Much of this bitter disagreement found its way into the press – and not simply in reports of what had been said in Cabinet derived from non-attributable ministerial comments. There were particularly embarrassing comments from Francis Pym and Peter Thorneycroft, who between them were meant to be responsible for the public presentation of our policies. At Francis’s suggestion I had authorized the recreation of the ‘Liaison Committee’, at which ministers and Central Office were supposed to work together to achieve a coherent message. In August it became clear that these arrangements were actually being used to undermine the strategy.
Geoffrey Howe had said in the House of Commons that the CBI’s latest Industrial Trends Survey provided evidence that we were now at the end of the recession – a remark which may have been slightly imprudent, but which was strictly true. The following weekend Francis Pym in the course of a lengthy speech observed: ‘There are few signs yet of when an upturn will occur. And that recovery when it comes in due course may be slower and less pronounced than in the past.’ This forecast would have been bold even from an economist; coming from Francis it verged on the visionary. Even Peter Thorneycroft, who had been a superb chairman of the Party in Opposition, joined the ‘wet’ chorus, describing himself as suffering from ‘rising damp’ and saying that ‘there [was] no great sign of [the economy] picking up’. Given that these comments came from the two men in charge of presenting government policy, they were extremely damaging and easily seen (in that inevitable metaphor) as ‘the tip of the iceberg’.
Trade union reform was another subject of Cabinet disagreement. We had issued a Green Paper on trade union immunities on which comments were to be received by the end of June 1981. When they came in, these showed a desire among businessmen for further radical action to bring trade unions fully under the rule of law. But Jim Prior and I disagreed about what should be done. I wanted further action to restrict trade union immunities, which would make union funds liable to court action. Jim’s proposals would not have achieved this. In his reading, history showed that the unions could defeat any legislation if they wanted to. I believed that history showed nothing of the sort, but rather that governments in the past had failed the nation through lack of nerve – drawing back when the battle was nearly won. I was also convinced that on the issue of union reform there was a great reserve of public support on which we could draw.
The differences between Cabinet ministers over the economic strategy – and between myself and Jim Prior over trade union reform – were of fundamentals. So it was quite clear to me that a major reshuffle was needed if our economic policy were to continue, and perhaps if I were to remain Prime Minister.
I preferred to have a Cabinet reshuffle during the recess if possible, so that the ministers could get used to their departments before being questioned in the House. It was not, therefore, until September that I discussed the details with my closest advisers. Willie Whitelaw, Michael Jopling (the Chief Whip) and Ian Gow came over to Chequers on the weekend of 12–13 September. For part of the time Peter Carrington and Cecil Parkinson joined us. The reshuffle itself took place on the Monday.
I always saw first those who were being asked to leave the Cabinet. I began with Ian Gilmour and told him of my decision. He was – I can find no other word for it – huffy. He left Downing Street and denounced government policy to the television cameras as ‘steering full speed ahead for the rocks’ – altogether a flawless imitation of a man who has resigned on principle. Christopher Soames was equally angry – but in a grander way. I got the distinct impression that he felt that he was, in effect, being dismissed by his housemaid. Mark Carlisle, who had not been a very effective Education Secretary, also left the Cabinet – but he did so with courtesy and good humour. Jim Prior was obviously shocked to be moved from Employment. The press had been full of his threats to resign from the Government altogether if he were asked to leave his present position. I wanted this post for the formidable Norman Tebbit, so I called Jim’s bluff, and offered him the post of Northern Ireland Secretary. After some agonizing and some telephoning he accepted my offer and became Secretary of State for Northern Ireland in place of the debonair Humphrey Atkins, who succeeded Ian Gilmour as the main Foreign Office minister in the Commons.
I moved David Howell from Energy to Transport. It gave me great pleasure to promote the immensely talented Nigel Lawson into the Cabinet to take his place.
Keith Joseph had told me that he wished to move from Industry. With his belief that there was an anti-enterprise culture that had harmed Britain’s economic performance over the years, it was natural that Keith should now wish to go to Education where that culture had taken deep roots. Accordingly, I sent Keith to my old department to replace Mark Carlisle. Norman Fowler returned to take up Health and Social Security, the portfolio he had held in Opposition, replacing Patrick Jenkin who took over at Industry from Keith. Janet Young, a friend for many years, became Leader of the House of Lords, the first woman to hold the post, taking over Christopher Soames’s responsibility for the civil service.
Perhaps the most important change was the promotion of Norman Tebbit to replace Jim Prior at Employment. Norman had been an official of the British Airline Pilots’ Association and had no illusions about the vicious world of hard-left trade unionism, nor by contrast, any doubt about the fundamental decency of most trade union members. As a true believer in the kind of approach Keith Joseph and I stood for, Norman understood how trade union reform fitted into our overall strategy. Norman was also one of the Party’s most effective performers in Parliament and on a public platform. The fact that the Left howled disapproval confirmed that he was just the right man for the job. He was someone they feared.
I had already agreed with Peter Thorneycroft that he should cease to be Party Chairman. I had been unhappy about some of Peter’s actions in recent months. But I would never forget how much he did to help win the 1979 election and he remained a friend. I appointed Cecil Parkinson to succeed him – dynamic, full of common sense, a good accountant, an excellent presenter and, no less important, on my wing of the Party.
The whole nature of the Cabinet changed as a result of these appointments. After the new Cabinet’s first meeting I remarked to David Wolfson and John Hoskyns what a difference it made to have most of the people in it on my side. This did not mean that we would always agree, but it would be a number of years before there arose an issue which fundamentally divided me from the majority of my Cabinet, and by then Britain’s economic recovery, so much a matter of controversy in 1981, had been accepted – perhaps all too easily accepted – as a fact of life.
The ‘wets’ had been defeated, but they did not yet fully realize it and decided to make a last assault at the 1981 Party Conference in Blackpool that October.
The circumstances on the eve of the Conference were grim. Inflation remained stubbornly at between 11 and 12 per cent. Largely as a result of the US budget deficit, interest rates had been increased by 2 per cent in mid-September. Then, shortly after I arrived at Melbourne for the Commonwealth Conference on 30 September, I received a telephone call to say that we would have to make a second increase of 2 per cent. Interest rates now stood at an alarming 16 per cent.
Above all, unemployment continued its inexorable rise: it would reach the headline figure of three million in January 1982, but already in the autumn of 1981 it seemed almost inevitable that this would happen. Most people were unpersuaded, therefore, that recession was coming to an end and it was too soon for the new sense of direction in Cabinet to have had an effect on public opinion.
We were also in political difficulties for another reason. The weakness of the Labour Party had allowed the newly formed SDP to leap into political contention. In October the Liberals and SDP were standing at 40 per cent in the opinion polls: by the end of the year the figure was over 50 per cent. (At the Crosby by-election in the last week of November Shirley Williams was able to overturn a 19,000 Conservative majority to get back into the Commons.) On th
e eve of our Party Conference I was being described in the press as ‘the most unpopular Prime Minister since polls began’.
In the Conference economic debate no less a figure than Ted Heath spearheaded the attack. He argued that there were alternative policies available but that we just refused to adopt them. In answer to Ted, Geoffrey Howe, who summed up our case with a cool, measured and persuasive speech, reminded the Conference of Ted’s own words in his introduction to the 1970 Conservative manifesto:
Nothing has done Britain more harm in the world than the endless backing and filling which we have seen in recent years. Once a policy has been established, the Prime Minister and his colleagues should have the courage to stick with it.
‘I agree with every single word of that,’ said Geoffrey. His speech won over some of the doubters and ensured that we had a comfortable win. Nevertheless, in my own speech later I felt the need to fasten down our victory by taking the arguments to Ted Heath and others head-on:
Today’s unemployment is partly due to the sharp increase in oil prices; it absorbed money that might otherwise have gone to increased investment or to buy in the things which British factories produce. But that is not all. Too much of our present unemployment is due to enormous past wage increases unmatched by higher output, to union restrictive practices, to overmanning, to strikes, to indifferent management, and to the basic belief that, come what may, the government would always step in to bail out companies in difficulty. No policy can succeed that shirks those basic issues.
Even though the ‘wets’ would continue to be sceptics for another six months, our policy had already begun to succeed. The early signs of recovery in the summer of 1981 were confirmed by statistics in the following quarter, which marked the start of a long period of sustained economic growth. Political recovery followed in the wake of these early signs of improvement, with better poll figures in the spring of 1982. We were about to find ourselves in the Falklands War, but we had already won the second Battle of Britain.
* Higher interest rates caused people to increase the amount they held in interest-bearing financial assets and to reduce cash and non-interest-bearing assets in their current accounts.
* The civil service strike began in March 1981 and lasted for five months. Union members struck selectively at crucial government installations, including computer staff involved in tax collection, costing the Government over £350 million in interest charges on money borrowed to cover delayed and lost tax revenue. Industrial action was also taken at GCHQ, the installation at the heart of Britain’s signals intelligence, which led to our decision in January 1984 to ban trade unions there.
CHAPTER EIGHTEEN
The West and the Rest
The early reassertion of western – and British – influence in international affairs in 1981–1982
WE WERE NOT TO KNOW IT AT THE TIME, but 1981 was the last year of the West’s retreat before the axis of convenience between the Soviet Union and the Third World. The year began with Iran’s release of US hostages in a manner calculated to humiliate President Carter and ended with the crushing, albeit temporarily, of Solidarity in Poland. The post-Vietnam drift of international politics, with the Soviet Union pushing further into the Third World with the help of Cuban surrogates, and the United States reacting with a nervous defensiveness, had settled into an apparently fixed pattern. Several consequences flowed from that. The Soviet Union was increasingly arrogant; the Third World was increasingly aggressive in its demands for international redistribution of wealth; the West was increasingly apt to quarrel with itself, and to cut special deals with bodies like OPEC; and our friends in Third World countries, seeing the fate of the Shah, were increasingly inclined to hedge their bets. Such countervailing trends as had been set in motion – in particular, the 1979 decision to deploy Cruise and Pershing in Europe – had not yet been given concrete effect or persuaded people that the tide had turned. In fact it had just begun to do so.
The election of Ronald Reagan as President of the United States in November 1980 was as much of a watershed in American affairs as my own election victory in May 1979 was in those of the United Kingdom, and a greater one in world politics. As the years went by, the British example steadily influenced other countries in different continents, particularly in economic policy. But Ronald Reagan’s election was of immediate and fundamental importance, because it demonstrated that the United States, the greatest force for liberty that the world has known, was about to reassert a self-confident leadership in world affairs. From the first I regarded it as my duty to do everything I could to reinforce and further President Reagan’s bold strategy to win the Cold War which the West had been slowly but surely losing.
I had met Governor Reagan twice when I was Leader of the Opposition. I had been immediately struck by his warmth, charm and complete lack of affectation – qualities which never altered in the years of leadership which lay ahead. Above all, I knew that I was talking to someone who instinctively felt and thought as I did; not just about policies but about a philosophy of government, a view of human nature, all the high ideals and values which lie – or ought to lie – beneath any politician’s ambition to lead his country.
It was easy for lesser men to underrate Ronald Reagan. His style of work and decision-making was apparently detached and broad-brush – very different from my own. This was in part the result of our two very different systems of government rather than differences of temperament. He laid down clear general directions for his Administration, and expected his subordinates to carry them out at the level of detail. These objectives were the recovery of the American economy through tax cuts, the revival of American power by means of a defence build-up, and the reassertion of American self-confidence. Ronald Reagan succeeded in attaining these objectives because he not only advocated them; in a sense, he embodied them. He was a buoyant, self-confident, good-natured American who had risen from poverty to the White House – the American dream in action – and who was not shy about using American power or exercising American leadership in the Atlantic alliance. In addition to inspiring the American people, he went on later to inspire the people behind the Iron Curtain by speaking honest words about the evil empire that oppressed them.
At this point, however, President Reagan still had to face a largely sceptical audience at home and particularly among his allies. I was perhaps his principal cheerleader in NATO.
So I was delighted to learn that the new President wished me to be the first foreign head of government to visit the United States after he took office. When I arrived in Washington I was the centre of attention, not just because of my closeness to the new President but for another less flattering reason. As I left for America, US readers were learning from a long article in Time entitled ‘Embattled but Unbowed’ that my Government was beset with difficulties. The US press and commentators suggested that given the similarity of economic approach of the British and US Governments, the economic problems we were now facing – above all high and rising unemployment – would soon be faced in the US too. This in turn prompted some members of the Administration and others close to it to explain that the alleged failures of the ‘Thatcher experiment’ stemmed from our failure to be sufficiently radical. I took every occasion to explain the facts of the case both to the press and to the Senators and Congressmen whom I met. Unlike the US, Britain had to cope with the poisonous legacy of socialism – nationalization, trade union power, a deeply rooted anti-enterprise culture.
At one meeting, Senator Jesse Helms said that some of the US media were playing a requiem for my Government. I was able to reassure him that news of a requiem for my policies was premature. There was always a period during an illness when the medicine was more unpleasant than the disease, but you should not stop taking the medicine. I said that I felt there was a deep recognition among the British people that my policies were right.
I had successfully persuaded President Reagan in the course of our discussions in Washington of the importance of attend
ing the Cancún summit which was held that October in Mexico. I felt that we should be present, both to argue for our positions and to forestall criticism that we were uninterested in the developing world. The whole concept of ‘North-South’ dialogue, which the Brandt Commission had made the fashionable talk of the international community, was in my view wrong-headed. Not only was it false to suggest that there was a homogeneous rich North which confronted a homogeneous poor South: underlying the rhetoric was the idea that redistribution of world resources rather than the creation of wealth was the way to tackle poverty and hunger. Moreover, what the developing countries needed more than aid was trade, so our first responsibility was – and still is – to give them the freest possible access to our markets.
The conference’s joint chairmen were President López-Portillo, our Mexican host, and Pierre Trudeau who had stepped in for the Chancellor of Austria, prevented by illness from attending. Twenty-two countries were represented. We were staying in one of those almost over-luxurious hotels which you so often seem to find in countries where large numbers of people are living in appalling poverty.
There is no immodesty in saying that Mrs Indira Gandhi and I were the two conference media ‘personalities’. India had just received the largest loan yet given by the International Monetary Fund at less than the market rate of interest. She and others naturally wanted more cheap loans in the future. This was what lay behind the pressure, which I was determined to resist, to place the IMF and the World Bank directly under United Nations control. I engaged in a vigorous discussion with a group of heads of government who could not see why I felt so strongly that the integrity of the IMF and the World Bank would inevitably be compromised by such a move, which would do harm rather than good to those who were advocating it. In the end I put the point bluntly: I said that there was no way in which I was going to put British deposits into a bank which was totally run by those on overdraft. They saw the point.
Margaret Thatcher: The Autobiography Page 44
