supported by her economic adviser, Sir Alan Walters. “There is no way in which you can buck the market,” she said in the House of Commons, clearly dissenting from her Chancellor.
The Opposition exploited the split, just as other members of the European Union, encouraged by the President of the Commission, Jacques Delors, tried to speed up moves towards monetary union. On June 25, 1989, before the EC summit at Madrid, Lawson and the Foreign Secretary, Howe, presented what was in effect an ultimatum — backed by the threat of resignation — for Thatcher to agree to set a timetable for Britain to enter the exchange-rate mechanism. They were concerned that without such a commitment Britain would become increasingly isolated within the EU, unable to influence developments.
But Thatcher, who had stated her case for a Europe of nation states, in a controversial speech in Bruges the previous September, dug in her heels. She did not mind being isolated in Europe — indeed, she sometimes appeared to relish the prospect. She feared that any flirtation with monetary union would open the door to federalism and that Britain would lose control of monetary policy and interest rates. Helped by her foreign affairs adviser, Charles Powell, she refused to set a timetable but proposed a set of conditions for membership (including completion of the single market and the convergence of Britain’s inflation rate with the average of ERM states). She did not think the terms would be attained.
She resented the pressure put on her by her two colleagues, and as soon as an opportunity arose, in the July ministerial reshuffle, she broke up this dangerous alliance of senior ministers, moving Howe from the Foreign Office and replacing him with John Major. After much undignified argument, Howe was partially placated with the title of Deputy Prime Minister to go alongside his Leadership of the House of Commons, but he was aggrieved by his treatment and further wounded by briefings from Downing Street which suggested that his new title was of no consequence. The lines for the future calamitous Cabinet battles were now drawn.
The new Cabinet line-up did not last long. In October 1989 the publication of criticisms of the European Monetary System by Walters finally snapped the patience of the Chancellor. Although the article had been written many months earlier and said nothing new, Lawson insisted that Walters’s position as her adviser was unsettling the markets, and that unless Walters was dismissed he would himself resign. Thatcher made several unsuccessful attempts to keep her Chancellor and seemed genuinely surprised that he was so adamant. She later suggested that he was seeking an excuse to leave before the full inflationary consequences of his policies became apparent.
In place of Lawson as Chancellor, she appointed John Major (who, paradoxically, was also firmly committed to Britain joining the ERM). Walters was obliged to resign. And Douglas Hurd moved from the Home Office to become Foreign Secretary.
The politics of Europe continued to take their toll on Thatcher’s Government. In July 1990 she lost perhaps her closest Cabinet colleague, Nicholas Ridley, the Secretary of State for Trade and Industry. In the course of an extraordinarily frank interview in The Spectator, he bitterly criticised the European Community, claimed that the ERM and EMU were “a German racket” and compared current German ambitions within the EU to those of Adolf Hitler. What was especially damaging was that his sentiments were widely regarded as an expression of Thatcher’s own views.
During 1990 Hurd at the Foreign Office and Major at the Treasury — buoyed by Thatcher’s Madrid pledge on the ERM — induced her to take a more pragmatic approach to Europe, and eventually persuaded her to agree to British entry into the ERM that October. In return, she insisted on a 1 per cent cut in interest rates. She was already sensitive to the severity of the recession. Her ability to deny the Chancellor his way was weaker since she had already lost Lawson over this issue, and the rise in inflation and other economic difficulties made membership more attractive as a way of sustaining market confidence.
But Thatcher was half-hearted to the end. Her own view was that the European Community should be nothing more than an open economic market with no real political dimension, and that its members should remain independent states co-operating only in a few areas where this was mutually beneficial. She therefore supported the creation of a single market, but not steps to what she dismissed as federalism, including economic and monetary union, the Social Charter, majority voting on foreign affairs and defence, or any further transfer of power to the European Commission or Parliament. Membership of the ERM would undoubtedly constrain Britain’s room for manoeuvre in macroeconomic policy. Thatcher never accepted this, and became increasingly outspoken in her denunciations of it.
Nonetheless she continued to play a commanding role on the international stage. In part this was a consequence of her close relationships with the US Presidents Ronald Reagan and George Bush Sr. She also enjoyed a good relationship with President Gorbachev of the Soviet Union, and took pride in the claim that she had “discovered” him in 1984.
By nature an Atlanticist, suspicious of European entanglements and the ambitions of European “partners”, she was at first resistant to the idea of the speedy reunification of East and West Germany. Douglas Hurd persuaded her to acquiesce, however, largely on the ground that there was nothing Britain could do to stop it. The collapse of the Soviet empire in Eastern Europe enh
anced her reputation in East European states, which were turning to their own versions of Thatcherism — experiments with markets, economic incentives, and the privatisation of state enterprises. She argued that it was the strong stand taken by herself and Reagan that helped to ensure the breakdown of Soviet hegemony.
Thatcher’s warrior qualities were again displayed in August 1990 in the Gulf crisis, occasioned by the Iraqi seizure of Kuwait. She was outraged by this aggression and clear breach of international law. From the outset she wanted strong measures. She helped to stiffen President Bush’s resolve to send troops to protect Saudi Arabia and free Kuwait, and Britain contributed to this force. The dilatory response of most other European states only increased her scepticism about their intentions.
Imperious abroad, Thatcher was starting to face stirrings of discontent at home as inflation and unemployment started to rise and the recovery to slow. Talk of Britain’s “economic miracle” began to sound hollow. Her own backbenchers became restive, and one, Sir Anthony Meyer, challenged her for the leadership in November 1989. He was seen, and presented himself, as a stalking-horse for the exiled Heseltine, who represented for many Conservatives a more politically acceptable style of charismatic leadership. Thatcher saw off the challenge easily, but her campaign managers told her that it represented a deeper dissatisfaction at Westminster, and the very fact of the challenge encouraged more mutterings about her political mortality. The scene was set for the terminal drama of the following year.
