Within weeks of Jim Callaghan’s becoming Prime Minister, relations between Government and Opposition chilled to freezing point as a result of Labour chicanery on a Bill nationalizing the aircraft and shipbuilding industries. After a long campaign by one of our backbenchers, Robin Maxwell-Hyslop, the Speaker had finally ruled that the Bill was ‘hybrid’ and so subject to special (and time-consuming) Commons procedures. Labour announced that they would ask the House to set aside the relevant Standing Orders, effectively nullifying the Speaker’s ruling. This was bad enough, but there was more to come. That night several MPs on each side were unwell and were paired. It so happened that Labour had one more sick MP than we had, and he was absent unpaired. There were two divisions that evening, the second following immediately after the first. The first was tied. By precedent the Speaker cast his vote for the status quo and the Government lost. But this revealed to the Government Whips that they were one vote short for the next — and crucial — division. So they went out and found a Labour MP who was paired — that is he had agreed with a Tory MP that neither of them would vote that night. They pushed him into the Labour lobby, as a result of which the Government won by a single vote.
Since the Labour Party had in fact lost its majority, the temptation to do this sort of thing was obviously great. But to nationalize two great industries by a single vote, breaking agreements into the bargain, was completely unacceptable. Tempers ran high on both sides. Michael Heseltine, our Industry spokesman who had led for the Opposition in the debate and felt personally affronted, grabbed the Mace and tried to present it to the Labour benches to symbolize their breach of the conventions.[40] This in itself was a grave offence to the order of the House, as Michael recognized as soon as he was calmed down by Jim Prior.
Less dramatically, I called off all pairing arrangements and withdrew cooperation over Commons business, demanding that the Government hold the division again. This was designed to cause the Government maximum difficulty: not only did all their MPs — however eminent — have to turn up for important divisions, but the Government could not know how long to allow for its business, much of which passes by agreement with the Opposition. Government business slowed down to a snail’s pace. This continued for almost a month until Mr Callaghan asked to see me and said somewhat huffily that we could not go on in this way. I told him that I could. In the end we agreed that the Government and Opposition Chief Whips should investigate what had happened, and when their report showed that we were in the right the Prime Minister conceded a second division on the disputed question. The Labour whips made certain that all their Members were present that night and accordingly won.
Against this background of ill-feeling, we decided to propose a Motion of No Confidence in the Government. Had we not done so, we would have been accused of failing to press home the attack on a Government which was resorting to chicanery because it had lost its majority. But the other side of the coin was that we would be made to look foolish if we failed, as we were very likely to do because the minority parties feared an early general election and anyway might be tempted by blandishments from the Government Whips. And, of course, this is what happened. It was not until almost three years later that the Government’s lack of a majority finally brought it down.
Meanwhile, the state of the economy was worsening. In February 1976 the Government had announced spending cuts of £1,600 million for 1977/78 and £3,000 million for 1978/79 (in today’s terms the equivalent of £6,000 million and £11,500 million). Impressive though this might sound, it amounted to no more than a modest cut in large planned increases. In December 1975 the International Monetary Fund had granted an application for stand-by credit to tide over Britain’s finances. Even so, in March there was a full-scale sterling crisis. The pound came under heavy pressure yet again in June, and more international stand-by credit had to be obtained, repayable in six months, failing which Britain agreed to apply again to the IMF. Inflation was falling by then, but large negative interest rates, combined with the failure to make real cuts in public spending and borrowing, prevented the Government from getting to grips with its underlying financial and economic problems. The new sterling crisis in September, which would lead to the humiliating abdication of control over our economy to the IMF, was the final result of an entirely justified loss of confidence by international markets in the Labour Government’s handling of the economy.
It might be expected that all of this would make an Opposition’s life easier, no matter how bad it was for the country. But that was not so.
And this was our third problem. For we were expected to support the Labour Government’s hesitant and belated moves to apply financial discipline. That was fair enough. But we were also under a more general pressure to be ‘responsible’ in dealing with the Labour Government’s self-contrived tribulations. However commendable, this inevitably cramped my attacking style.
For example, the 1976 Party Conference, held against the background of an uncontainable financial crisis, ought to have been a triumph. But it was not. All of us in Brighton were almost neurotically conscious of the need for responsibility and caution. Of course, in practice nothing I said about the Government’s economic policy was likely to give the financial markets a worse opinion of it than they already had. But interest rates were raised to 15 per cent on the day before my speech. I called a Shadow Cabinet meeting at Brighton to see what our stance should be before I did the final draft. Reggie Maudling helped me rewrite the already tortured economic passages. But it was a poor text and, probably because I lacked confidence in it, I delivered it badly in the uncongenial atmosphere of a cramped temporary hall — before going next door to the overflow of the Conference and delivering an off-the-cuff speech, praised by the few journalists who heard it but which, being untexted, sank without trace.
All in all, the regular Party politics of 1976 were frustrating and inconclusive. Despite the large Tory lead in the opinion polls and the disappearing Labour majority in the Commons, the Government managed to stagger on. Our opening to the TUC ran into the sand, and with the IMF superintending economic policy, the air of extreme crisis began to subside. At a more fundamental level, however, things were looking up.
ON THE HIGH GROUND
The Right Approach, which we published on the eve of the 1976 Conference, gave a persuasive account of the new Conservatism. Indeed, it still reads well and, stylistically at least, ranks with Change is our Ally as one of the best-written documents produced by the post-war Conservative Party. The credit for this must go to Chris Patten and Angus Maude who, with Keith Joseph, Geoffrey Howe and Jim Prior, drafted it.
It was helped by the fact that a truce had been reached in the internal arguments about where we all stood on incomes policy. A speech by Geoffrey Howe to the Bow Group (a Conservative ginger group) in May 1976 provided an agreed ‘line to take’ which was broadly followed in The Right Approach. The document pointed out that prices and incomes policies did not offer a long-term solution to inflation, while noting that it would be unwise ‘flatly and permanently’ to reject the idea, and nodding favourably in the direction of the West German system of ‘concerted action’. It was a fudge — but temporarily palatable.
But it was the fact that The Right Approach concentrated on the big general arguments, restating what differentiated our approach from that of socialism, that made it the success it was. It received a good press, not least because I and my colleagues put in considerable effort to explain it to the editors beforehand. The confident, authoritative tone of the opening sections pleasantly surprised the critics, lifting their vision above daily political infighting and the Government’s obsession with ever-changing ‘norms’.
The success of The Right Approach illustrates an important paradox about the whole of this period. For a variety of reasons, we were not a particularly successful Opposition in the ordinary sense of the word. Differences kept on emerging between us. We were usually unsuccessful in the House of Commons. We found it difficult to ca
pitalize on the Government’s mistakes. Yet on the higher plane of belief, conviction and philosophy we were extremely effective. We were winning the battle of ideas which was the necessary preliminary not just to winning the election but to winning enduring popular support for the change of direction we wanted to make.
Keith Joseph’s speeches continued to put over the powerful themes he developed in the CPS. In March he delivered a speech in Harrow which took head-on the Government’s claim that high public expenditure was necessary for high levels of employment. In fact, as Keith pointed out:
Government overspending is a major and continued cause of unemployment. Immediate cuts in runaway state expenditure are essential if we are to save the economy now, and eventually restore a high and stable level of employment… Several Peters go on the dole for every Paul kept in a protected job. Several wealth-creating private-sector Peters are thrown out of work to keep each wealth-consuming public sector Paul in make-work. The saved jobs are identifiable and concentrated: the lost jobs are anonymous and dispersed.
I wrote the introduction to the published version of Keith’s Stockton Lecture, entitled Monetarism is Not Enough, which appeared a few months later. Since monetarism was far from accepted by most members of the Shadow Cabinet, this title was a deliberately bold way of expressing an important truth. It was ‘not enough’ to exert monetary control alone. That would indeed bring down inflation. But if we also failed to cut public expenditure and public borrowing, the whole burden of disinflation would then be placed on the wealth-creating private sector.
Alfred Sherman, who had assisted Keith with his Stockton Lecture, helped me draft the speech I made to the Zurich Economic Society on Monday 14 March 1977. Although delivered in Switzerland, it was aimed very much at the domestic audience. Alfred and I worked particularly hard on the text, which, in spite of the economic crisis in Britain, took an optimistic view of Britain’s future, arguing that:
The tide is beginning to turn against collectivism… and this turn is rooted in a revulsion against the sour fruit of socialist experience. The tide flows away from failure. But it will not automatically float us to our desired destination… It is up to us to give intellectual content and political direction… If we fail, the tide will be lost. But if it is taken, the last quarter of our century can initiate a new renaissance matching anything in our island’s long and outstanding history.
It played well in Zurich to the bankers, who were joined by Carol and my friends Douglas and Eleanor Glover — Douglas had been for many years the MP for Ormskirk. But it was how it played in London that mattered. In fact, it was extremely important that I should reach out for the high ground at such a time because there were more than enough difficulties on the low ground of Westminster politics.
I have already described some of the tactical difficulties which the economic crisis now engulfing Britain presented to us. A new one now arose. There was a growing crisis of confidence in Labour, and the polls showed us more than ten points ahead. By-election victories at Walsall North and Workington with big swings to us would shortly confirm the picture. It was at this juncture that talk of a coalition began again among those Conservatives determined at all costs to snatch defeat for me from the jaws of victory.
Harold Macmillan went on television to call for a ‘Government of National Unity’. Nor, it seemed, was there much doubt in his mind about who should be called back to lead it. I thought that I had better go and talk to him to see what he really thought, and it was arranged that we should meet in Maurice Macmillan’s house in Catherine Place. I arrived early and waited upstairs in the sitting room. I heard Maurice’s father arrive and say to him: ‘Has the call come?’ Maurice said: ‘No, not quite.’ He had to make do with me. Our meeting was pleasantly inconclusive, with Macmillan urging me not to be too critical of the Government at a time of crisis. And the only call was that eventually made to the IMF.
I now decided to make some changes of my own. Reggie Maudling’s performance as Shadow Foreign Secretary had long been a source of embarrassment. He did not agree with my approach to either the economy or foreign affairs; he was increasingly unwilling to disguise his differences with me; and he was laid back.[41] But when I told him that he had to go, he summoned up enough energy to be quite rude. Still, out he went.
I also wanted to move Michael Heseltine out of Industry and replace him with John Biffen. When not overreacting, Michael was an effective scourge of the Government, and he was certainly passionately interested in his brief at Industry. The trouble was that his outlook was completely different from mine, and from anything recognizably Conservative. For example, in January 1976 he made a speech criticizing Labour ministers for failing to meet sufficiently often ‘to agree and develop an industrial strategy for this nation’. His real criticism seemed to be that the Labour Party intervened in industry and picked losers whereas he would intervene and pick winners. The notion that the state did not and could not know who would win or lose, and that in intervening to back its own judgement with taxpayers’ money it was impoverishing the economy as a whole, seemed never to have occurred to him. Again, however, when I asked Michael to leave Industry and go to Environment, he said that he preferred not to. I sent my PPS, John Stanley, who knew him well, off to negotiate, and Michael reluctantly agreed to make way for John Biffen on the understanding that he would not have to be Secretary of State for the Environment once we were in power. That settled, the rest of the changes could now go ahead. I asked John Davies to take over from Reggie on Foreign Affairs, where until illness tragically struck him down, he worked hard and effectively.
It was important to have an energetic and effective front-bench team because there seemed a growing likelihood that we might soon be asked to become a government. On Wednesday 15 December Denis Healey introduced a further mini-Budget. He announced deep cuts in public spending and borrowing, and targets for the money supply (though expressed in terms of domestic credit expansion), as part of the deal agreed with the IMF. It was, in fact, a monetarist approach of the sort which Keith Joseph and I believed in, and it outflanked on the right those members of my own Shadow Cabinet who were still clinging to the outdated nostrums of Keynesian demand management. True to the tactic of not opposing measures necessary to deal with the crisis, we abstained in the vote on the measures. The IMF-imposed package was a turning point, for under the new financial discipline the economy began to recover. But in party political terms this was a mixed blessing. On the one hand, discontent with the Government’s economic stewardship would diminish and support was likely to swing back towards Labour. On the other, we could now argue that socialism as an economic doctrine was totally discredited and that even the socialists were having to accept that reality was Conservative. The precise electoral implications of all that would have to be seen.
The political uncertainty made everyone jittery. The Government no longer had an overall majority. No one knew how members of the smaller parties might vote on any particular issue. It was frustrating enough even for those of us who were kept informed of the changing parliamentary arithmetic by the Whips. But it was all but incomprehensible to Conservative supporters in the country, who could not understand why we were unable to inflict a fatal defeat and bring about a general election. In fact, on Tuesday 22 February 1977 the Government was defeated on a guillotine on the Scotland and Wales Bill. The end of any immediate hope of achieving devolution in Scotland and Wales caused the Scottish and Welsh Nationalists to withdraw their support from the Government. A new parliamentary crisis — one in which the Government had ceased to have even a working majority — was upon us.
TOWARDS LIB-LABBERY
Before describing the outcome of that crisis, it is necessary to trace something of the background to the arguments about devolution, which would resurface with a vengeance later. For the devolution issue — at least until the final dénouement in March 1979– had brought almost as much grief to the Conservative Party as it had to Labour.
; Ted had originally committed the Conservatives to devolution at the Scottish Party Conference in May 1968, following a surge in support for the Scottish Nationalist Party (SNP) — a short-lived surge, as it turned out. Ted’s ‘Perth Declaration’ came as a shock to most Conservatives, including those in Scotland. I was never happy with the policy and there was little enthusiasm for it among English Tories generally. But Ted pressed on. He set up a Party Committee under Alec Douglas-Home to draft a detailed plan. Alec’s proposals were agreed at the Scottish Party Conference on the eve of the 1970 general election, finding their way into the manifesto. (There was no commitment for devolution in Wales.) In office between 1970–74 the devolution commitment was, however, quietly dropped. Although the Kilbrandon Royal Commission on the Constitution, which proposed an elaborate devolution scheme, reported in October 1973, our February manifesto just committed the Party to study it. Labour on the other hand committed itself to legislate.
After the general election, Ted became convinced that the Party should offer devolution to Scotland as a way of winning back lost support and appointed Alick Buchanan-Smith as Shadow Scottish Secretary with a brief to do so. At the Scottish Party Conference in May, Ted resurrected our devolution policy, promising a Scottish Development Fund financed by North Sea oil and going beyond the Home proposals in finance. This was the policy upon which we fought the October 1974 election — which, notwithstanding what was proposed on devolution, saw our support in Scotland diminish further. Indeed, for the first time ever we finished in third place in the popular vote.
Anxieties about the way in which the Party had been bounced into the new policy had never been far below the surface. There was in particular a small group of Scottish Tory MPs, including my old friend Bettie Harvie-Anderson, who began to make their views known with increasing vigour after October 1974. They saw the proposal for a Scottish Assembly as one which would threaten the Union, not consolidate it. They also saw no reason to go along with Labour Party policy, let alone try to outbid it. The Scottish party itself was deeply split, with the critics of devolution representing much grassroots opinion pitted against the left-leaning Scottish party leadership of people like Alick Buchanan-Smith, Malcolm Rifkind and George Younger.
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