Margaret Thatcher: The Authorized Biography

by Charles Moore

  The lifting of controls was a very bold step. Ever since the war, British governments had believed that they had to control the movements of money in and out of the country in order to prevent a collapse of sterling. British tourists going on holiday had to register the currency they took with them: in the 1960s, the maximum was £50 per head. When the day of currency freedom dawned, there was no collapse but rather, if anything, the opposite problem. The British economy, and particularly the City of London, at last had the opportunity to compete globally. In her speech at the Lord Mayor’s annual banquet on 12 November, Mrs Thatcher told the assembled financial grandees that sterling was no longer locked in the Bastille: ‘the prison doors have been thrown open.’85 In the Commons on the day of the announcement, Enoch Powell said: ‘Is the Chancellor aware that I envy him the opportunity and privilege of announcing a step that will strengthen the economy of this country and help restore our national pride and confidence in our currency?’ Although Powell’s confidence in the change was to prove fully justified, its effects were not immediate enough to deflect the force of Jay’s pointed question on 1 November. For the British economy, things might eventually get better, but, in the meantime, they could only get worse.

  Less than a week after the White Paper’s publication, the money supply target, by which the government set such store, was heavily exceeded. Sterling M3 was growing at an annual rate of 14 per cent in October, when the government’s target remained within the range of 7–11 per cent. The spending targets in the White Paper were not tough enough to convince the markets that the future was going to be different: they were £2 billion, Howe quickly came to think, above where they should have been. At this rate of money growth, and with inflation running at an annual rate of 16 per cent, the purchasers of government debt ‘went on strike’86 and a funding crisis ensued. Internationally, the stage had been set for tougher action by the decision in October of Paul Volcker,* the new chairman of the Federal Reserve Board, to bear down on the money supply and accept the painfully high exchange rates that resulted. Britain needed to show a comparable toughness. On 5 November, Howe came to see Mrs Thatcher, to warn her of the situation and the fact that, a further fiscal package being ‘unthinkable’, ‘the only option for bringing the money supply back within the target seemed likely to be a further increase in MLR’.87 Mrs Thatcher said she was ‘most disturbed’ by the news. Howe added that he doubted whether inflation would fall below 14 or 15 per cent by the end of 1980. She said she was ‘most unhappy’ and asked, ‘How could this be so if the Government were pursuing a tight monetary policy?’88 It was a question to which more and more people would demand an answer in the coming months.

  Mrs Thatcher had little choice but to agree with her Chancellor, however. On 15 November interest rates went up by 3 per cent to 17 per cent, a punitive increase, and the highest nominal level in the whole of British history, before or since. The rise was designed to be so big as to brook no doubt in the markets. When Howe informed the Cabinet of his decision on the morning of 15 November, Jim Prior pronounced himself ‘disappointed and shocked’ by the increase and said that he did not ‘know where it’s going to stop’. But it was a vivid illustration of Howe’s case that the low interest rates for which the more centrist members of the party particularly pined could come only if the strict policies he sought were genuinely pursued. Mrs Thatcher pointed out acidly to colleagues that ‘It wouldn’t be 17 per cent if we got our expenditure down.’ In a characteristic formulation, Howe told the Cabinet that he was trying to keep things ‘as un-unpleasant as possible’.89 Events were proving him right that – the famous phrase was, in fact, his, not Mrs Thatcher’s* – ‘There is no alternative.’ As he put it in a memo on the economic outlook despatched to relevant ministers early the following month, ‘The general strategy remains the only feasible one but the difficulties we face are greater than we had any reason to expect.’90 The worse things got, the stronger, by a strange logic, his case became.

  The consequence was that two arguments about the government’s economic policy were being conducted separately but at the same time. The first, by far the noisier, was that between Howe and Mrs Thatcher and their allies on the one hand and the Keynesians, Heathites, the Labour Party and the corporatists on the other. This concerned whether or not the policy, often characterized as cruel and ‘doctrinaire’, was destroying British jobs and prosperity. The second, by far the more important for the economic future, was between those who agreed about the essential thrust of the policy, but believed that the balance was wrong or that reform was not coming fast enough or that the methods chosen for controlling the money supply were having perverse effects. In terms of party management, Mrs Thatcher had to deal with anxious colleagues, such as Jim Prior, who did not really understand the policy, and who certainly did not like it. She was absolutely confident that Prior and co. were wrong and had little to contribute to the debate, but it was they who had more political capacity to break her. In terms of the decisions she required to make the policy succeed, she was debating matters with those – Howe, Nott, Lawson, Joseph, as well as advisers like Hoskyns and civil servants like Peter Middleton* at the Treasury – who were of similar mind, but far from unanimous about the methods to be used. These were the people whose opinions made a real difference, yet whose weight in the eyes of politics and public opinion was much less. By this time, by the adaptation of a public school usage, Mrs Thatcher’s opponents within the Conservative Party were coming to be known as ‘Wets’, which in turn required a new coinage to describe her supporters: they became ‘Dries’. However beleaguered she was, Mrs Thatcher always knew that if she were forced to adopt a Wet position she would catch her political death of it. It was among the Dries, therefore, that real debate took place.

  This helps to explain the testimony of so many people close to Mrs Thatcher in the early years that, however appalling were the political and economic pressures, there was never panic about the entire direction of economic policy. The world beyond Downing Street expected a U-turn, having seen one with Heath. Those within knew that this would not happen. What they feared was simply that events would overtake Mrs Thatcher and that electoral unpopularity or a party coup would bring her down. If people like John Hoskyns were right that recovery would take two full Parliaments, how could the Conservatives contrive a way to win the election which would have to be held halfway through? She said as much herself in an interview given to the New York Times on 9 November when she already knew, though the public did not, that the huge interest rate rise was on the way: ‘Can we get far enough by the next election to show that it – our program – is working?’91

  18

  Our doubts are traitors

  ‘I cannot play Sister Bountiful’

  Growing economic difficulties did not immediately damage Mrs Thatcher’s public standing. This was partly because they seemed, in 1979 at least, to be proof of the arguments she was making. She told her party conference in October that she had ‘the task of leading this country out of the shadows’,1 so she did not suffer, in the short term, if those shadows seemed dark indeed. It was also because the sense of courage in adversity, of one woman battling against heavy odds, was intrinsic to her style of leadership and to her popular appeal. This leadership was quickly evident not only in economic matters, but on many other fronts.

  On 27 August 1979, Lord Mountbatten, the Queen’s cousin and the last Viceroy of India, was murdered, with three others, while sailing near his home in the Irish Republic. The IRA were responsible. On the same day, eighteen British soldiers were blown up and killed in an IRA booby-trap at Warrenpoint in Northern Ireland, the result of a failure of intelligence so dire that it inspired the creation of a new security directorate under Maurice Oldfield, the recently retired head of the Secret Intelligence Service, better known as MI6,* whose existence, throughout Mrs Thatcher’s time as prime minister, remained ‘unavowed’ in public by the government. Two days later, Mrs Thatcher flew to Northern Ireland.
There she went on a lightly protected walkabout in Belfast. Then, against the advice of the Royal Ulster Constabulary and the Northern Ireland Office, but with the encouragement of the army, who wanted her to see just how bad things were, she flew to the so-called bandit country of County Armagh. In Crossmaglen, she put on the uniform of a ‘Greenfinch’, the female members of the Ulster Defence Regiment, the only regiment of the British army permanently serving in Northern Ireland. The UDR’s members, many of them part-time and local, were the subject of endless terrorist attack. Brigadier David Thorne, who commanded the 3rd Infantry Brigade, produced an epaulette of the Queen’s Own Highlanders, which had belonged to Colonel David Blair, the most senior soldier killed at Warrenpoint: ‘This, Prime Minister, is all that is left of Colonel Blair.’ Mrs Thatcher wept.2 Her dash, courage and human sympathy were much admired, and her intuitive bond with the military was noted. Mrs Thatcher’s views on the politics of Northern Ireland were sometimes confused and her attention intermittent, but her instinct of solidarity with the British security forces was strong, deep and always vividly expressed.*

  The new Prime Minister also had to contend with a different sort of enemy of the country. She was faced with the unravelling of a fifteen-year cover-up. Ever since the defections of the Communist spies Guy Burgess and Donald Maclean to the Soviet Union in the 1950s and that of Kim Philby in 1963, there had been a hunt for ‘the Fourth Man’ of the original Cambridge spy ring. This was Anthony Blunt. Blunt, who had become a Communist in the late 1930s, spied for the Soviet Union from 1940 to 1945, while working for the British Security Service (MI5). A distinguished art historian, especially learned on Poussin, he later became director of the Courtauld Institute and Surveyor of the Queen’s Pictures. In the autumn of 1979, Andrew Boyle published a book called The Climate of Treason, in which he dropped heavy hints about Blunt, referring to him as ‘Maurice’. It had earlier got out that the Fourth Man was a don with a Cambridge background with a surname five letters long and beginning with B. The Times had run the story, wrongly identifying a blameless old Fellow of King’s College called Donald Beves. As the Observer started to print extracts of Boyle’s book in early November, Private Eye named Blunt. In interviews about his book, Boyle refused to identify Maurice, but challenged the government to do so.3

  Inside Downing Street, the issue was hotly debated. Ever since the early 1950s, there had been strong official suspicions against Blunt, and he was interrogated on eleven occasions. In 1964, because of new evidence from the American traitor Michael Straight, the suspicions became certainties. The British authorities concluded, however, that Straight’s evidence was not the sort which could be used in court. They believed, although this turned out to be mistaken, that there was a Fifth Man in the ring, and so they had not yet succeeded in identifying the ‘Ring of Five’ British traitors, and did not want to prejudice their hunt for the Fifth Man by going public.4 They therefore decided to offer Blunt a deal – immunity from prosecution in return for a confession, and the information which that confession would supply. Blunt confessed. The embarrassment consisted in his royal connection. It would be damaging if it ever became known that the government and the Palace had agreed to cover up Blunt’s treachery, and yet, successive governments felt, once the cover-up had happened, it must be preserved. Because of the secrecy involved, there was also a good deal of confusion about who had ever been told. Alec Douglas-Home, the Prime Minister at the time, had not known, though the Queen’s then private secretary, Sir Michael Adeane, had.

  Mrs Thatcher asked Sir Robert Armstrong, by now the Cabinet Secretary, to investigate. He found little on paper, and several politicians with apparently faulty memories. He concluded that the Queen had been informed, though this was never officially confirmed to him.5* Within Whitehall, there were differing views about how to proceed. The head of MI5, Michael Hanley, advised against any prime ministerial intervention, but the Attorney-General, Sir Michael Havers,† advised that if Blunt were not named by the government he would be free to sue for libel if others named him. This would create an intolerable position. Mrs Thatcher, who was new to all this, listened carefully to both sides, but was inclined to name him. Her straightforward instinct was that ‘he had betrayed his country’,6 and there was no reason to protect him unless exposure would cause intolerable embarrassment to Crown or government. She was also worried that ‘the finger was pointing at several innocent people’,7 and only the government had the power to tell the truth. Blunt’s right to immunity from prosecution did not automatically guarantee him anonymity. It was decided to take advantage of a written security question put down by the Labour MP Ted Leadbitter and ask him to raise the issue of Blunt. Armstrong gave Blunt’s lawyer twenty-four hours’ notice.

  Mrs Thatcher duly gave Leadbitter a written parliamentary answer naming Blunt, and later, on 21 November, a full statement to the Commons. There was tremendous excitement about the story. Acting as the establishment person which, in one half of his mind, he was, Blunt gave his version of events exclusively to The Times, and was served white wine and smoked trout in the paper’s offices by the deputy editor, Louis Heren, to the rage of the other newspapers. Meanwhile, in another dining room in the building, the editor, William Rees-Mogg, was giving lunch to Ted Heath, who was surprised and, until he realized what had happened, pleased to emerge from the building to a barrage of cameras.8 The optics of the moment were very good for Mrs Thatcher. It looked as if she would have nothing to do with the corrupt and weak old ways of doing things. She had told the Commons that Blunt’s behaviour had been ‘contemptible and repugnant’.9 In the lobby of the Commons, she saw Leadbitter and told him, ‘And it damn well serves him [Blunt] right.’10 Shortly after Mrs Thatcher’s statement to the House, Buckingham Palace announced that Blunt would be stripped of his knighthood. Because she had insisted on openness in this case, many jumped to the conclusion that Mrs Thatcher would inaugurate a new era of transparency in the security services, but this was not her intention at all. As she also told the House, ‘Our task now is to guard against their [the Communist traitors’] counterparts of today.’11 She wanted the Blunt embarrassment out of the way, but she had no desire to shed light on secrecy which she thought was vital in the defence of the nation.

  Nothing did more than the long row over the EEC budget to bring out the qualities which made Mrs Thatcher so impressive to her admirers and so irritating to her detractors. When Bryan Cartledge left his job as her foreign affairs private secretary in September 1979, she wrote him a thank-you letter which was remarkably frank about affairs of state. ‘Rhodesia’, she wrote, ‘goes desperately slowly. Peter [Carrington] and Ian [Gilmour] are doing a superb job and are much more reconciled to a long stint than I am. I think it is time we forced the pace a bit …’ Then she continued: ‘I get more and more disillusioned with the EEC. We are going to have a real fight over the budget and by one means or another we have to get our way. We need the money.’12 These few words summarize fully her approach to the question at the time. She wanted a fight; she wanted the money; and she found the whole EEC set-up uncongenial. She had not, as she was later to do, sat down and considered the constitutional implications of the whole European project. Since the disputes of the early 1970s and the ‘yes’ vote in 1975, European controversies had, to the relief of party managers, died down. There was a strong ‘atmospheric pressure’ to be pro-Europe and leave it at that. Mrs Thatcher half succumbed to this, but only half. She was not, in any general sense, anti-European, but she was frustrated and displeased, and jealous of encroachments upon British sovereignty. The attitudes of her main European counterparts brought out her combative instincts. And although she agreed with the general proposition advanced to her by officials when she came into office that the new government must show itself more friendly to Europe than Britain had been in the fraught Wilson–Callaghan years, she did not like most of the suggested ways of doing so.

  One of these was joining, or promising soon to join, the Exchange Rate M
echanism (ERM). On the very day she reached No. 10, John Hunt had sent her a memo advocating ‘an open-minded approach to the concept of a zone of monetary stability in Europe consistent with the mainstream of Community development’. She wrote beside this: ‘I doubt whether this can be achieved by a currency system. Indeed it can’t – unless all of the underlying policies of each country are right.’ (And for good measure, she added: ‘Fish should never have been made a common resource.’)13 Lord Carrington argued in a similar strain to Hunt’s, and the Foreign Office’s generally conciliatory attitude provoked her to write on one of their reports: ‘I despair of FO memos … This is jabberwocky to me. What is it supposed to mean.’14 Records of her discussion with Roy Jenkins, the Commission President, over the summer and autumn, show him pushing her to join the ERM, and her dragging her feet: ‘she recognised the political advantages but was not prepared … to take the risk with the money supply that full membership would involve.’15 In October the government privately decided that it was the wrong time for Britain to join the ERM.

  Although her European attitudes gave ministers and officials in the Foreign Office the vapours, they were popular in the country. They also caused her little political difficulty in her own party. Bernard Ingham told the usual off-the-record lobby briefing, ‘I personally voted to go in, admittedly more for political than economic reasons. But, I am sure like millions of others, I didn’t vote to go in to be fleeced.’ He was annoyed to find these words quoted in the papers and attributed to Mrs Thatcher herself,16 but they probably reflected the prevailing mood among Tory supporters and did his boss no harm. Nor was Mrs Thatcher arraigned by the Opposition. The feeling in the rank and file of the Labour Party, though not of most of the leadership, remained anti-EEC. At Prime Minister’s Questions, she was often pressed on the subject by Labour MPs, almost always from the point of view of those who wanted her to insist on an even larger rebate than that for which – the quantum varied as negotiation progressed – she was arguing. On her own side, a newly elected MP by the name of John Major* put down an early day motion in the Commons congratulating her on her tough negotiating stance.