Margaret Thatcher: The Autobiography

by Margaret Thatcher

  I made one other point which was to prove of some significance. I said that, ‘The arrangement [must] last as long as the problem.’ It seemed to me then, and even more so by the end of the Council, that we simply could not have these battles every year, all to establish what common sense and equity ought to have made self-evident from the beginning.

  It quickly became clear that I was not going to make the other heads of government see matters like this. Some, for example the Dutch Prime Minister, Mr Andries Van Agt, were reasonable, but most were not. I had the strong feeling that they had decided to test whether I was able and willing to stand up to them. They were determined to keep as much of our money as they could. By the time the Council broke up Britain had been offered a refund of only £350 million, implying a net contribution of some £650 million. That refund was just not big enough and I was not going to accept it. I had agreed that there should be another Council to discuss the matter further, but I was not overoptimistic after what I had seen and heard in Dublin, and what I would not accept was the attitude that fairness as such did not seem to enter into the equation at all.

  At the press conference after the Council, I gave a vigorous defence of our position. I said that the other states should not have ‘expected me to settle for a third of a loaf’. I also refused to accept the communautaire language about ‘own resources’. I continued to state without apology that we were talking about Britain’s money, not Europe’s. I said:

  I am only talking about our money, no one else’s; there should be a cash refund of our money to bring our receipts up to the average level of receipts in the Community.

  Most of the other heads of government were furious.

  We used the period between the end of the Dublin meeting and the next European Council to press our case. On 25 February Helmut Schmidt came to London again. Our talks centred on the question of our budget contribution and on the German Chancellor’s repeated wish to see sterling within the ERM, and – contrary to the usual misleading press reports – they were useful and quite jolly. On 27 and 28 March there was a full-scale Anglo-German summit in London. I sought once more to stress how seriously we felt about the British contribution. Subsequently, I learned that Helmut Schmidt had been telling other Community governments that if there were no solution there was a danger that we would withhold British contributions to the Community. I had created the desired impression. The European Council due for 31 March and 1 April had to be postponed because of a political crisis in Italy (not an unusual event), but we pressed for a new Council before the end of April and it was finally called for Sunday and Monday 27 and 28, to meet in Luxemburg.

  The atmosphere in Luxemburg turned out to be a good deal better than in Dublin. But we did not get around to talking about the budget at all at our first session. Indeed, only after dinner, and the usual foreign affairs tour de table, did I obtain agreement that the official group should resume effective negotiation that evening. The French were the main stumbling block: the proposals their officials presented were much less helpful to us than President Giscard’s had seemed to be. In the meantime, the Agriculture ministers of the other governments of the Community had agreed on a package of proposals which would have raised farm prices, increasing again the proportion of the Community budget devoted to agriculture (quite contrary to the proposals put forward in Dublin) and giving the French a sheep meat regime which was more or less all that they wanted. Against this – for us – distinctly unfavourable background, we received eventually the offer of a limit on our net contribution of about £325 million, applying only to the year 1980. Under a subsequent proposal our net contribution would have been limited to about £550 million for 1981 as well.

  My reaction was that this was too little. But above all I was not prepared to have a settlement that only lasted for two years. Helmut Schmidt, Roy Jenkins (President of the Commission) and almost everyone else urged me to settle. But I was not willing to return the following year to face precisely the same problem and the attitude that went with it. So I rejected the offer.

  In fact, we were a good deal closer to a settlement than was widely recognized. Great progress had already been made in winning agreement to substantial reductions in our contribution. What remained was to secure these reductions for the first two years with a reliable undertaking for the third. We had a number of powerful levers by which we could apply pressure to this end. The French were increasingly desperate to achieve their aims in the Agriculture Council. The Germans, too, were keen to see higher agricultural prices. Most important of all, the Community would, we thought, probably reach the limit of its financial resources in 1982. Its persistent overspending was catching up with it, and greater resources could only be made available with British agreement. Ultimately our negotiating position was a strong one.

  It soon became clear that Luxemburg, following the clashes in Dublin, had had the desired effect. In spite of talk of the Luxemburg offer having now been ‘withdrawn’, there was evidence of a general desire to solve the budget issue before the next full European Council at Venice in June. The easiest way to achieve this appeared to be a meeting of the Community Foreign ministers.

  Peter Carrington, having received his mandate from me, flew to Brussels on Thursday 29 May with Ian Gilmour. After a marathon eighteen-hour session they came back with what they considered an acceptable agreement, arriving at lunchtime on Friday to brief me at Chequers.

  My immediate reaction was far from favourable. The deal involved a net budget contribution in 1980 higher than envisaged at Luxemburg. It appeared from Peter’s figures that we would pay rather less under the new package in 1981, though to some extent this was sleight of hand, reflecting different assumptions about the size of that year’s total budget. But the Brussels proposal had one great advantage: it now offered us a three-year solution. We were promised a major review of the budget problem by mid-1981 and if this had not been achieved (as proved to be the case) the Commission would make proposals along the lines of the formula for 1980–81 and the Council would act accordingly. The other elements of the Brussels package relating to agriculture, lamb and fisheries, were more or less acceptable. We had to agree a 5 per cent rise in farm prices. Overall, the deal marked a refund of two-thirds of our net contribution and it marked huge progress from the position the Government had inherited. I therefore decided to accept the offer.

  Wider international affairs had not stood still while we were engaged in bringing Rhodesia to legal independence and negotiating a reduction in our Community budget contribution. In November 1979, forty-nine American diplomatic personnel had been taken hostage in Iran, a source of deep and growing humiliation to the greatest western power. In December at the invitation of President Carter I made a short visit to the United States – the first of many as Prime Minister. In a short speech at my reception on the White House lawn I went out of my way to reaffirm my support for American leadership of the West.

  At the end of 1979, the world reached one of those genuine watersheds which take almost everyone by surprise: the Soviet invasion of Afghanistan. In April 1978, the Government of Afghanistan had been overthrown in a communist-inspired coup; a pro-Soviet government was established, which was met by widespread opposition and eventual rebellion. In September 1979 the new President, Taraki, was himself overthrown and killed by his deputy, Hafizullah Amin. On 27 December, Amin was overthrown and killed, to be replaced by Babrak Karmal, whose regime was supported by thousands of Soviet troops.

  Perhaps I was less shocked than some by the invasion of Afghanistan. I had long understood that détente had been ruthlessly used by the Soviets to exploit western weakness and disarray. I knew the beast.

  What had happened in Afghanistan was only part of a wider pattern. The Soviets had instigated Cubans and East Germans to advance their aims and ambitions in Africa. They had been working to further communist subversion throughout the Third World, and had built up armed forces far beyond their defensive needs. Whatever their preci
se motives now in Afghanistan, they must have known that they had threatened the stability of Pakistan and Iran and were within 300 miles of the Straits of Hormuz. Moreover, bad as the situation was in itself, it could be worse as a precedent. There were other areas of the world in which the Soviets might prefer aggression to diplomacy, if they now prevailed: for example, Marshal Tito was approaching the end of his life in Yugoslavia and there could be opportunities for Soviet intervention there. They clearly had to be punished for their aggression and taught that the West would not only talk about freedom, but was prepared to make sacrifices to defend it.

  On Friday 28 December President Carter rang me at Chequers. What had happened was a bitter blow to him. Britain had not felt able to comply with all that the Americans had wanted of us in response to the hostage crisis: in particular, we were not willing (or indeed legally able) to freeze Iranian financial assets, which would have had a devastating effect on international confidence in the City of London as a world financial centre. However, I was determined that we should follow America’s lead now in taking action against the USSR and its puppet regime in Kabul. We therefore decided on a range of measures, including the curtailment of visits and contacts, non-renewal of the Anglo-Soviet credit agreement and a tightening of the rules on technology transfer. I also sought to mobilize the governments of the European Community to support the Americans. But, like President Carter, I was sure that the most effective thing we could do would be to prevent the USSR using the forthcoming Moscow Olympics for propaganda purposes. Unfortunately, most of the British Olympic team decided to attend the Games, though we tried to persuade them otherwise: of course, unlike their equivalents in the Soviet Union, our athletes were left free to make up their own minds. At the UN our ambassador, Tony Parsons, helped to rally the ‘non-aligned’ countries to condemn the Soviet Union’s aggression. In London, on 3 January, I saw the Soviet Ambassador to enlarge in vigorous terms on the contents of my exchanges by telegram with President Brezhnev.

  From now on, the whole tone of international affairs began to change, and for the better. Hard-headed realism and strong defence became the order of the day. The Soviets had made a fatal miscalculation: they had prepared the way for the renaissance of America under Ronald Reagan.

  But this was the future. America had still to go through the humiliating agony of the failed attempt to rescue the Iranian hostages. As I watched President Carter’s television broadcast explaining what had happened, I felt America’s wound as if it were Britain’s own; and in a sense it was, for anyone who exposed American weakness increased ours. I was soon, though, in a position to demonstrate that there would be no flinching when it came to dealing with our own brand of Middle East terrorism.

  I first learned of the terrorist attack on the Iranian Embassy at Prince’s Gate in Knightsbridge on Wednesday 30 April during a visit I was making to the BBC. Several gunmen had forced their way into the Iranian Embassy and were holding twenty hostages – most of them Iranian staff, but also a policeman who had been on duty outside and two BBC journalists who had been applying for visas. The gunmen were threatening to blow up both the embassy and the hostages if their demands were not met. The terrorists belonged to an organization calling itself ‘the Group of the Martyr’; they were Iranian Arabs from Arabistan, Iraqi-trained and bitterly opposed to the prevailing regime in Iran. They demanded that a list of 91 prisoners be set free by the Iranian Government, that the rights of Iranian dissidents should be recognized and a special aeroplane provided to take them and the hostages out of Britain. The Iranian Government had no intention of conceding these demands; and we, for our part, had no intention of allowing terrorists to succeed in their hostage taking. Though the group involved was a different one, this was no less an attempt to exploit perceived western weakness than was the hostage taking of the American Embassy personnel in Tehran. My policy would be to do everything possible to resolve the crisis peacefully, without unnecessarily risking the lives of the hostages, but above all to ensure that terrorism should be – and be seen to be – defeated.

  Willie Whitelaw, as Home Secretary, took immediate charge of operations from the special emergency unit in the Cabinet Office. Throughout the crisis, Willie kept in regular contact with me. In turn the Metropolitan Police kept in touch with the terrorists by a specially laid telephone line. We also made contact with those who might be able to exert some influence over the gunmen. The latter wished to have an Arab country’s ambassador act as intermediary. But there was a risk that the objective of such an intermediary would be different from our own. The Jordanians, whom we were prepared to trust, refused to become involved. A Muslim imam did talk to the terrorists, but without result. It was a stalemate.

  The position began to deteriorate on Sunday afternoon. I was called back early from Chequers and we were driving back to London when a further message came over the car-phone. The hostages’ lives were now at risk and Willie wanted my permission to send in the SAS. ‘Yes, go in,’ I said. Executed with the superb courage and professionalism the world now expects of the SAS, the assault took place in the full glare of the television cameras. Of the 19 hostages known to be alive at the time of the assault all were rescued. Four gunmen were killed; one was captured; none escaped. I breathed a sigh of relief when I learned that there were no police or SAS casualties. Later I went to the Regent’s Park Barracks to congratulate our men. I was met by Peter de la Billière, the SAS commander, and then watched what had happened on television news, with a running commentary, punctuated by relieved laughter, from those involved in the assault. One of them turned to me and said, ‘We never thought you’d let us do it.’ Wherever I went over the next few days, I sensed a great wave of pride at the outcome; telegrams of congratulation poured in from abroad: we had sent a signal to terrorists everywhere that they could expect no deals and would extort no favours from Britain.

  The Middle East continued to occupy my attention throughout the rest of 1980. At the European Council in Venice on 12 and 13 June the heads of government discussed Israel and the Palestinian question. The key issue was whether the Community governments were to call for the PLO to be ‘associated with’ the Middle East peace talks, or to ‘participate in’ them: I was very much against the latter course, for as long as the PLO did not reject terrorism. The final communiqué reaffirmed the right of all the states in the region – including Israel – to existence and security, but also demanded justice for all peoples, which implied recognition of the Palestinians’ right to self-determination. So, of course, it pleased no one.

  Then in September 1980 Iraq attacked Iran and we were once again in the throes of a new crisis, with potentially dangerous political and economic implications for western interests. Saddam Hussein had decided that the chaos in Iran provided him with a good opportunity to renounce the 1975 Algiers Settlement of the two countries’ disputed claims to the Shatt-al-Arab waterway and seize it by force.

  I was chiefly concerned to prevent the conflict spreading down the Gulf and involving the vulnerable oil-rich Gulf States, which had traditionally close links with Britain. I told Peter Carrington that I did not share the common view that the Iranians would quickly be beaten. They were fanatical fighters and had an effective air force with which they could attack oil installations. I was right: by the end of the year the Iraqis became bogged down and the war threatened both the stability of the Gulf and western shipping. But by this time we had put in the Armilla Patrol to protect our ships.

  As I looked back on the international scene that Christmas of 1980 at Chequers, I reflected that the successes of British foreign policy had helped us through a particularly dark and difficult time in domestic, and particularly economic, affairs. But, as in economic matters, so in foreign affairs I knew that we were only starting the course. Tackling Britain’s Community budget problem was only the first step to reforming the Community’s finances. Bringing Rhodesia to legal independence was but a prelude to addressing the problem of South Africa. The West’s
response to the Soviet invasion of Afghanistan would have to be a fundamental rethinking of our relations with the communist bloc, and this had barely begun. The renewed instability in the Gulf as a result of Iraq’s attack on Iran would ultimately require a new commitment by the western powers to the security of the region. All these issues were to dominate British foreign policy in the years ahead.

  CHAPTER SIXTEEN

  Not At All Right, Jack

  The restructuring of British industry and trade union reform in 1979–1980

  IN THE YEARS SINCE THE WAR British politics had focused, above all, on the debate about the proper role of the state in the operation of the economy. By 1979 and perhaps earlier, optimism about the beneficent effects of government intervention had largely disappeared. This change of attitude, for which I had long worked and argued, meant that many people who had not previously been Conservative supporters were now prepared to give our approach at least the benefit of the doubt.

  A sort of cynical disdain, often disguised as black humour, had come to characterize many people’s attitude to industry and unions. We all enjoyed the film I’m All Right, Jack, but the problem was no laughing matter.

  British goods will only be attractive if they can compete with the best on offer from other countries, and the truth is that too often British industrial products were uncompetitive. This was not simply because the strong pound was making it difficult to sell abroad, but because our industrial reputation had steadily been eroded. In the end reputation reflects reality. Nothing less than changing that reality – fundamentally and for the better – would do.

  The root of Britain’s industrial problem was low productivity. British living standards were lower than those of our principal competitors and the number of well-paid and reasonably secure jobs was smaller because we produced less per person than they did. The overmanning resulting from trade union restrictive practices was concealed unemployment; and beyond a certain point – certainly beyond the point we had reached in 1979 – overmanning would bring down businesses and destroy existing jobs. Outdated capacity and old jobs have to go to make the most of new opportunities. Yet the paradox, which neither British trade unions nor the socialists were prepared to accept, was that an increase in productivity is likely, initially, to reduce the number of jobs before creating the wealth that sustains new ones. Time and again we were asked when plants and companies closed, ‘Where will the new jobs come from?’ As the months went by, we could point to the expansion of self-employment and to industrial successes in aerospace, chemicals and North Sea oil. Increasingly we could also look to foreign investment, for example in electronics and cars. But the fact is that in a market economy government does not – and cannot – know where jobs will come from.