Margaret Thatcher: The Autobiography

by Margaret Thatcher

  The debate about trade union reform, both inside and outside government, was conducted under the shadow of industrial conflict: the issues of secondary action and immunities became inextricably entangled with the 1980 steel strike. But that strike also challenged our economic strategy directly and it is unlikely, once the strike had begun, that our economic policies would have survived if we had suffered defeat.

  One of my first decisions about the nationalized industries was to agree to the closure of the Shotton steel works in North Wales. Measures aimed at providing new job opportunities in the area would be announced, but I knew that the closure would have a devastating effect on the steelmen and their families. I felt desperately sorry for them. They had done all that was expected. But it was not – and could not be – enough.

  BSC exemplified not only the disadvantages of state ownership and intervention, but also the way that British trade unionism dragged down our industrial performance. At the Hunterston ore terminal on the Clyde BSC had built the largest deep-water jetty in Europe. It had been opened in June 1979, but could not be used until November because of a manning dispute between the Transport and General Workers’ Union and the ISTC. For five months bulk ore carriers had to be diverted to the Continent, where their cargo was transferred to smaller vessels for shipment to Terminus Quay, Glasgow, and from there finally sent on to Ravenscraig.

  Over the five years to 1979–80 more than £3 billion of public money had gone into BSC, which amounted to £221 for every family in the country. Yet still the losses accumulated. Keith Joseph and I were prepared to continue for the present to fund BSC’s investment and redundancy programme; what we were not prepared to do was to fund losses which arose from excessive wage costs, unearned by higher productivity.

  If we were serious about turning BSC round – with all the closures, job losses, and challenges to restrictive practices that would involve – we faced the risk of a very damaging steel strike. There was only one worse alternative: to allow the present situation to continue.

  BSC’s cash limit for 1980–81 was first set in June 1979: the aim was for it to break even by March 1980. This objective had been set by the previous Labour Government. But by 29 November 1979 BSC had announced a £146 million half-year loss. The crisis was fast approaching.

  On 6 December Keith Joseph let me know that BSC could not afford any general wage increase from 1 January other than the consolidation of certain additional increases agreed the previous year – amounting to 2 per cent. Any further increase would be dependent on local negotiations and conditional on the equivalent improvements in productivity. The Corporation had told the unions the week before that 5 million tonnes of surplus capacity, over and above the closure of iron- and steel-making at Corby and Shotton, would have to be shut down. Already Bill Sirs was threatening a strike. I agreed with Keith that we must back the Corporation. We also agreed that BSC must win the support of public opinion and bring home to the unions the harm which a strike would do to their own members.

  As the strike loomed, there was much disquiet about whether the management of BSC had properly prepared its ground for it. The figures used to justify the management’s position were questioned, even by Nicholas Edwards, the Secretary of State for Wales. He might have been right. But I said that we must not attempt to substitute our judgement as politicians for that of the industry. It was up to the management of BSC – at last – to manage.

  On 10 December the BSC Board confirmed that 52,000 steel jobs would have to go. The business prospects for BSC were still worsening. Indeed, when we looked at their figures for future steel demand we thought that they were, if anything, slightly optimistic.

  From the end of December I chaired regular meetings of a small group of ministers and officials to monitor the steel situation and decide what action needed to be taken. It was a frustrating and anxious time. The details of the BSC offer were not well understood either by the steel workers or by the public and allowed a bewildering array of different figures to gain currency, pleasing no one: to the general public the figures always seemed to be increasing, while to the unions they never seemed sufficient.

  It was against this background that I met first the unions at their request and then the management of BSC on Monday 21 January at No. 10. The union leaders had seen Keith Joseph and Jim Prior the previous Saturday. One difficulty we had was that the unions might have drawn the wrong impression from widely reported remarks made by Jim, criticizing the BSC management. I had been angry to read this. But, when a week later I was asked about it by Robin Day on Panorama, my reply was sweetly dismissive: ‘We all make mistakes now and then. I think it was a mistake, and Jim Prior was very, very sorry indeed for it, and very apologetic. But you don’t just sack a chap for one mistake.’

  In my discussion with Mr Sirs and Mr Smith (the leaders respectively of the ISTC and NUB), I said that the Government was not going to intervene in the dispute. I did not know enough about the steel industry to become involved in the negotiations though, of course, I was keen to hear their views. The unions wanted the Government to bring pressure on BSC to make an increased offer. They wanted some ‘new money’, but I pointed out that there is no such thing: money for the steel industry could only come from other industries which were making a profit. The real issue, I said, was productivity where – although Bill Sirs disputed the figures – it was generally accepted that BSC’s performance lagged far behind. Luxemburg had reduced its steel workforce from 24,000 to 16,000 and substantially increased its productivity, with the result that it was now exporting railway lines to the UK. When I had heard this the previous autumn I had been cut to the quick, and I told him so.

  That same afternoon I met Sir Charles Villiers and Bob Scholey, the Chairman and Chief Executive of BSC. They described to me precisely what was on offer and the very limited scope for flexibility. I gave them my full support.

  The real problem was now arising in the private steel sector. Mass picketing at Hadfields raised the stakes. It had overtones of the kind of intimidation and violence which had led to the closure of the Saltley Coke Depot during the miners’ strike in 1972: it was vital that we win through.

  British business proved resourceful in meeting the strike: somehow, they got hold of the steel they needed.

  Although it was now obvious that the unions had lost, the precise terms on which the Government and management had won remained in the balance. On 9 March BSC had held a ‘ballot about a ballot’, asking workers whether they wanted a ballot on pay, which the ISTC had hitherto denied them, and this had shown strong evidence of disenchantment with the ISTC’s tactics and leadership. The union wanted a way out which would save face. BSC had formally proposed arbitration on 17 February and, although rejected, the offer had remained open. There was strong pressure for a Court of Inquiry into the strike which would propose a settlement. I would have preferred the involvement of ACAS (the Advisory, Conciliation and Arbitration Service). It seemed to me that if ACAS had any reason for existing at all, it should surely have a role in a situation such as this. In fact, we were condemned to watch while BSC and the unions agreed to the appointment of a three-man inquiry consisting of Lords Lever and Marsh (both former Labour Cabinet ministers) and Bill Keyes of SOGAT, which on 31 March recommended a settlement well above the figure originally offered by BSC but substantially below what the ISTC had demanded. The offer was accepted.

  At its final meeting on 9 April my committee was told that all the BSC plants were back in operation. Production and steel deliveries were about 95 per cent of what they would have been without the dispute. The outcome, in spite of the size of the final settlement, was generally seen as a victory for the Government. The bills, however, kept on coming in.

  This had been a battle fought and won not simply for the Government and for our policies, but for the economic well-being of the country as a whole. It was necessary to stand up to unions which thought that because they were in the public sector they should be allowed to igno
re commercial reality and the need for higher productivity. In future, pay had to depend on the state of the employing industry, and not on some notion of ‘comparability’ with what other people received. But it was always going to be more difficult to induce such realism where the state was owner, banker, and at times tempted to be manager as well.

  In many ways British Leyland presented a similar challenge to the Government as BSC, though in a still more acute and politically difficult form. Like BSC, BL was effectively state-owned and controlled, though technically it was not a nationalized industry. The company had become a symbol of Britain’s industrial decline and of trade union bloody-mindedness. However, by the time I entered No. 10 it had also begun to symbolize the fightback by management. Michael Edwardes, BL’s Chairman, had already demonstrated his grit in taking on the trade union militants who had brought the British car industry to its knees. I knew that whatever we decided to do about BL would have an impact on the psychology and morale of British managers as a whole, and I was determined to send the right signals. Unfortunately, it became increasingly clear that the action required to support BL’s stand against trade union obstruction diverged from what was required on purely commercial grounds. This was a problem: but we had to back Michael Edwardes.

  We had indicated in Opposition our hostility to the Ryder Plan for BL with its enormous cost, unmatched by sufficiently rigorous measures to increase productivity and earn profits.* My first direct experience as Prime Minister of BL’s difficulties came in September 1979 when Keith Joseph informed me of BL’s dreadful half-yearly results and of the measures the Chairman and Board intended to take. The new plan involved the closure of BL’s Coventry plant. At least 25,000 jobs would be lost. Productivity would be increased. The development of BL’s medium car range of models would be accelerated. The BL Board said that the company would require additional funds beyond the £225 million remaining of the £1 billion which Labour had in principle committed.

  BL’s workers were to be balloted on the Corporate Plan. If it received substantial majority support the Government would find it very difficult to turn down and, as quickly became apparent, the company would want a further £200 million above and beyond the final tranche of Ryder money. The ballot, of which the result would be announced on 1 November, seemed likely to go the company’s way. But it might not; and that would present its own immediate problems. For if the ballot showed anything other than overwhelming support for the company’s proposals there would be speculation about its future, with the prospect of BL’s many small and medium-sized creditors demanding immediate payment and the large holders of loan stock adding to the pressure. BL might be forced precipitately into liquidation and the economic implications of such a collapse were appalling. One hundred and fifty thousand people were employed by the company in the UK; there were perhaps an equal number of jobs in the component and other supplying industries dependent on BL. It was suggested that complete closure would mean a net loss to the balance of trade of around £2,200 million a year, and according to the NEB it might cost the Government as much as £1 billion.

  Closure would have some awful consequences, but we must never give the impression that it was unthinkable. If ever the company and workforce came to believe that, there would be no limit to their demands on the public purse. For this reason Keith and I decided not to agree to BL’s request for the Government to issue an undertaking to honour the company’s debt. They had wanted us to publish a letter to this effect even before the ballot result. In fact, 87.2 per cent of those voting supported BL’s plan and BL immediately sought approval from the NEB to go ahead with it. A firm request for money was made to the Government.

  Our consideration of the BL Corporate Plan was delayed by two other events. First, as a result of our (unconnected) decision to remove Rolls-Royce from the purview of the NEB, Sir Leslie Murphy and his colleagues resigned and a new Board had to be appointed under Sir Arthur Knight. Second, the Amalgamated Union of Engineering Workers (AUEW) now threatened the very survival of BL by calling a strike following the dismissal on 19 November of Derek Robinson, a notorious agitator, convenor of the shop stewards at Longbridge and chairman of the so-called ‘Leyland Combine Trade Union Committee’. Robinson and others had continued to campaign against the BL plan even after its approval. The management had been right to sack him, pending the outcome of an inquiry by the AUEW.

  We were now, though, put under pressure to approve the plan before the Christmas recess – without waiting for completion of BL’s wage negotiations – in order to enable the company to sign a collaborative deal with Honda for a new middle-range car. I was not prepared to be bounced into a commitment. Past experience suggested to me that the plan would not in fact be fulfilled.

  I, therefore, asked John Nott to go over BL’s accounts with the company’s Finance Director. Keith Joseph, John Biffen and others also went over the plan in detail with Michael Edwardes. Their conclusion was that there was only a small chance of BL surviving and that it was probable that the plan would fail, followed by a run-down or liquidation of the company. About a third of BL was thought to be saleable. But the final judgement had to be based on wider considerations. We reluctantly decided that people would simply not understand liquidation of the company at the very moment when its management was standing up to the unions and talking the language of hard commercial common sense. After much discussion, we agreed to endorse the plan and to provide the necessary financial support. Keith announced our decision to the House of Commons on 20 December.

  But BL’s ballot on their pay offer went badly wrong, partly because the question put to the workforce – ‘Do you support your Negotiating Committee’s rejection of the Company’s wage and conditions offer?’ – was confusing. Fifty-nine per cent of those taking part voted against the offer. Moreover, the AUEW inquiry found that Robinson had been unfairly dismissed by the company and an official strike was announced, to begin on 11 February. Michael Edwardes rightly refused to reinstate him or to improve on the pay offer. Contingency plans were made by the BL Board, assisted by Department of Industry and Treasury officials, to cope with the situation if the plan had to be withdrawn and the company put into liquidation. Michael Edwardes was unwilling to approach possible foreign buyers for a sell-off of BL, although he agreed to respond positively to any approaches potential buyers might make to him. Certainly, the workforce at BL could be in little doubt as to the seriousness of their position. BL’s share of the market had fallen so low that in January Ford sold more of one model (the Cortina) than BL’s total sales.

  Michael Edwardes and the BL Board faced down the union threat. The strikers were told that unless they returned to work by Wednesday 23 April they would be dismissed. But much as I admired BL’s tenacity, I was becoming increasingly unhappy about the Board’s commercial approach.

  As the summer wore on it became clear that the company’s financial position was deteriorating even further. The company lost £93.4 million before interest and tax in the first half-year compared with a profit of £47.7 million for the same period the previous year. Michael Edwardes tried to get the Government to agree to fund the new BL medium-range car – known as the LM10 – separately and in advance of the 1981 Corporate Plan. Indeed, he wanted me to announce the Government’s commitment to this at a dinner given by the Society of Motor Manufacturers and Traders (SMMT) on 6 October. I had no intention of agreeing; once again, I would not be bounced.

  On 27 October BL’s trade unions decided overwhelmingly to reject the company’s offer of a pay increase of 6.8 per cent and recommended a strike. Michael Edwardes wrote to Keith Joseph to say that a strike would make it impossible to achieve the 1981 Corporate Plan submitted just a week before. To win support for the pay offer, he wanted to write to inform union officials of the key aspects of the 1981 Plan, including the funds required for 1981 and 1982 – a figure which he would put at £800 million. I reluctantly accepted his approach but only on the clear understanding that the Departme
nt of Industry would make it known that the Government was not committed in any way to finding these funds and that the matter had yet to be considered. In fact, on 18 November BL’s union representatives backed down and finally decided to accept the company’s offer. Almost the same thing had happened the previous year. The need to deal with an industrial relations crisis made it extremely difficult to avoid the impression that we were prepared to provide large amounts of extra public funding for the company. No matter how clear our disclaimers, inevitably people drew that conclusion.

  On any rational commercial judgement, there were no good reasons for continuing to fund British Leyland. BL was still a high-cost, low-volume manufacturer of cars in a world where low cost and high volume were essential for success. But I knew that closure of the volume car business, with all that would mean for the West Midlands and the Oxford area, would not be politically acceptable, at least in the short term. It would also be a huge cost to the Exchequer – perhaps not very different from the sort of sums BL was now seeking. I was in favour of supporting the BL Plan – but on condition that BL disposed of its assets rapidly or arranged mergers with other companies.

  But this was contentious. Michael Edwardes was not willing to sell Land Rover if BL were also required to go on trying to salvage the volume car business. He said that the Board’s position would be quite impossible if a public deadline were to be set for its sale.

  Political realities had to be faced. We agreed to accept BL’s Corporate Plan, involving the division of the company into four more or less independent businesses. We settled the contingencies which would lead to the plan being abandoned. We set out the objectives for further collaboration with other companies. And – most painfully – we provided £990 million.