In her first setpiece interview of the autumn, Mrs Thatcher took the budget row as the touchstone for whether people would regard Britain as being fairly treated in the EEC – ‘it is about free people living together.’17 And in her speech to the party conference at Blackpool she spoke of the ‘appalling prospect’ of paying out £1 billion net per annum to Brussels (the net contribution five years before had been £16 million). Even when asked to lift her sight to the far horizon for the Winston Churchill Memorial Lecture in Luxembourg later that October, Mrs Thatcher was frank and fierce about the ‘manifest inequity’ of the budget problem. ‘Our friends may despair – I sometimes do myself –’, she said, ‘at the daily bickering over small matters,’ and she warned: ‘I cannot play Sister Bountiful to the Community while my own electorate are being asked to forgo improvements in the fields of health, education, welfare and the rest.’18 The Thatcher vision of the EEC, even at this early stage in her premiership, was one that no other European leader would have advanced. It was to link the EEC and NATO so that ‘The principle at the heart of our European institutions is the principle of liberty.’ This principle needed to be advanced in the face of the fact that the West had nothing better than ‘prolonged armed truce’ with the Soviet Union. Away with ‘grey uniformity’, away with the ‘unnecessary standardisation’ which ‘sits ill with liberty’ – the point of the whole thing, she believed, was to advance in ‘the struggle between liberty and tyranny’.19 In an interview in Luxembourg the next day, she was asked about a United States of Europe. ‘That has never, I believe, been the practical intention,’ she said.20
In fact, for most of those at the heart of the project, that was indeed the intention. According to Sir Michael Jenkins, who at that time worked with Roy Jenkins, the President of the Commission, ‘The Commission was trying to create a United States of Europe – with a common currency and a constitution,’21 and most of the relevant people in the British Foreign Office were of a like mind. Michael Butler,* who was the United Kingdom’s ambassador to the EEC (a position always known as UKREP) from 1979, and David Hannay,† who ran European Community affairs for the Cabinet Office at the same time, were lifelong, committed European integrationists. So was Sir Michael Palliser,* the Permanent Secretary at the Foreign Office. As Michael Jenkins put it, ‘We were Ted’s children.’22 Many British ministers, though perhaps less Euro-visionary than the Commission, saw ‘Europe’ as an unquestionably ‘good thing’. When they met at the councils of European foreign ministers, Roy Jenkins and Ian Gilmour, who were anyway great friends, would ‘wring their hands’ about Mrs Thatcher.23
Even before she entered into the battle of the budget, Mrs Thatcher lacked the instinctive sympathy with the European Continent and Community institutions which, for much of the British educated elite, was seen as a mark of being civilized. Michael Palliser first met her in 1975, when she had just become leader of the Opposition and he was the United Kingdom’s ambassador to the Community. At dinner with him in Luxembourg, she told him what an unsatisfactory lot the European Commissioners were: ‘She found them rather tiresomely foreign.’24 He found her ‘exceptionally ignorant, but with some deep-rooted prejudices’ which did not alter over the years. One of these was that the French were preternaturally cunning, and therefore almost always had to be resisted in negotiation. ‘They are cleverer than us,’ she told him. ‘They will run rings round us.’25† From the start, the mindset of those of all nations who were involved with the running of Europe was quite different from that of Mrs Thatcher. This difference probably only increased her determination. It was a very strong part of her character that she felt the need to fight if everyone else seemed to disagree with her: ‘My father taught me to “dare to be a Daniel”,’ she told Bernard Ingham.26 She felt isolated in Europe, and among her own officials and ministers. A few days before the Dublin summit at the end of November, she told Geoffrey Howe that ‘she could not understand why Mr Ridley [Nicholas Ridley, the free-marketeer whom she had made a junior minister at the Foreign Office] was not working on economic issues. He was the only FCO minister who understood economics. She intended to take this up with Lord Carrington.’27 For the European leaders confronted by Mrs Thatcher, her request for a rebate was more than a bruising battle about particular sums. It had a quasi-theological significance. Mrs Thatcher insisted on referring to the British payments involved as ‘our money’, sometimes as ‘my money’. This offended against the European doctrine that ‘own resources’ – the percentage of VAT receipts voted to the Community by the member states – belonged absolutely to the EEC and so could not be broken down nationally or talked of in terms of a ‘net contribution’.* Mrs Thatcher took refuge in the promise, made by the other member states during Britain’s accession negotiations in the early 1970s, that, should an ‘unacceptable situation’ arise, ‘the very survival of the Community would demand that the institutions find equitable solutions’.28 At a joint press conference with Mrs Thatcher in Bonn at the end of October, in which she once more complained that Britain’s payment was ‘very unfair and inequitable’, the German Chancellor, Helmut Schmidt, sharply questioned the principle on which she took her stand. If Germany were to take her view that there had to be a ‘broad balance’ between what a country put in and what it got out, he said, ‘it would mean the end of the Community in a few weeks.’29 European leaders feared that she was trying to revive the concept, beloved of General de Gaulle, of the ‘juste retour’, which, according to Euro-enthusiasts, had been destructively nationalistic. At a similar occasion in London three weeks later, President Giscard d’Estaing of France also attacked the ‘broad balance’ idea. Mrs Thatcher, determined not to be bamboozled by clever Frenchmen, was tart. The battle over the budget was not a matter of technicalities, she said, but of will: ‘I trust I make myself clear.’30
At the European Council in Dublin on 29 November 1979, Mrs Thatcher made herself clearer still. In preparing for the summit, she had continued to come under pressure from her own officials who believed that only by signing up to grand European beliefs could she gain specific, detailed negotiating advantages. At the end of October, for example, when Sir Donald Maitland retired as UKREP, he sent the customary farewell despatch to the Foreign Secretary. It concluded with the idea that a common market and a customs union provided ‘an inadequate basis on which to face the challenges of today’, and he hailed the aspiration for an ‘eventual political community’. Michael Alexander,† who had succeeded Bryan Cartledge as Mrs Thatcher’s foreign affairs private secretary, sent her Maitland’s memo. He commended the conclusion and wrote on top: ‘Selfish, wilful and short sighted though our partners are, they are so far as I can see, the only partners we have. I … believe that you personally could play a major role in pointing the Community in the right direction.’31 Against Maitland’s notion of a ‘political community’, however, Mrs Thatcher inscribed her customary wiggly line of disapproval.
But, contrary to some of the myths that grew up later, there was no great disagreement within the government about what to demand at Dublin. Although Mrs Thatcher and even, despite his lifelong Euro-enthusiasm, Geoffrey Howe, were more hawkish than Carrington and the Foreign Office, it became increasingly obvious to all that Britain was being set up by its partners. In the words of Maitland’s successor, Sir Michael Butler, ‘They certainly thought they’d score off her.’32 Giscard gave no ground, and even Schmidt, the friendliest of the main players, warned her of isolation and that, if it came to a matter of take it or leave it in reference to budget reform, ‘The other members might well say leave it.’33 The government prepared its position. It would not hold out for a complete rebate – a reduction in Britain’s net contribution of between three-quarters and two-thirds was privately agreed as the acceptable minimum so long as, in the favoured phrase, ‘the solution was as long as the problem’ rather than one-off – nor would it plan to break EEC law if it did not get its way. But it would accept isolation at Dublin and warn, in the words of a note f
rom Howe to Mrs Thatcher, that, unless she got satisfaction, ‘you would not thereafter be able to facilitate the operation of the Community’.34 On 28 November the Cabinet agreed this approach. Even the Europhile Lord Soames, who could not attend the meeting, wrote to her before it: ‘… I hope that you will make the punishment fit the crime and you may ultimately need to withhold payments.’35 Two days earlier, a rather agonized Roy Jenkins had called on Mrs Thatcher to try to calm matters down. He failed. Mrs Thatcher reiterated her positions, even regretting that she had not gone so far as to demand that Britain become a net beneficiary of the EEC budget. She bridled at criticisms by member states: ‘The Prime Minister expressed impatience with the wish of other members of the Community to have more evidence that the Government was Community-minded.’ In response to Jenkins’s prediction that she would not get what she wanted at Dublin, she warned that there would be ‘no movement in the Community’ unless she prevailed. Jenkins said she should avoid building up a ‘head of steam’ about the budget question. Mrs Thatcher ‘said that there was already an uncontrollable head of steam’. The record of the meeting ended thus: ‘Mr Jenkins commented that the Dublin Council promised to be an interesting one.’36
It was interesting. From the beginning, Mrs Thatcher went to war. She refused all prepared texts for her opening statement in Dublin Castle, preferring to extemporize and thus speak more vigorously. At the dinner of the heads of government, she kept them all at table for four hours, talking, as Roy Jenkins put it, ‘without pause, but not without repetition’.37 ‘I want my money back,’ she said again and again. Schmidt pretended to fall asleep and Giscard was alleged, though he denied this to the author, to have read a newspaper. ‘I am not a night bird,’ Giscard remembered. ‘I hate discussions after dinner. It bores me.’38 Mrs Thatcher’s performance was, according to Carrington, ‘a rant’.39 Giscard agreed: ‘It was unpleasant, because it wasn’t a conversation. It was a repetition.’40 Britain was offered £350 million in rebate. Mrs Thatcher, who was arguing in public that the full £1 billion contribution should be rebated, scornfully dismissed it as ‘a third of a loaf’ at the press conference afterwards. She felt she was being ganged up against, and resented it. Her own notes scribbled during the summit say, ‘We thought we had joined an equitable system.’41 She considered the Continental approach unBritish: ‘What I would not accept was the attitude that fairness did not seem to enter into the equation at all.’42 ‘Equity, of course, is historically a British concept,’ she said in reply to Alan Clark when she reported on the summit to the House of Commons:43 the EEC, in her view, had not displayed it. There was no basis for agreement, except, as Britain had planned, agreement to have another meeting. Mrs Thatcher amplified her anger at the press conference. The negotiations had been ‘totally unsatisfactory’: ‘all we are doing is asking for our own money back.’44
There is no doubt that Mrs Thatcher’s behaviour did annoy the other European leaders. In the days after the summit, Foreign Office telegrams keened with reports of upset from their Continental counterparts. But even Euro-enthusiasts like Michael Butler, who thought that it ‘didn’t do her any good’ to talk about ‘having my money back’, believed that her stance was essentially correct. She set out the case with ‘great aplomb’, he considered, and the other heads of government ‘were always pretending to be outraged by what she said’.45 The budget mechanism was inequitable, and the nations – the majority – which benefited from this tried very hard to avoid the issue. France, in particular, worried that a Common Agricultural Policy constructed from the start essentially for its benefit was threatened by Mrs Thatcher’s approach, and so resisted fiercely. More than 70 per cent of the Community budget went on the CAP, strikingly little of it benefiting Britain. Given the state of public opinion at home, Mrs Thatcher had little choice but to fight, and her style of doing so did her more political good than harm. ‘It was an uncomfortable manner of doing it,’ recalled Carrington, but an uncomfortable manner was what was required, and Mrs Thatcher ‘did her homework and the other heads of government didn’t’.46
Returning home, she felt pleased with her stance, and redoubled her energy for combat. One compromise suggestion floating around was that Britain should make some concessions to the EEC about privileged access to North Sea oil, the resource which was doing so much to secure Britain’s balance of payments at a time of wider economic difficulty. She hated the idea of ‘linkage’ between her budget position and other issues, and scrawled on a memo from Robert Armstrong: ‘Energy – I am not prepared to bargain away our few resources. To suggest that we might be allowed to keep our own money in return for giving up some of our oil is ridiculous.’47 In the New Year, the Foreign Office had another go, producing a draft statement on North Sea oil. Mrs Thatcher wrote on it: ‘The idea that we should have to sacrifice our main asset to secure some of our own money back is one that may appeal to the Foreign Office but it doesn’t to me. Wouldn’t it have been courteous to have come to me first?’48 Her blood was up.
As winter turned into spring, it gradually became clear to all sides that a settlement would have to be reached fairly soon. In Giscard’s view, Mrs Thatcher ‘with good judgment saw that she would get better from the Germans than from the French’.49 Helmut Schmidt helped move things on by setting up an informal meeting between the personal representatives of all the heads of government. Giscard also observed that Mrs Thatcher ‘thought that the male was weaker than she’.50 This was true.* On the other hand, France had not only the high ground of European doctrine but also the low ground of doing very well out of the existing budget and the CAP, and so wanted to fight hard. Giscard told his close associate Prince Poniatowski that ‘we must keep on bashing the British steak to make it tender.’51 As the special summit in Luxembourg at the end of April 1980 approached, the whole thing turned into a blame game. Intensive British diplomacy round Europe revealed that the other partners were getting restive with France for its insistence on linkage between agreeing the budget and putting up agricultural prices. On 24 April, just days before the summit, Giscard telephoned Mrs Thatcher in some anxiety, in order to accuse her of ‘perpetual postponement’. She replied that she was not qualified to negotiate agricultural prices at the summit. Echoing the language she had used publicly during Giscard’s visit to London in November, she reminded him that the problem at issue was not a technical problem, but ‘a question of the will’.52 Without resorting to active illegality, Mrs Thatcher told the Cabinet on the same day, Britain stood ready to block progress on sheepmeat, agricultural prices and the entire Community budget for 1980.53 At the Luxembourg summit, though improved offers for British rebates were made, the issues were not resolved, and there was no agreed communiqué.
Carrington, however, got wind of the general desire for a settlement, brokered by Italy, which held the incoming presidency, and started working on Mrs Thatcher with the idea that a three-year deal, pending a longer-term solution, could at last be achieved by the foreign ministers meeting together at the end of May. His first memo on this displeased her. She wrote on it: ‘I am so horrified with this approach that I think it would be better if we didn’t have the meeting [planned with Carrington to discuss the situation]. I feel as if the FCO is going to cancel out all my own efforts.’54 Yet the meeting between Carrington and Mrs Thatcher took place, and Carrington pushed ahead, though not without much storming from Mrs Thatcher. Clive Whitmore recalled a meeting in the Cabinet Room shortly before the EEC Foreign Affairs Council, when Carrington, needing to leave, got up, still arguing, and walked to the door without looking where he was going. He knocked into one of the Doric pillars. ‘My God,’ he exclaimed, ‘I’ve hit another immoveable obstacle.’55
On 30 May, in Brussels, Carrington and Ian Gilmour reached a provisional deal with their opposite numbers. Carrington immediately telegraphed Mrs Thatcher to give her the details, which included agreed amounts of refund for 1980 and 1981— a two-thirds reduction of the net contribution – and a repetition of th
e formula upon which the 1980 and 1981 refunds were based for 1982, so they had at last got a three-year deal. He had fought off, he said, any link between the 1981 refund and agreement on agricultural prices for that year. By 1981, a longer-term settlement would be agreed, within the 1 per cent VAT ‘own-resources ceiling’. Carrington said: ‘I am convinced that this is the limit of what we can negotiate.’56 Luckily for Carrington’s cause, the Continental press interpreted the deal as a victory for Mrs Thatcher (‘British Europe’ said the headline in Le Monde), and a great improvement on what had been offered at Luxembourg. Clive Whitmore improved the shining hour, writing on the telegram from the British Embassy in Paris, ‘Michael Alexander has just telephoned me from Paris to say that all the French media are presenting the Brussels proposals as a great victory for you and a defeat for France.’57 Mrs Thatcher was highly suspicious, however. When Carrington and Ian Gilmour flew straight to Chequers to see her, she gave them a hard time for which they were unprepared. She did not like the figures; possibly she did not like the feeling that the wind had been taken out of her sails. ‘She didn’t even offer us a drink,’ remembered Carrington, who had been negotiating for eighteen hours continuously before flying back, and had not slept. ‘ “I’ll resign,” she said. “No,” I said, “I’ll resign.” ’58
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