I felt victory — almost tangibly — slip away from us in the last week. I just could not believe it when I heard on the radio of the leak of evidence taken by the Pay Board which purported to show that the miners could have been paid more within Stage 3, with the implication that the whole general election was unnecessary. The Government’s attempts to deny this — and there did indeed turn out to have been a miscalculation — were stumbling and failed to carry conviction. We had become caught up in the complexities of pay policy and finally been strangled by them. From now on it was relentlessly downhill.
Two days later, Enoch Powell urged people to vote Labour in order to secure a referendum on the Common Market. I could understand the logic of his position, which was that membership of the Common Market had abrogated British sovereignty and that the supreme issue in politics was therefore how to restore it. But what shocked me was his manner of doing it — announcing only on the day the election was called that he would not be contesting his Wolverhampton seat and then dropping this bombshell at the end of the campaign. It seemed to me that to betray one’s local supporters and constituency workers in this way was heartless. I suspect that Enoch’s decision in February 1974, like his earlier intervention in 1970, had a crucial effect.
Then three days later there was another blow. Campbell Adam-son, the Director General of the CBI, publicly called for the repeal of the Industrial Relations Act. It was all too typical of the way in which Britain’s industrial leaders were full of bravado before battle was joined, but lacked the stomach for a fight. I must admit, though, that our own interventionist policies had hardly encouraged British businessmen and managers to accept the risks and responsibilities of freedom.
Partly because of these developments, but partly too no doubt because it was bound to be difficult to focus on just one issue for a three-week campaign, we lost our momentum. I still thought that we might possibly win, but I was aware of a slackening of enthusiasm for our cause and confusion about our objectives. I also knew from the opinion polls and soundings in my own constituency that the Liberals were posing a serious threat. So by polling day my optimism had been replaced by unease.
That sentiment grew as I heard from Finchley and elsewhere around the country of a surprisingly heavy turn-out of voters to the polls that morning. I would have liked to think that these were all angry Conservatives, coming out to demonstrate their refusal to be blackmailed by trade union power. But it seemed more likely that they were voters from the Labour-dominated council estates who had come out to teach the Tories a lesson. I was glad to be wearing a spray of blue flowers in my buttonhole instead of the usual paper rosette. They had been given me by Mark and they stayed fresh all day, helping to keep up my spirits.
The results themselves quickly showed that we had nothing to be cheerful about. We lost thirty-three seats. It would be a hung Parliament. Labour had become the largest party with 301 seats — seventeen short of a majority; we were down to 296, though with a slightly higher percentage of the vote than Labour; the Liberals had gained almost 20 per cent of the vote with fourteen seats, and smaller parties, including the Ulster Unionists, held twenty-three. My own majority in Finchley was down from 11,000 to 6,000, though some of that decline was the result of boundary changes in the constituency.
I was upset at the result. We had finally squared up to the unions and the people had not supported us. Moreover, I had enjoyed my time as Education Secretary, or most of it. I would miss the workload and the decisions, and of course the conveniences like the ministerial car: from now on I would be driving myself around once more in my Vauxhall Viva. At least the painful process of clearing out desks and cupboards full of personal belongings was largely spared me. I had never taken much personal clutter to the DES in any case and, prudently, I had brought most of what there was back home at the start of the campaign and popped into the office to sign urgent letters when in central London. I could make a more or less clean break.
On Friday afternoon we met, a tired and downcast fag-end of a Cabinet, to be asked by Ted Heath for our reactions as to what should now be done. There were a number of options. Ted could advise the Queen to send for Harold Wilson as the leader of the largest single party. Or the Government could face Parliament and see whether it could command support for its programme. Or he could try to do a deal with the smaller parties for a programme designed to cope with the nation’s immediate difficulties. Having alienated the Ulster Unionists through our Northern Ireland policy, this in effect meant a deal with the Liberals — though even that would not have given us a majority. There was little doubt from the way Ted spoke that this was the course he favoured. We argued in circles about these possibilities.
My own instinctive feeling was that the party with the largest number of seats in the House of Commons was justified in expecting that they would be called to try to form a government. But Ted argued that with the Conservatives having won the largest number of votes, he was duty bound to explore the possibility of coalition. So he offered the Liberal Leader Jeremy Thorpe a place in a coalition Government and promised a Speaker’s conference on electoral reform. Thorpe went away to consult his party. Although I wanted to remain Secretary of State for Education, I did not want to do so at the expense of the Conservative Party’s never forming a majority government again. Yet that is what the introduction of proportional representation, which the Liberals would be demanding, might amount to. I was also conscious that this horse-trading was making us look ridiculous. The British dislike nothing more than a bad loser. It was time to go.
When we met again on Monday morning Ted gave us a full account of his discussions with the Liberals. They had in any case not been willing to go along with what Jeremy Thorpe wanted. A formal reply from him was still awaited. But it now seemed almost certain that Ted would have to tender his resignation. The final Cabinet was held at 4.45 that afternoon. By now Jeremy Thorpe’s reply had been received. From what Ted said, there were clues that his mind was already turning to the idea of a National Government of all parties, something which would increasingly attract him. It did not, of course, attract me at all. In any case, the Liberals were not going to join a coalition Government with us. There was nothing more to say.
I left Downing Street, sad but with some sense of relief. I had given little thought to the future. But I knew in my heart that it was time not just for a change in government but for a change in the Conservative Party.
CHAPTER VIII
Seizing the Moment
The October 1974 general election and the campaign for the Tory Leadership
THE 9½ PER CENT SOLUTION
It is never easy to go from government to opposition. But for several reasons it was particularly problematical for the Conservatives led by Ted Heath. First, of course, we had up until almost the last moment expected to win. Whatever the shortcomings of our Government’s economic strategy, every department had its own policy programme stretching well into the future. This now had to be abandoned for the rigours of Opposition. Secondly, Ted himself desperately wanted to continue as Prime Minister. He had been unceremoniously ejected from 10 Downing Street and for some months had to take refuge in the flat of his old friend and PPS Tim Kitson, having no home of his own — from which years later I drew the resolution that when my time came to depart I would at least have a house to go to. Ted’s passionate desire to return as Prime Minister lay behind much of the talk of coalitions and Governments of National Unity which came to disquiet the Party, though doubtless there was a measure of genuine conviction as well. Indeed, the more that the Tory Party moved away from Ted’s own vision, the more he wanted to see it tamed by coalition. Thirdly, and worst of all perhaps, the poisoned legacy of our U-turns was that we had no firm principles, let alone much of a record, on which to base our arguments. And in Opposition argument is everything.
For my part, I was glad that Ted did not ask me to cover my old department at Education but gave me the Environment portfolio instead. I had lear
ned during our previous period in Opposition in the 1960s that there are difficulties in attacking proposals many of which will have been in some stage of gestation within one’s own department. Moreover, I was convinced from my own soundings in the course of the general election campaign that both rates and housing — particularly the latter — were issues which had contributed to our defeat. The task of devising and presenting sound and popular policies in these areas appealed to me.
There were rumblings about Ted’s own position, though that is what they largely remained. This was partly because most of us expected an early general election to be called in order to give Labour a working majority, and it hardly seemed sensible to change leaders now. But there were other reasons as well. Ted still inspired nervousness, even fear among many of his colleagues. In a sense, even the U-turns contributed to the aura around him. For he had single-handedly and with barely a publicly expressed murmur of dissent reversed Conservative policies and had gone far, with his lieutenants, in reshaping the Conservative Party. Paradoxically too, both those committed to Ted’s approach and those — like Keith and me and many on the backbenches — who thought very differently agreed that the vote-buying policies which the Labour Party was now pursuing would inevitably lead to economic collapse. Just what the political consequences of that would be was uncertain. But there were many Tory wishful thinkers who thought that it might result in the Conservative Party somehow returning to power with a ‘doctor’s mandate’. And Ted had no doubt of his own medical credentials.
He did not, though, make the concessions to his critics in the Party which would have been required. He might have provided effectively against future threats to his position if he had changed his approach in a number of ways. He might have shown at least some willingness to admit and learn from the Government’s mistakes. He might have invited talented backbench critics to join him as Shadow spokesmen and contribute to the rethinking of policy. He might have changed the overall complexion of the Shadow Cabinet to make it more representative of parliamentary opinion.
But he did none of these things. He replaced Tony Barber — who announced that he intended to leave the Commons though he would stay on for the present in the Shadow Cabinet without portfolio — with Robert Carr, who was even more committed to the interventionist approach that had got us into so much trouble. He promoted to the Shadow Cabinet during the year those MPs like Michael Heseltine and Paul Channon who were seen as his acolytes, and were unrepresentative of backbench opinion of the time. Only John Davies and Joe Godber, neither of whom was ideologically distinct, were dropped. Above all, he set his face against any policy rethinking that would imply that his Government’s economic and industrial policy had been seriously flawed. When Keith Joseph was not made Shadow Chancellor, he said he wanted no portfolio but rather to concentrate on research for new policies — something which would prove as dangerous to Ted as it was fruitful for the Party. Otherwise, these were depressing signals of ‘more of the same’ when the electorate had clearly demonstrated a desire for something different. Added to this, the important Steering Committee of Shadow Ministers was formed even more in Ted’s image. I was not at this stage invited to join it, and of its members only Keith and perhaps Geoffrey Howe were likely to oppose Ted’s wishes.
With everyone expecting another election before the end of the year — October being the favoured date — the Tory Party entered on an almost frantic search for attractive policies to be deployed in our next manifesto. These had to meet two criteria: they had to be novel, and they had to cast no doubt on the underlying correctness of the recent Conservative Government’s policies. I added a third complication: as far as my area of responsibility was concerned, the new policies also had to be recognisably Conservative. Meeting all these criteria involved us in some extremely testing acrobatics.
Between the February and October 1974 elections most of my time was taken up with work on housing and the rates. I had an effective housing policy group of MPs working with me. Hugh Rossi, a friend and neighbouring MP, was a great housing expert, with experience of local government. Michael Latham and John Stanley were well versed in the building industry. The brilliant Nigel Lawson, newly elected, always had his own ideas. We also had the help of people from the building societies and construction industry. It was a lively group which I enjoyed chairing.
The political priority was clearly lower mortgage rates. The technical problem was how to achieve these without open-ended subsidy. Of course, the purist view would be that artificially controlling the price of borrowing for house purchase was bound to be counterproductive. And in this matter the purist, as so often, was right. If we had pursued a responsible economic policy there would have been no boom and bust of property prices, and rising inflation would not have driven up mortgage rates. Policies providing for sound money and the release of sufficient quantities of development land are the proper way to ensure an orderly housing market. But of course we had not pursued policies of that sort. And Labour was already embarking on a vendetta against property development. In these circumstances, holding the mortgage rate down below the level the market — or more precisely the building societies — would otherwise have set made short-term political sense. In Government we had introduced a mortgage subsidy, and there had even been talk of taking powers to control the mortgage rate. The Labour Government quickly came up with its own scheme devised by Harold Lever to make large cheap short-term loans to the building societies. Our task was to devise something more attractive.
As well as having an eye for a politically attractive policy, I had reasons of conviction for action on the mortgage rate and for the other measures we devised to help homebuyers. I had always believed in a property-owning democracy and wider home ownership. At this point too, I was acutely aware of how much the middle classes were suffering. Because of the inflation which we and the Labour Party had conspired to create, the value of people’s savings had been eroded by negative real interest rates. On top of that, by 1974 house values had slumped. So had the stock market: the FT Ordinary Share index went down to 146, the lowest level for twenty years. Trade union power and left-wing socialism were in the ascendant. Tax increases were bearing down on businesses and people.
In such circumstances, it can be right to make modest temporary provision for the interests of the middle classes of a country on whom future prosperity largely depends. Moreover, 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. I reported from time to time to Shadow Cabinet where, in the absence of real agreement on economic policy or much constructive thinking on anything else, attention focused heavily on my areas of responsibility. 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. There was a huge amount of technical information to master. Moreover, reform, let alone abolition, of the ra
tes 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.
That said, I could well understand how much was at stake politically. For example, on Tuesday 21 May I met 350 protesters from Northamptonshire — one from every town and village in the county — who were furious about rate rises of between 30 and 100 per cent. Several factors combined to raise the issue to such political prominence: there was the basic unfairness of a system which taxed a single widow at the same rate as a family with three grown-up working sons; our own rating revaluation in 1973 had led to inordinate rate rises;[31] and, more recently, Labour’s rate support grant settlement had treated the rural shire counties particularly harshly. There was, in short, on the rates issue as on housing, a full-scale middle-class anti-socialist revolt, and it was essential that it be harnessed, not dissipated. This I was determined to do.
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 by now little chance of doing more than finding a sustainable line to take in the manifesto.
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