As well as having an eye for a politically attractive policy, I had always believed in a property-owning democracy and wider home ownership. It is cheaper to assist people to buy homes with a mortgage – whether by a subsidized mortgage rate, or by help with the deposit, or just by mortgage interest tax relief – than it is to build more council houses or to buy up private houses through municipalization. I used to quote the results of a Housing Research Foundation study which observed: ‘On average each new council house now costs roughly £900 a year in subsidy in taxes and rates (including the subsidy from very old council houses) … Tax relief on an ordinary mortgage, if this be regarded as a subsidy, averages about £280 a year.’ My housing policy group met regularly on Mondays. Housing experts and representatives from the building societies gave their advice. It was clear to me that Ted and others were determined to make our proposals on housing and possibly rates the centrepiece of the next election campaign, which we expected sooner rather than later. For example, at the Shadow Cabinet on Friday 3 May we had an all-day discussion of policies for the manifesto. I reported on housing and was authorized to set up a rates policy group. But this meeting was more significant for another reason. At it Keith Joseph argued at length but in vain for a broadly ‘monetarist’ approach to dealing with inflation.
The question of the rates was a far more difficult one than any aspect of housing policy, and I had a slightly different group to help me. Reform, let alone abolition, of the rates had profound implications for the relations between central and local government and for the different local authority services, particularly education. I drew on the advice of the experts – municipal treasurers proved the best source, and gave readily of their technical advice. But working as I was under tight pressure of time and close scrutiny by Ted and others who expected me to deliver something radical, popular and defensible, my task was not an easy one.
The housing policy group had already held its seventh meeting and our proposals were well developed by the time the rates group started work on 10 June. I knew Ted and his advisers wanted a firm promise that we would abolish the rates. But I was loath to make such a pledge until we were clear about what to put in their place. Anyway, if there was to be an autumn election, there was little chance of doing more than finding a sustainable line to take in the manifesto.
Meanwhile, throughout that summer of 1974 I received far more publicity than I had ever previously experienced. Some of this was inadvertent. The interim report of the housing policy group which I circulated to Shadow Cabinet appeared on the front page of The Times on Monday 24 June. On the previous Friday Shadow Cabinet had spent the morning discussing the fourth draft of the manifesto. By now the main lines of my proposed housing policy were agreed. The mortgage rate would be held down to some unspecified level by cutting the composite rate of tax paid by building societies on depositors’ accounts, in other words by subsidy disguised as tax relief. A grant would be given to firsttime buyers saving for a deposit, though again no figure was specified. There would be a high-powered inquiry into building societies; this was an idea I modelled on my earlier James Inquiry into teachers’ training. I hoped it might produce a long-term answer to the problem of high mortgage rates and yet save us from an open-ended subsidy.
The final point related to the right of tenants to buy their council houses. Of all our proposals this was to prove the most far-reaching and the most popular. The February 1974 manifesto had offered council tenants the chance to buy their houses, but retained a right of appeal for the council against sale, and had not offered a discount. We all wanted to go further than this; the question was how far. Peter Walker constantly pressed for the ‘Right to Buy’ to be extended to council tenants at the lowest possible prices. My instinct was on the side of caution. It was not that I underrated the benefits of wider property ownership. Rather, I was wary of alienating the already hard-pressed families who had scrimped to buy a house on one of the new private estates at the market price and who had seen the mortgage rate rise and the value of their house fall. These people were the bedrock Conservative voters for whom I felt a natural sympathy. They would, I feared, strongly object to council house tenants who had made none of their sacrifices suddenly receiving what was in effect a large capital sum from the Government. We might end up losing more support than we gained. In retrospect, this argument seems both narrow and unimaginative. And it was. But there was a lot to be said politically for it in 1974 at a time when the value of people’s houses had slumped so catastrophically.
In the event, the October 1974 manifesto offered council tenants who had been in their homes for three years or more the right to buy them at a price a third below market value. If the tenant sold again within five years he would surrender part of any capital gain. Also, by the time the manifesto reached its final draft, we had quantified the help to be given to first-time buyers of private houses and flats. We would contribute £1 for every £2 saved for the deposit up to a given ceiling. (We ducked the question of rent decontrol.)
It was, however, the question of how low a maximum mortgage interest rate we would promise in the manifesto that caused me most trouble. When I was in the car on the way from London to Tonbridge on Wednesday 28 August in order to record a Party Political Broadcast the bleeper signalled that I must telephone urgently. Ted wanted a word. Willie Whitelaw answered the phone and it was clear that the two of them, and doubtless others of the inner circle, were meeting. Ted came on the line. He asked me to announce on the PPB the precise figure to which we would hold down mortgages, and to take it down as low as I could. I said I could understand the psychological point about going below 10 per cent. That need could be satisfied by a figure of 9½ per cent, and in all conscience I could not take it down any further. To do so would have a touch of rashness about it. I was already worried about the cost. I did not like this tendency to pull figures out of the air for immediate political impact without proper consideration of where they would lead. So I stuck at 9½ per cent.
It was a similar story on the rates. When we had discussed the subject at our Shadow Cabinet meeting on Friday 21 June I had tried to avoid any firm pledge. I suggested that our line should be one of reform to be established on an all-party basis through a Select Committee. Even more than housing, this was not an area in which precipitate pledges were sensible. Ted would have none of this and said I should think again.
In July Charles Bellairs at the Conservative Research Department and I worked on a draft rates section for the manifesto. We were still thinking in terms of an inquiry and an interim rate relief scheme. I went along to discuss our proposals at the Shadow Cabinet Steering Committee. I argued for the transfer of teachers’ salaries – the largest item of local spending – from local government onto the Exchequer. Another possibility I raised was the replacement of rates with a system of block grants, with local authorities retaining discretion over spending but within a total set by central government. Neither of these possibilities was particularly attractive. But at least discussion revealed to those present that ‘doing something’ about the rates was a very different matter from knowing what to do.
On Saturday 10 August I used my speech to the Candidates’ Conference at the St Stephen’s Club to publicize our policies. I argued for total reform of the rating system to take into account individual ability to pay, and suggested the transfer of teachers’ salaries and better interim relief as ways to achieve this. It was a good time of the year – a slack period for news – to unveil new proposals, and we gained some favourable publicity.
It seemed to me that this proved that we could fight a successful campaign without being more specific; indeed, looking back, I can see that we were already a good deal too specific because, as I was to discover fifteen years later, such measures as transferring the cost of services from local to central government do not in themselves lead to lower local authority rates.
I had hoped to have a pleasant family holiday at Lamberhurst away from the demands of
politics. It was not to be. The telephone kept ringing, with Ted and others urging me to give more thought to new schemes. Then I was called back for another meeting on Friday 16 August. Ted, Robert Carr, Jim Prior, Willie Whitelaw and Michael Wolff from Central Office were all there. It was soon clear what the purpose was – to bludgeon me into accepting a commitment in the manifesto to abolish the rates altogether within the lifetime of a Parliament. I argued against this for very much the same reason that I argued against the ‘9½ per cent’ pledge on the mortgage rate. But so shell-shocked by their unexpected defeat in February were Ted and his inner circle that in their desire for reelection they were clutching at straws, or what in the jargon were described as manifesto ‘nuggets’.
There were various ways to raise revenue for expenditure on local purposes. We were all uneasy about moving to a system whereby central government just provided block grants to local government. So I had told Shadow Cabinet that I thought a reformed property tax seemed to be the least painful option. But in the back of my mind I had the additional idea of supplementing the property tax with a locally collected tax on petrol. Of course, there were plenty of objections to both, but at least they were better than putting up income tax.
What mattered to my colleagues was clearly the pledge to abolish the rates, and at Wilton Street Ted insisted on it. I felt bruised and resentful to be bounced again into policies which had not been properly thought out. But I thought that if I combined caution on the details with as much presentational bravura as I could muster I could make our rates and housing policies into vote-winners for the Party. This I now concentrated my mind on doing.
It was at a press conference on the afternoon of Wednesday 28 August that I delivered the package of measures – built around 9½ per cent mortgages and the abolition of the rates – without a scintilla of doubt, which as veteran Evening Standard reporter Robert Carvel said, ‘went down with hardened reporters almost as well as the sherry’ served by Central Office. We dominated the news. It was by general consent the best fillip the Party had had since losing the February election. The Building Societies’ Association welcomed the proposals for 9½ per cent mortgages but questioned my figures about the cost. As I indignantly told them, it was their sums which were wrong and they subsequently retracted. Some on the economic right were understandably critical, but among the grassroots Conservatives that we had to win back the mortgage proposal was extremely popular. So too was the pledge on the rates. The Labour Party was rattled and unusually the party-giving Tony Crosland was provoked into describing the proposals as ‘Margaret’s midsummer madness’. All this publicity was good for me personally as well. Although I was not to know it at the time, this period up to and during the October 1974 election campaign allowed me to make a favourable impact on Conservatives in the country and in Parliament without which my future career would doubtless have been very different.
Although it was my responsibilities as Environment spokesman which took up most of my time and energy, from late June I had become part of another enterprise which would have profound consequences for the Conservative Party, for the country and for me. The setting up of the Centre for Policy Studies (CPS) is really part of Keith Joseph’s story rather than mine. Keith had emerged from the wreckage of the Heath Government determined on the need to rethink our policies from first principles. If this was to be done, Keith was the ideal man to do it. He had the intellect, the integrity and not least the humility required. He had a deep interest in both economic and social policy. He had long experience of government. He had an extraordinary ability to form relationships of friendship and respect with a wide range of characters with different viewpoints and backgrounds. Although he could, when he felt strongly, speak passionately and persuasively, it was as a listener that he excelled. Moreover, Keith never listened passively. He probed arguments and assertions and scribbled notes which you knew he would go home to ponder. He was so impressive because his intellectual self-confidence was the fruit of continual self-questioning. His bravery in adopting unpopular positions before a hostile audience evoked the admiration of his friends, because we all knew that he was naturally shy and even timid. He was almost too good a man for politics – except that without a few good men politics would be intolerable.
I could not have become Leader of the Opposition, or achieved what I did as Prime Minister, without Keith. But nor, it is fair to say, could Keith have achieved what he did without the Centre for Policy Studies and Alfred Sherman. Apart from the fact of their being Jewish, Alfred and Keith had little in common, and until one saw how effectively they worked together it was difficult to believe that they could co-operate at all.
Alfred had his own kind of brilliance. He brought his convert’s zeal (as an ex-communist), his breadth of reading and his skills as a ruthless polemicist to the task of plotting out a new kind of free market Conservatism. He was more interested, it seemed to me, in the philosophy behind policies than the policies themselves. He was better at pulling apart sloppily constructed arguments than at devising original proposals. But the force and clarity of his mind, and his complete disregard for other people’s feelings or opinion of him, made him a formidable complement and contrast to Keith. Alfred helped Keith to turn the Centre for Policy Studies into the powerhouse of alternative Conservative thinking on economic and social matters.
I was not involved at the beginning, though I gathered from Keith that he was thinking hard about how to turn his Shadow Cabinet responsibilities for research on policy into constructive channels. In March Keith had won Ted’s approval for the setting up of a research unit to make comparative studies with other European economies, particularly the so-called ‘social market economy’ as practised in West Germany. Ted had Adam Ridley put on the board of directors of the CPS (Adam acted as his economic adviser from within the Conservative Research Department), but otherwise Keith was left very much to his own devices. Nigel Vinson, a successful entrepreneur with strong free enterprise convictions, was made responsible for acquiring a home for the Centre, which was found in Wilfred Street, close to Victoria. It was at the end of May 1974 that I first became directly involved with the CPS. Whether Keith ever considered asking any other members of the Shadow Cabinet to join him at the Centre I do not know: if he had, they certainly did not accept. His was a risky, exposed position, and the fear of provoking the wrath of Ted and the derision of left-wing commentators was a powerful disincentive. But I jumped at the chance to become Keith’s Vice-Chairman.
The CPS was the least bureaucratic of institutions. Alfred Sherman has caught the feel of it by saying that it was an ‘animator, agent of change, and political enzyme’. The original proposed social market approach did not prove particularly fruitful and was eventually quietly forgotten, though a pamphlet called Why Britain Needs a Social Market Economy was published.
What the Centre then developed was the drive to expose the follies and self-defeating consequences of government intervention. It continued to engage the political argument in open debate at the highest intellectual level. The objective was to effect change – change in the climate of opinion and so in the limits of the ‘possible’. In order to do this, it had to employ another of Alfred’s phrases, to ‘think the unthinkable’. It was not long before more than a few feathers began to be ruffled by that approach.
Keith had decided that he would make a series of speeches over the summer and autumn of 1974 in which he would set out the alternative analysis of what had gone wrong and what should be done. The first of these, which was also intended to attract interest among potential fundraisers, was delivered at Upminster on Saturday 22 June. Alfred was the main draftsman. But as with all Keith’s speeches – except the fateful Edgbaston speech which I shall describe shortly – he circulated endless drafts for comment. All the observations received were carefully considered and the language pared down to remove every surplus word. Keith’s speeches always put rigour of analysis and exactitude of language above style, but taken as a whol
e they managed to be powerful rhetorical instruments as well.
The Upminster speech infuriated Ted and the Party establishment because Keith lumped in together the mistakes of Conservative and Labour Governments, talking about the ‘thirty years of socialistic fashions’. He said bluntly that the public sector had been ‘draining away the wealth created by the private sector’, and challenged the value of public ‘investment’ in tourism and the expansion of the universities. He condemned the socialist vendetta against profits and noted the damage done by rent controls and council housing to labour mobility. Finally – and, in the eyes of the advocates of consensus, unforgivably – he talked about the ‘inherent contradictions [of the] … mixed economy’. It was a short speech but it had a mighty impact, not least because people knew that there was more to come.
From Keith and Alfred I learned a great deal. I renewed my reading of the seminal works of liberal economics and conservative thought. I also regularly attended lunches at the Institute of Economic Affairs where Ralph Harris, Arthur Seldon, Alan Walters and others – in other words all those who had been right when we in government had gone so badly wrong – were busy marking out a new non-socialist economic and social path for Britain. I lunched from time to time with Professor Douglas Hague, the economist, who would later act as one of my unofficial economic advisers.
At about this time I also made the acquaintance of a polished and amusing former television producer called Gordon Reece, who was advising the Party on television appearances and who had, it seemed to me, an almost uncanny insight into that medium. In fact, by the eve of the October 1974 general election I had made a significant number of contacts with those on whom I would come to rely heavily during my years as Party Leader.
Margaret Thatcher: The Autobiography Page 21
