This was not a good result for Mrs Thatcher. If Foot had won (he had amazed everyone by coming top in the first ballot), her excoriations of socialism would immediately have resonated with the voters. With Jim Callaghan, the Red wolf wore more effective sheep’s clothing than ever before. Callaghan was thirteen years older than Mrs Thatcher, and had been an MP since 1945. He was an unquestionably patriotic product of the respectable working class and he embodied the idea, still persuasive to many voters, that only Labour could get on with the trade unions. A tall man, who deployed what Mrs Thatcher well described as ‘avuncular flannel’,4 Callaghan treated her at the despatch box with a condescension which usually worked in the heavily male House of Commons. In one of their early exchanges at Prime Minister’s Questions, Mrs Thatcher claimed that ‘his only policy is to put Britain deeper in the red, to keep the red flag flying here.’ Callaghan replied: ‘I still have hopes that one day Question Time will be a serious period, without Members just thinking up clever phrases in advance and then shouting them across the Dispatch Box … I am sure that one day the right honourable Lady will understand these things a little better.’5 On another occasion, when Mrs Thatcher was trying to press Callaghan on the revolutionary opinions of one of his colleagues, he put her down: ‘I could, of course, give the right honourable Lady my views on these matters, but unfortunately I do not seem able to endow her with a sense of humour.’6 Mrs Thatcher remembered Callaghan as a more ‘dominating’ political figure than Wilson.7 Throughout his time as leader, Callaghan had a higher personal popularity rating with the public than she did.
Two days after Callaghan became leader, Labour lost its overall majority in the Commons through the death of one of its Members and the resignation of the whip by the fraudster John Stonehouse.* This loss of control was not the blessing for the Tories which many of their supporters took it to be. Many now expected the Labour government to fall, but the Liberals and the minor parties could and did ensure that it stayed in office. Mrs Thatcher therefore found herself in the difficult position of having to keep her troops in permanent readiness for a war which might still be as much as three years away – the end of the legal life of the Parliament. With most Commons votes so finely balanced, parliamentary chaos became more frequent. At the end of May 1976, Labour’s Bill to nationalize the shipbuilding and aircraft industry was pushed to the vote even though the Speaker had declared it ‘hybrid’ (that is, a Bill which, because it mixed general provisions with ones applying to specific businesses, was contrary to House of Commons procedure), and then was carried only, the Tories alleged, when the government whips induced one of their MPs to break his pair. Left-wing Labour MPs started to sing ‘The Red Flag’ in the Chamber of the House of Commons. Then Michael Heseltine, the Conservative industry spokesman, grabbed the Mace, which symbolizes the delegated authority of the Crown, and waved it aloft. Jim Prior and Willie Whitelaw restrained him, but not before everyone saw what had happened. Heseltine claimed ever afterwards that he was satirically offering the Mace to the Labour left, not brandishing it,8 but that is not how the matter was viewed. Mrs Thatcher seems quite to have enjoyed the kerfuffle, and did not reprimand Heseltine. The result of these dramas was that she suspended all parliamentary co-operation with the government until Callaghan agreed to hold the vote on the Shipbuilding Bill once more. This he did, four weeks later, but by that time he had made sure of the votes he needed.
Even the economic plight of the nation was not pure advantage to the Tories. The previous December, when the International Monetary Fund had agreed standby credit for the British government, the monetary disease which the Conservatives, starting with Keith Joseph, had identified had been confirmed by impartial medical opinion. In the debate on the Budget which came the day after Callaghan became prime minister, Mrs Thatcher turned in her most effective parliamentary performance yet as leader. She pointed out that when Healey had stood up to present his Budget a year before, the pound had been worth $2.37; now it was worth $1.87. The Public Sector Borrowing Requirement of £12 billion meant that ‘the size of the deficit dominates everything the Chancellor can do.’ The ‘influenza’ was recession: the ‘cancer’ was ‘the underlying structural problem, that we are living beyond our means’.9 Two months later, as sterling came under pressure, a further standby credit, of $5,300 million available for three months, was offered by the Bank for International Settlements. And then, on 28 September, a new sterling crisis, in which the pound fell to $1.63, forced Healey to turn back at the airport minutes before he had been due to fly to a Commonwealth financial conference in Hong Kong. Britain applied to borrow $3.9 billion from the IMF. Although interest rates rose to 15 per cent, the pound fell still further in October 1976, reaching a low of $1.56. This time, the IMF loan came with strict conditions, and required a Letter of Intent about the next Budget, which was delivered by the British government in December. For the next fifteen years, the memory of Labour going ‘cap in hand’ – as it was always expressed – to the IMF became a standard feature of Tory propaganda.
Although these humiliations proved the Conservatives right, they also changed the political atmosphere. In such a crisis, there was talk once more of the need for national unity. A coalition government with such a purpose was touted by Harold Macmillan, who secretly imagined himself, aged eighty-two, at its head.* With rhetoric of belt-tightening and pulling together in the air, Mrs Thatcher’s message that incomes policies could not work struck the wrong note with many. Shortly after Parliament had approved Stage 2 of the government’s incomes policy in early May, she was interviewed by the journalist Peter Jay (who happened also to be Callaghan’s son-in-law) on LWT’s Weekend World. ‘No pay deal will solve our problems at the moment, if pursued alone,’ she told him. ‘Is Britain to be thought of wholly in terms of restraint? Can’t we advance?’10 Her demand for public spending cuts to be ‘immediate’ and ‘real’11 combined with her preference for free collective bargaining to make many think that she would end up giving big wage settlements to overmighty unions and letting the weaker workers get worse deals. Senior Conservatives continued to disagree on this vital area of policy.
At the same time, the Labour government became more visibly responsible in its conduct. On 22 July, Healey announced public spending cuts of £1 billion. In response to the IMF crisis at the end of September, he produced the ‘stern, decisive measures’ which Mrs Thatcher had demanded. And although the Labour Party conference, which took place in the middle of that crisis, produced a show of strength from the left which helped sink the pound, it was also notable for the speech by Jim Callaghan (written by Peter Jay) in which he declared that the option of borrowing and spending one’s way out of economic trouble ‘no longer exists’. The era of ‘cuts’, which Mrs Thatcher was later frequently accused of inaugurating, really began with this speech. As the man to lead the nation soberly through a crisis, Callaghan looked convincing, even if the crisis had been of his own government’s making.
In her speech to her own party’s conference, which took place in Brighton the following week, Mrs Thatcher was therefore, in her own words, ‘almost neurotically cautious about the need for responsibility and caution’.12 John Gummer, who often helped draft her party conference speeches, rather wearily recalled that ‘What she liked best was being defiant, so it was one’s job to find something for her to be defiant about.’13 In October 1976 that something was not to be found. Mrs Thatcher had to be seen to support what Callaghan was doing without boosting him at the same time. Her line was to take a stand which appeared to eschew party advantage in the interests of ‘the prosperity, the freedom – yes – and the honour of Britain’. ‘Now half the Cabinet are beginning to tell half the truth,’ she told the party faithful, but the chance of the government changing course was ‘nil’, because of the power of the left. She highlighted the document produced by the party’s National Executive, Labour’s Programme (which was not binding on the party leadership), as ‘frankly and unashamedly Marxist’, and said
that the behaviour of the left in barracking poor Healey at Blackpool the week before had been ‘a sight the country is unlikely ever to forget’.
Her proposed remedies were very cautious. As a form of thanks to Ted Heath for the (somewhat grudging) support he had offered for the general direction of policy in his Brighton speech, Mrs Thatcher praised him as ‘a man who never sells the truth to serve the hour’, and kept to an unspoken agreement with the left of the party not to damn all forms of incomes policy. She spoke of the virtues of ‘a generally agreed basis for wage bargaining’. At the same time, she declared that she sought no confrontation with the unions: ‘the confrontation that matters to us is confrontation with rising prices, with rising unemployment, with rising debts.’14 As a piece of political positioning, the speech did its work. The Times tried to wrap her to its establishment heart: ‘Mrs Thatcher has moved with characteristic caution on to the middle ground of politics … the party has rallied on a set of policies and approaches that are markedly closer to Mr Heath than to Sir Keith Joseph.’15 But the audience in the hall was much less excited than the previous year, and the speech fell rather flat. Frank Johnson,* the sketch-writer of the Daily Telegraph, and one of those sympathetic to the change that Mrs Thatcher represented, noted how much better she spoke in an impromptu speech to an overflow meeting organized after her setpiece speech (because the main event had taken place, due to building works, in a small, temporary hall). The earlier performance, he wrote, ‘was markedly inferior to her showing last year’.16 In acknowledging its comparative failure in her memoirs, Mrs Thatcher is probably displaying a bad conscience: she had conceded more than she liked to the consensual wing of the party.
The text which bound Mrs Thatcher and Ted Heath in uneasy unity for the party conference of 1976 was a document called The Right Approach, which was published as the Conservatives convened in Brighton. Drafted chiefly by Chris Patten, the lengthy document was subtitled ‘A Statement of Conservative Aims’ in order to avoid having definite policies hung round the party’s neck at too early a stage. It represented, as Patten himself put it, ‘a treaty’17 between the Heathite and Thatcherite strands of Conservatism and so, like all good treaties, sought to express itself in a way from which both sides could draw comfort. In rhetorical terms, the centrist voice, which was really Patten’s own, dominated. The Right Approach talked repeatedly of ‘a return to common sense’, and warned against being ‘too dogmatic’. ‘A Philosophy of Balance’ between man as an individual and as a social being was offered. The document sought a ‘whole-hearted contribution to the development of the European Community’ and it represented the Conservative approach as being ‘in tune with the instincts and views of the overwhelming majority of our fellow citizens’. It praised the Heath era as one in which ‘tough decisions’ had been taken. In its substance, however, The Right Approach was almost Thatcherite enough for Mrs Thatcher. The key section entitled ‘Bringing the Economy into Balance’ (‘balance’ here being a word that appealed to Heathites as suggesting moderation and to Thatcherites as implying a balanced budget) spoke of ‘a steady and disciplined monetary policy’, a reduction in government borrowing and cash limits. Control of the money supply was ‘a key feature of economic policy, though by no means the only one’. Public spending cuts were described as ‘essential’ and it was stated as ‘probable … that reductions in the scale of some public services are inescapable’. Once borrowing had been successfully reined in, direct taxes would be cut and the tax burden ‘as a whole’ would be reduced. The Price Code, which sought to control prices, should be relaxed, the National Enterprise Board, which had the power to take controlling stakes in strategic industries, should be abolished and clear financial objectives set for nationalized industries: there was no general proposal to sell them off. Tenants of more than three years’ standing would be given a statutory right to buy their council house or flat. In only two areas was the caution arising from internal disagreement visible. The first concerned the reform of trade unions. This was approached under the heading of increasing ‘the authority of Parliament’. Public money for union postal ballots would be provided and individual rights against the closed shop better protected, but the rest was vague: ‘We do not intend to introduce a major round of new industrial relations legislation.’ Although this certainly represented less than Thatcherites sought, there was agreement, right across the party, that discretion was the better part of valour: the wounds of the Heath Industrial Relations Act were still raw.
It was in the second, related area of incomes policy that The Right Approach’s need for compromise reduced it almost to nonsense. Restraint in pay bargaining, it said, did not necessarily mean a prices and incomes policy. ‘Experience does not suggest that this [incomes policy] is the best way of finding a long-term solution to the problem. The same experience demonstrates the unwisdom of flatly and permanently rejecting the idea.’ Noises were made in the direction of German ‘Concerted Action’ by which unions and management agreed general financial outlines without producing a percentage guideline for wage increases. The internal Tory battle about incomes policy would have to be fought another day. On the whole, Mrs Thatcher was well pleased with the treaty-drafting. The Right Approach even produced a phrase which later came, falsely, to be attributed to her: ‘The facts of life invariably do turn out to be Conservative.’
Although she suffered from the political weakness discussed above, and a lack of kindred spirits at the top of the party, Mrs Thatcher had the great advantage that the battleground on which she wished to conduct most of her fight was economic. Her critics within the party were weak on economics. Most of the political heavyweights were economic lightweights (and vice versa). William Waldegrave, one of the few originating in the Heath camp who was interested in and sympathetic to liberal economics, remembered that the grandees paid very little attention to the subject: ‘ “Didn’t Keynes settle all this for ever?” they thought.’18 And although they instinctively disliked the direction that Mrs Thatcher wanted to take, they did not have the knowledge to mount a resistance based on actual argument. Even incomes policy, over which they fought the hardest, was something which its supporters tended to see as merely temporary – ‘the economic equivalent of internment in Northern Ireland’19 – and they therefore found it hard to resist the tide of objection which gradually eroded it. This economic ignorance of the men who later became known as the Wets was reflected in the portfolios which Mrs Thatcher assigned in her Shadow Cabinet. Of those who dealt with economic matters, only Jim Prior, at Employment, represented a block on the analysis of Keith Joseph and the passion of Margaret Thatcher, and he was the only man brave enough to raise serious objection to the direction of policy in Shadow Cabinet meetings. But since Prior objected on principle to ideas, he was ill equipped to have many of his own. Of her other critics in the Shadow Cabinet, the most economically literate was Reggie Maudling, who had been Chancellor of the exchequer. He did protest from time to time, but he did not exert himself and was on the downward slope of his career.* Her Shadow Cabinet critics took refuge in the general, pragmatic hope that ‘events would modify her views.’20
On the Thatcher side of the argument were ranged an intellectually impressive group of mainly younger men, much less well known to the public than the old grandees. Rather like soldiers who have forged a camaraderie by fighting in the same campaigns, some of these were veterans of the resistance to the Heath U-turn, and all of them served at some point on the Finance Bill Standing Committee, the body on which Mrs Thatcher had so distinguished herself during her fight for the leadership. They included David Howell,† Nigel Lawson, Nicholas Ridley, John Nott, John Biffen, Ian Gow, Cecil Parkinson, Norman Lamont and Jock Bruce-Gardyne. All of these men possessed considerable brainpower and applied it in the years of opposition to develop new economic policy. There were important differences of emphasis – Biffen, for example, was much more cautious and Baldwinesque than Ridley or Lawson – but all pointed essentially in the same
direction, towards greater freedom in the economy.
In addition to these politicians, those who advised Mrs Thatcher on economic matters were also economic liberals. With the partial exception of Adam Ridley, who, though no dirigiste, came from the Heath stable, none of her economic advisers felt any need to justify anything that Heath had done. Indeed, they were raring for change, and shared her impatience with the formal policy processes of the Conservative Party. She complained that at the Conservative Research Department, supposedly the party’s intellectual powerhouse, ‘there was nobody in the room with a single idea that was worth having’.21 As Chris Patten, of the Research Department, who tried to manage the policy process, remembered ruefully, Mrs Thatcher would study the work of the formal policy groups, but ‘You’d know that she was also seeing a crazed Swiss professor.’22 Through Keith Joseph, Alfred Sherman and the Centre for Policy Studies, and to a lesser but significant extent through Arthur Seldon, Ralph Harris and the Institute of Economic Affairs, Mrs Thatcher met a steady stream of economic and political thinkers, of whom Friedrich von Hayek* and Milton Friedman† were the most famous. She took as her watchword Solzhenitsyn’s dictum that ‘it is part of the business of the artist and the philosopher to light up the politician’s path,’23 and the path which she most wanted illuminated was that which led to greater freedom, under the rule of law. She instinctively disliked mere individualism: what she was searching for was liberty in a strong moral and social order. She had read Hayek’s Road to Serfdom as an undergraduate at Oxford, and in the 1970s used to pull his Constitution of Liberty out of her handbag, declaring ‘This is what we believe.’24 And she loved to invoke the authority of great thinkers as part of her campaign of public evangelizing. During the opposition years, Mrs Thatcher’s speeches referred admiringly to, among many others, Karl Popper, Bastiat, Keynes, Burke, Schumpeter, Tocqueville, Alfred Marshall, C. S. Lewis, Adam Smith and Rudyard Kipling. Although she had often not read these authors before someone else drew her attention to them, their inclusion in her speeches was almost always an authentic representation of her interest and her views. On the recommendation of others, Mrs Thatcher would set herself homework. ‘I have just embarked on holiday reading,’ she wrote to Adam Butler to thank him for a Christmas present. ‘But after Dostoevsky’s The Possessed and Koestler’s Darkness at Noon am none too cheerful!’25‡ She amazed the novelist and journalist Jilly Cooper by telling her that in the course of the broiling summer of 1976 she had read the entire 845 pages of Kipling’s Collected Poems.26 In the preparation of her more substantial speeches, particularly at weekends, Mrs Thatcher drew heavily on these authorities, and also on more current thinkers and commentators. Records of the preparation for a speech entitled ‘The will-o-the-wisp of the classless society’, delivered on 26 January 1977, are typical. She heavily underlines articles from current newspapers and magazines by Shirley Robin Letwin,* P. T. Bauer,† Milton Friedman, Samuel Brittan, Robert Skidelsky,‡ Hayek, Alan Walters and Paul Johnson.27
Margaret Thatcher: The Authorized Biography Page 46
