________________
* Blair House is the US President’s guest house where foreign heads of state and heads of government stay during official visits. Built in 1824, the red-brick mansion stands across Pennsylvania Avenue from the White House.
† The term ‘handbagging’, now defined in the Oxford English Dictionary as ‘an idiom for asserting oneself and ruthlessly attacking one’s opponent’, first entered the lexicon of politics at the time of Margaret Thatcher’s aggressive arguments about the British rebate at the EEC summit meetings.
‡ See Chapter 19, ‘The Falklands War: the prelude’.
18
Storm clouds on the economy and in the cabinet
THE GATHERING STORM
Margaret Thatcher’s determination to cure Britain’s deep-rooted economic sickness came to be symbolised by her words to the Conservative Conference of October 1980: ‘You turn if you want to – the lady’s not for turning.’1 Although greeted with thunderous applause by the rank and file of the party, there were many in her cabinet who thought them foolhardy. For by this time unemployment was over 2 million, inflation had risen to 13 per cent and the recession was worsening. The government’s main weapons in the battle to restore prudence to the nation’s finances were controlling the money supply and reducing public expenditure. Neither was working.
There was a widespread expectation that the realities of the recession, especially the rise in unemployment, would force a change of strategy in the management of the economy. But the Prime Minister had staked her reputation on not initiating the kind of U-turn that had brought about the political demise of Ted Heath. Moreover, she was far more resolute than he had been in her certainty that she must stick to the course she had set. The big question, not resolved until the autumn of 1981, was: would her cabinet stick with her?
Although the cabinet was portrayed as being divided into the wets and the drys this was largely a caricature of Margaret Thatcher’s own making. She enjoyed the mystique of being an embattled crusader against her adversaries. But the reality was that her praetorian guard of Treasury ministers and like-minded colleagues on the ‘E’ or Economic Committee of the cabinet backed her strategy. So did two other bulwarks of support in the shape of William Whitelaw and Lord Carrington. ‘As every other nostrum for reversing our economic decline had failed, we thought we had better let her get on with what she wanted to do’, was how Carrington described their position.2 So, with the connivance of her Home and Foreign Secretaries, the cabinet itself rarely discussed economic policy for the first two years of the Thatcher government’s existence. The Wets (Jim Prior, Francis Pym, Lord Soames, Norman St John-Stevas, Ian Gilmour, Peter Walker and later allies) huffed, puffed and leaked, but they never came close to bringing the house down. In the meantime, the Chancellor and the Prime Minister went ahead with implementing their master plan.
But what exactly was their strategy? In the beginning it was said to be all about monetarism. But measuring, let alone controlling, the money supply proved an elusive failure. The principal yardstick was called £M3, which meant all money in circulation including notes, coins and bank deposits. In 1980, £M3 soared to 18 per cent, three times the government’s target of 6 per cent. Ian Gilmour had a point when he commented that monetarism was ‘the uncontrollable in pursuit of the indefinable’.3 Margaret Thatcher was stung by his criticism, tartly noting that the Wets were finding ‘the wayward behaviour of £M3 a suitable subject for mockery at dinner parties’.4 She insisted that the monetary squeeze was bringing down inflation and working more effectively than the £M3 figures suggested.
The second cornerstone of the strategy was reducing public expenditure. Sir Geoffrey Howe did make cuts of over £3 billion in his 1979 and 1980 budgets, but these were overwhelmed by overspending in Defence and Health; by the high cost of subsidising nationalised industries; and by burgeoning wage claims in the public sector, particularly those granted by the Clegg Commission,* whose awards Margaret Thatcher had promised to honour in the heat of the election campaign. The net result was that public spending kept on rising.
Some order in all this chaos looked as though it might be imposed by the Medium Term Financial Strategy (MTFS). It was the brainchild of the intellectually assertive Nigel Lawson, still only a junior minister in the Treasury. Margaret Thatcher, who was in awe of first-class minds in general and Nigel Lawson’s in particular, bought the idea of MTFS. It was supposed to be a set of iron-clad rules setting fixed targets for monetary growth and public expenditure reductions for several years ahead, replacing the usual one-year forecast. But who would deliver performance in line with the MTFS rules? The Prime Minister took the challenge personally. ‘The MTFS would only influence expectations in so far as people believed in our determination to stick to it’, she declared. ‘Its credibility depended … on the quality of my own commitment, about which I would leave no-one in doubt. I would not bow to demands to reflate.’5
It was the recognition of Margaret Thatcher’s commitment not to make a U-turn that proved the game changer. Although she was vilified for her inflexibility, stubbornness, heartlessness and even for practising ‘sado-monetarism’,6 somewhere deep down in the political subconscious of the British people there was a recognition that her determination should be given its chance.
The ‘winter of discontent’ remained such a bad memory that a majority of the electorate, rather like Whitelaw and Carrington, were willing to try Margaret Thatcher’s prescriptions for reforming the economy. But to a sizeable minority, including many within her party, her remedies seemed divisive.
Around this time the acronym ‘TINA’ entered the political vocabulary. It was derived from briefings Margaret Thatcher gave to Conservative MPs and others, vehemently repeating the phrase, ‘There is no alternative’. It rang true because the Wets had not come up with any coherent plan B for the economy that did not involve paying for the extra expenditure they wanted by printing more money. But TINA also became an irreverent nickname for the Prime Minister. I remember using it myself on the Terrace of the House of Commons one spring evening in 1981, only to be rebuked by Donald Thompson, the MP for Sowerby. He was a hands-on Yorkshire butcher who still chopped up carcasses and delivered cuts of meat to his customers on Saturdays. ‘Aye, Jonathan, but TINA is bloody well right – isn’t she?’7
Belatedly and perhaps too grudgingly I was beginning to agree. So were many other Tory MPs who were not paid up members of the ‘one of us’ Thatcherite fan club. But thanks to Ian Gow’s assiduous efforts among back-benchers, the Prime Minister was much better supported by her parliamentary party than she was by her cabinet. What was starting to make an impact was the very ingredient Margaret Thatcher had mocked her critics for lacking – courage in backing the economic strategy. While the Wets fretted and fumed, often in a hand-wringing style that was unattractive, she was ploughing her own lonely furrow with such personalised determination that she warmed hearts even if she did not change minds.
There were, however, many unanswered questions about the strategy. The biggest one was: what was the government going to do to curb the excessive wage demands and the excessive powers of the trade unions?
OUTFLANKING JIM PRIOR
Jim Prior was Margaret Thatcher’s most formidable opponent within her cabinet during her early years as Prime Minister. How she outflanked him, sidelined him and emasculated his influence is a story that provides revealing insights into her personality.
The unanswered political question of the 1970s was: who governs Britain? The circumstances in which the governments of both Ted Heath and James Callaghan lost power suggested that union leaders rather than elected politicians were calling the shots on economic and industrial policy. Margaret Thatcher was determined to reverse this, and believed she had a mandate to do so. But so long as Jim Prior was her Secretary of State for Employment, she was thwarted in her reforming zeal to sort out the unions. Another problem in their relationship was that he was effectively the leader of the Wets,
and their only voice on the ‘E’ committee.
Jim Prior liked to play up to his image of a Suffolk farmer. He was authentic in this role, but he was a far cleverer operator than might be imagined from his rubicund countenance and genial manner. As a middle-way Conservative in the Harold Macmillan mould, he had an abhorrence of high unemployment. Prior was by temperament a seeker after consensualist solutions to the political problems of the day. He had invested much time and energy in building bridges with the leading trade unionists. Sincere in his determination to avoid a return to the scenarios of the three-day week or the ‘winter of discontent’, he thought he could gently nudge the unions towards greater moderation by personal diplomacy. So he followed a ‘softly, softly’ approach on the issue of trade-union law reform. As he took up this position in the cabinet with what might be called a ‘stubbornly, stubbornly’ attitude, this put him on a collision course with Margaret Thatcher.
Their first collision came over the Employment Bill of 1980, which did not go nearly as far as the Prime Minister wanted in curbing the excesses of trade-union power. She and most Tory back-benchers hoped to see secondary strike action outlawed, the closed shop banned and the legal immunities of trade unions from civil damages removed. Prior had a more modest agenda. His bill gave increased rights of appeal to workers against the operation of closed shops, but did not outlaw the closed shop itself. Secondary picketing was made illegal, but secondary strike action remained lawful. Trade-union immunities were untouched.
Margaret Thatcher, who had long ago accepted the case for wholesale reform of trade-union privileges, as set out in John Hoskyns’ unpublished policy document Stepping Stones, did her utmost to persuade Prior and the cabinet to toughen the legislation. She lost the early battles, but found other routes for winning the war.
One fundamental problem was that the personalities of Margaret Thatcher and Jim Prior were chalk and cheese. When she appointed him to her cabinet they had an argument about who should become his junior ministers. ‘I’m determined to have someone with backbone in your department’,8 she told him, insisting on the appointment of Patrick Mayhew as his Parliamentary Under-Secretary. In fact, Mayhew’s backbone leant more in the direction of Prior than Thatcher, but at the time her note of menace was clear. The difficulty was that from day one the Prime Minister thought her Secretary of State for Employment was an appeaser. She described him in pejorative terms. ‘Jim Prior was an example of a political type that had dominated and, in my view, damaged the post-war Tory Party. I call such figures “the false squire”. They have all the outward show of a John Bull – ruddy face, white hair, bluff manner – but inwardly they are political calculators who see the task of Conservatives as one of retreating gracefully before the Left’s inevitable advance.’9
For his part, Prior could not stand Margaret Thatcher’s shrill combativeness when challenging his proposals:
Margaret not only starts with a spirit of confrontation but continues with it right through the argument. It is not a style which endears and perhaps even less so when the challenger is a woman and the challenged is a man. I have to confess that I found it very difficult to stomach, and this form of male chauvinism was obviously one of my failings.10
Prior’s ‘confession’ is almost the only recorded example of any male minister or official admitting to suppressed feelings of misogynism as a result of being told off by Margaret Thatcher. There were probably numerous examples of such emotions. The Attorney General, Peter Rawlinson, acknowledged having them late in life with the wry comment that his hostile reactions to her cost him the Lord Chancellorship.11 Men of that generation sometimes did find it hard to accept an abrasive and upbraiding style from a woman – even a woman prime minister. The fault was theirs. At least Jim Prior had the grace to admit it.
The Prior–Thatcher quarrels may have been exacerbated by a clash of styles, but at the core of their disputes lay a clash of wills. In February 1980, when the Employment Bill was going through its committee stages, the Prime Minister put heavy pressure on Prior to introduce a new clause outlawing secondary strike action. She even, through Ian Gow, solicited votes in the lobbies for what he called ‘Margaret’s amendments’ to the government’s own bill. This subversive activity failed. But it was becoming a parliamentary ‘Alice in Wonderland’, where the PPS to the Prime Minister was seen to be fermenting opposition to the legislation proposed by the Secretary of State for Employment.
Meanwhile, a strike accompanied by secondary picketing at the British Steel Corporation was causing serious national difficulties. In response Margaret Thatcher tried to pre-empt the main Employment Bill with an emergency one-clause bill to ban secondary picketing immediately. Prior felt that this would be a panic response, and was prepared to resign over it. So, the day before the vital ‘E’ committee meeting on 13 February, he embarked on a major lobbying exercise of his colleagues, persuading Willie Whitelaw, Lord Carrington, Michael Heseltine, Peter Walker, Lord Hailsham, Ian Gilmour and Norman St John-Stevas to support it.
The result was that Prior got his way. His ‘softly, softly’ line held. It was one of the rare examples of a rebellion by the Wets gaining a victory. But their success was short-lived. Margaret Thatcher hated her defeat, and came up with a new initiative of her own to signal her willingness to take tougher action against the unions.
Twenty-four hours after she had lost the argument with her cabinet, she made a surprise announcement at Prime Minister’s Questions that the government would soon be cutting welfare benefits for strikers. Jim Prior was ‘amazed’ by this announcement, but grudgingly admired the cunning of her pre-emptive move. ‘She was determined to get it on the record in case, when it came to the crunch, the wets prevailed’, he commented. ‘And that was quite often her way of doing things. Very effective.’12
The label the Wets originated from Prior–Thatcher tensions. She got into the habit of scrawling the adjective ‘wet’ in the margins of memoranda and letters from him when she was Leader of the Opposition. Prior saw the accusation of wetness as a badge of honour. He boasted of it to journalists. As a result, the word came to be a generic term for those who harboured serious doubts about the economic policies of Margaret Thatcher in her first three years as Prime Minister.
Jim Prior’s doubts went far further than employment legislation issues. On that front, he suffered more defeats. He thought his 1980 Employment Bill was to be the government’s last word on law reforms affecting the trade unions. Margaret Thatcher decreed it was to be the first step. Before the bill was on the statute book, the government published a green paper indicating that further curbs on the closed shop and other measures were in the pipeline. But as Prior was still refusing to end the legal immunities of trade unions, a priority reform for her, it became clear that he was a cabinet minister who would have to be reshuffled to some other job as soon as practicable.
Prior’s lame-duck status was none too subtly announced to the world by a process that could well have been called ‘death by a thousand leaks’. It was a form of slow torture applied to several other ministers over the next few years, but the Secretary of State for Employment was the prototype victim. What happened was that a trickle and then a steady flow of press stories started to appear, reporting in various formats that Prior was not up to the job, losing the confidence of the Prime Minister, failing to reform the unions and likely to be banished to Northern Ireland. There was an element of tit for tat in this war of attrition, since Prior himself was a fountain of indiscretion when it came to letting journalists know about his misgivings over the government’s economic strategy.
However, he was not the only such fountain. Others spouted higher and more artistically. One of the most voluble wets, Norman St John-Stevas, was sacked from the cabinet in January 1981 for being leaker-in-chief, although the charge was later somewhat unconvincingly withdrawn by the Prime Minister.
The Downing Street official often blamed for black propaganda activities against ministers was her new Press
Secretary, Bernard Ingham. He was far too professional a civil servant to do any negative briefing without higher authority. Most of the leaking was done by other hands and voices with access to Margaret Thatcher’s frequent fulminations against her colleagues.
The firing of Norman St John-Stevas, like the eighteenth-century execution of Admiral Byng, was widely seen as a move by the Prime Minister ‘pour encourager les autres’.13 Soon after it, Jim Prior had a meeting with her that he regarded as his effort to get back into a reasonable working relationship with his boss. He decided to tackle the problem of leaks and counter-leaks.
‘I know you think I leak things to the press, and yes, I sometimes do, deliberately at times and by mistake on others’, he began. ‘But, of course, so do you.’
‘Oh no, Jim, I never leak’, she replied.
‘Well, if you tell me that I must accept it, but in that case your officials and press people certainly leak for you.’
‘Oh, that is quite wrong: they never know anything, so how could they leak?’14
The straight-faced effrontery of this answer amazed Prior. He eventually came round to the view that the Prime Minister was in denial, because she simply never thought that any disclosure by herself could be a leak. ‘If she said it,’ he concluded, ‘how could there be any question of a leak?’15 This view might explain her handling of the Westland crisis and other unsavoury leak episodes at later stages of her time at No. 10.
With leaks, as with so many manoeuvres of power, the cards were always stacked in favour of the Prime Minister. She ran rings around Jim Prior, calling his bluff when he rumbled about resigning over economic policy, and when he made initial noises about refusing to serve as Secretary of State for Northern Ireland. She sent Whitelaw to rebuke him for disloyalty and for ‘holding a pistol to the PM’s head’.16 This caused Prior to back down and left him looking foolish.
Margaret Thatcher: Power and Personality Page 39
