But it was understood by Conservative Central Office that most of my effort should go into Finchley. It was my usual schedule of campaigning — daily canvassing, answering letters and a full programme of visits and public meetings, at which it seemed to me that not only did the numbers grow but also my support. I am always anxious on election day; but in 1964 my anxieties were, in spite of the predictions of my defeat at the start of the campaign, much greater for the Party nationally than for me in Finchley.
The results bore this out. I found myself with a majority over John Pardoe of almost 9,000. But I had seen the last of the Ministry at John Adam Street, for Labour had secured an overall majority of four seats. Thirteen years of Conservative Government were over and a period of fundamental rethinking of Conservative philosophy was about to begin — alas, not for the last time.
CHAPTER V
A World of Shadows
Opposition 1964–1970
CHANGING THE PIANIST
The Conservative Party has never been slow to shoot the pianist as a substitute for changing its tune. So it proved in the wake of our narrow 1964 election defeat. Anyone seriously thinking about the way forward for Conservatism would have started by examining whether the established tendency to fight on socialist ground with corporatist weapons had not something to do with the Party’s predicament. Then and only then — after a more or less inevitable second election defeat, for there was a general sense in the country that Labour needed a larger working majority if it were to carry out its programme — would have been the time to consider a leadership change. I had hoped and indeed naively expected that the Party would soldier on under Alec Douglas-Home. I later heard that the supporters of Ted Heath and others anxious to oust Alec had been busy behind the scenes; but I never ventured into the Smoking Room and so I was unaware of these mysterious cabals until it was too late. I was stunned and upset when Alec told the 1922 Committee that he intended to stand down to make way for someone else; I was all the more distressed by his evident unhappiness. I kept on saying to people, ‘Why didn’t he let his supporters know? We might have been able to help.’
Reggie Maudling and Ted Heath were generally accepted as the only two figures in serious contention for the leadership, which for the first time would be decided by a ballot of MPs. Iain Macleod was considered too left wing and by many, in Lord Salisbury’s jibe, as ‘too clever by half’. Enoch Powell, who did indeed put his name forward, had no large following at this time. Of the two serious contenders, Reggie Maudling was thought to have the better chance. Although his performance as Chancellor of the Exchequer had incurred serious and in some ways justified criticism, there was no doubting Reggie’s experience, brilliant intellect and command of the House. His main weakness, which grew more evident in later years, was a certain laziness — something which is a frequent temptation to those who know that they are naturally and effortlessly cleverer than those around them.
Ted had a very different character. He too had a very well organized mind. He was methodical, forceful and, at least on the one question which mattered to him above all others — Europe — a man of unyielding determination. As Shadow Chancellor he had the opportunity to demonstrate his capabilities in attacking the 1965 Finance Bill, which in those days was taken on the floor of the House. Ted was regarded as being somewhat to the right of Reggie, but they were both essentially centrists in Party terms. Something could be made of the different approaches they took to Europe, with Reggie regarding EFTA more favourably and Ted convinced that membership of the EEC was essential. But their attitudes to specific policies hardly affected the question of which to support.
I did not start with any particularly strong views on the matter. I knew both of them — Reggie Maudling as a neighbouring MP for Barnet and Ted Heath over a longer period when we were candidates for Kent constituencies. At this time I knew Reggie better. I liked his combination of laid-back charm and acute intellect. My acquaintanceship with Ted, though there was none of that bitter hostility which would develop in later years, had never risked developing into friendship. Although we came from not dissimilar backgrounds, neither of us having enjoyed the educational and social advantages of the traditional Tory politician, we were totally different sorts of people. Ted, of course, had fought with distinction in the war while I was a student at Somerville. He had been part of that generation which had been ineradicably affected by the rise of Nazism and fascism and the question of appeasement in the 1930s. So, of course, was I; but rather differently. Ted, to my mind, had swallowed a good deal of the fashionable interpretation of what had gone wrong in the world between the wars. For him, I imagine, as for many others who were to become passionate advocates of all things European, the evil genius of those times was nationalism. Consequently, Britain now had a duty to help create a Europe-wide structure which would supplant the nation state, provide an alternative focus for loyalties and so prevent war. For me, such grandiose visions had little appeal. I saw the principal cause of the conflict as being the appeasement of dictators — something which Ted himself had courageously opposed at Oxford — and I saw the principal victor of the conflict, whose health was itself the best guarantee of peace, as being the spirit and unity of the English-speaking world. Ted’s character seemed to me in many ways admirable. But he was not charming — nor, to be fair, did he set out to be. He was probably more at ease talking to men than women. But it was not just women who found him difficult to get on with. I felt that though I had known him for years, there was a sense in which I did not know him at all. Perhaps I never would. I was not conscious at this time of any hostility, simply of a lack of human warmth. I did not either then or later regard amiability as an indispensable or even particularly important attribute of leadership. Yet, all things considered, I thought that I would vote for Reggie Maudling.
It was Keith Joseph who persuaded me to change my mind. By now Keith was a friend, not just a senior colleague whom I liked. We worked together, though with him very much as the senior partner, on pensions policy in 1964—65. Like everyone else who came to know him, I was deeply impressed by the quality of his mind and the depth of his compassion. Keith had gone into politics for the same reason that many on the left had done so — he wanted to improve the lot of ordinary people, particularly those he saw living deprived, stunted, unfulfilled lives. Many jokes would be made — and the best of them by Keith himself — about the way in which he changed his mind and reversed his policies on matters ranging from housing to health to social benefits. But the common thread was his relentless search for the right answer to the practical problems of human suffering. So I took him very seriously when he telephoned to say that while he knew I was currently intending to vote for Reggie, I should think again. Keith understood Reggie’s weaknesses, and as a long-time colleague in Government and the Shadow Cabinet he had seen these weaknesses at close hand. But it was Ted’s strengths that he wanted to speak about. He summed them up: ‘Ted has a passion to get Britain right.’ And, of course, so did Keith, and so did I.
This was decisive for me. To the disappointment and surprise of Reggie Maudling and his PPS, Neil Marten, I told them that Ted Heath would be getting my vote. Sufficient numbers thought similarly. Ted emerged with a clear majority on the first ballot, Reggie withdrawing to make a second ballot unnecessary.
I was not displeased to be given a different portfolio by the new Leader, exchanging my role as Shadow spokesman on Pensions for that of Housing and Land under my old boss, John Boyd-Carpenter. I would always regard my knowledge of the Social Security system as one of the most important aspects of what turned out to be my training to become Prime Minister. Now that we were in Opposition, however, it was not easy to oppose the large pension and benefit increases which the Labour Government was making: only later would the full financial implications of this spending spree become evident. So it was a relief to me to be moved to Housing and Land, where I was able to set about attacking with a will one of the most ideological socialist m
easures — the setting-up of the Land Commission, a means of achieving the socialist obsession of nationalizing development gains. It was in this role also that I first became fully acquainted with the complexities and anomalies of the rating system, whose fate seemed destined to be inextricably intertwined with mine.[9] One of my early tasks was to devise and explain to a sceptical Conservative Party Conference how we intended to reform domestic rates by a combination of moving some expenditure onto central government and introducing rate rebates. It was my first Conference speech. At least those who heard it would have appreciated that I grasped the problems. But it would be too much to claim that I offered any very satisfactory solutions. It was only a succès d’estime.
AGAINST THE TREASURY
As was widely expected, Harold Wilson called an early snap election at the end of March 1966. The result — a Conservative rout and an overall Labour majority of ninety-seven — was equally expected. We fought an uninspiring campaign on the basis of a flimsy manifesto entitled Action not Words, which accurately summed up Ted’s impact on politics. This was widely seen as a completion of Wilson’s 1964 victory, and Ted was not blamed. I largely concentrated my efforts on Finchley and was not displeased to keep a healthy majority of 9,464, this time over the Labour Party which had beaten the Liberals into third place. But it was a depressing time. Denis knew my mood and went out to buy me an eternity ring to cheer me up.
I received a further fillip when Ted Heath made me Treasury spokesman on Tax under the Shadow Chancellor, Iain Macleod. There had been some speculation in the press that I would be promoted to the Shadow Cabinet myself. But I was not expecting it. I now know, having read Jim Prior’s memoirs,[10] that I was indeed considered but that Ted, rather presciently, decided against it because if they got me in ‘they would never get [me] out again’.
In any case, I was better placed to make an impact as Treasury spokesman outside the Shadow Cabinet than as something else within it. As a tax lawyer I already knew my way around my new brief. Although I had no formal training in economic theory, I felt naturally at ease with the concepts. I had always had strong convictions about the way in which public money should be handled. As I had found when junior minister responsible for pensions, I was lucky enough to have the sort of mind to grasp technical detail and understand quite complex figuring fairly easily. None of which meant, however, that I could afford to relax. Debating Finance Bills from Opposition, necessarily without the technical assistance available from the civil service, and relying on the help of a few outside experts and colleagues in the House, is immensely demanding.
Luckily, the family’s domestic arrangements permitted me to keep to my rigorous parliamentary schedule. By now, Mark and Carol were away at boarding school. Denis was still very active in business, although in 1965 he had sold the family firm to Castrol, which itself was soon bought by Burmah Oil. We felt that it would now make life much easier for us both to rent a flat in Westminster Gardens, not far from the House of Commons. We also sold our home in Farnborough and bought ‘The Mount’, a mock-Tudor house with a large garden in Lamberhurst, near Tunbridge Wells. One of my very few hobbies is interior decorating, and I now spent most of my free time painting and papering the bedrooms — all eight of them. But even I was defeated by the large hall and staircase and had to bring in the professionals. One reason why we bought the house was to have somewhere in the country for the children when they came back from boarding school in the holidays. But at this age they seemed to prefer staying in London with their friends. So ‘The Mount’ was not as much used as I would have liked. My programme of repairs and redecoration was not wasted, however: in 1972 we sold it, and out of the proceeds bought the house in Flood Street (Chelsea) which would be my home until in 1979 I moved into the flat above 10 Downing Street.
I not only felt well-suited to my new job: it was also an exciting time to begin it. The incoherence and irresponsibility of socialist economic management had become apparent. The optimistic projections of George Brown’s National Plan, published in September 1965, were an albatross to hang around Labour’s neck, as forecasts of economic growth were not met. Labour’s pre-election promises of ‘no severe increases in taxation’ were broken with the announcement in the Budget of May 1966 that a new Selective Employment Tax (SET) would be introduced, in effect a payroll tax falling particularly heavily on service industries: it was a major part of my brief to oppose it. The Labour Government’s reliance on its alleged special relationship with the trade unions to secure voluntary incomes restraint as a means of controlling inflation had already lost credibility with the failure of the Government-TUC joint Declaration of Intent, which had first been proclaimed amid fanfares in December 1964. In July 1966 the ‘voluntary’ approach was jettisoned. It was announced that there would be a six months’ wage freeze followed by six months of ‘severe restraint’. Prices would be frozen for a year, and a plea was made for limits to be applied to dividends over the same period. The National Board of Prices and Incomes, which Labour had established, was given powers to require one month’s advance notification of any price and wage increases and powers to delay increases by Order-inCouncil for up to three months. The Government might take power to direct that specified price and wage increases should not be made. Fighting this policy in general and, under Iain Macleod’s leadership, opposing the ‘Standstill orders’ which came before the House of Commons, were the other important aspects of my brief.
In preparing myself for my first major Commons speech in my new role, I got out from the House of Commons Library every Budget speech and Finance Bill since the war and read them. I was thus able to demonstrate to a somewhat bemused Jim Calla-ghan, then Chancellor of the Exchequer, and Jack Diamond, his Chief Secretary, that this was the only Budget which had failed to make even a minor concession in the social services area. Then I sunk my teeth into the SET. It was riddled with absurdities which I took great pleasure in exposing. The attempt to distinguish between manufacturing and service industries, shifting the tax burden onto the second and handing the money back as subsidies to the first, was a demonstrably inefficient, anomaly-ridden procedure. As I put it in the House: ‘Whatever the payroll tax is, it is thoroughly bad administration… I only wish that Gilbert and Sullivan were alive today so that we could have an opera about it.’
Our side of the House liked it. I got a good press, the Daily Telegraph observing that ‘it has taken a woman… to slam the faces of the Government’s Treasury ministers in the mud and then stamp on them’. Iain Macleod himself wrote some generous lines about the performance in another paper.
He did the same after my speech that autumn to the Party Conference in Blackpool, my first real Conference success. I put a special effort into it — though the nine hours of work I did would have seemed culpable idleness compared with the time I took for Conference speechwriting as Party Leader. That autumn, however, I spoke from notes, which gives extra spontaneity and the flexibility to insert a joke or jibe on the spur of the moment. Although the debate I was answering was on taxation, the cheers came in response to what I said about the way in which the Government was undermining the rule of law by the arbitrary powers it had taken through incomes policy and tax policy. With more than a touch of hyperbole, it must be admitted, I said: ‘All this is fundamentally wrong for Britain. It is a step not merely towards socialism but towards communism.’ Some of the more squeamish journalists demurred. But not the new and still left-of-centre Sun, which noted: ‘A Fiery Blonde Warns of the Road to Ruin’.
I was right to see a connection between the socialist approach to public expenditure and taxation on the one hand and to incomes policy on the other. They were both aspects of the same collectivist programme which, if taken to its ultimate conclusion, would jeopardize not just economic but political freedom as well. But what I and almost all of my colleagues at this time failed to do was to think through the full implications for our own policies. Although we wanted lower and simpler taxes on people and busine
sses, we were still inclined to assume — and not just for public presentation, but because we really thought it — that faster economic growth would allow us to cut taxes, as public expenditure measured as a share of GDP fell. We had some proposals to reduce public expenditure on socialist projects and waste. But we thought that we could create an atmosphere favourable to enterprise and so establish what was called a ‘virtuous circle’ in which higher growth allowed larger tax revenues with lower tax rates, which in turn stimulated further growth. Consequently, we were not as serious about making real public expenditure cuts as we should have been. Indeed, over the whole of this period — whether in 1956, 1966 or above all in 1976 — real cuts in public spending were only made by governments of either party under the exigent circumstances of a sterling crisis, a gilt strike or the arrival on the scene of the International Monetary Fund. This approach was only finally changed when in the run-up to the 1979 election the Conservative Opposition actually planned for public expenditure cuts because we believed in them.
Our failure in the 1960s to consider as an alternative government where we really stood on incomes policy was at least as serious. As Iain Macleod and I demonstrated by our vigorous opposition to Labour’s statutory incomes policy, we knew what we were against, but we were much less clear about what we were for. There was good reason for this, because the Shadow Cabinet itself was sharply divided. Ted Heath, true to the pragmatic, problem-solving approach which he prided himself on taking, was never able to give the lead required on this question. Probably the only member of the Shadow Cabinet who was opposed in principle to all kinds of incomes policy — voluntary or involuntary — was Enoch Powell, and he had failed to persuade his colleagues by the time I entered the Shadow Cabinet in 1967.
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