Forty per cent of the energy requirements of nationalized industries, including two-thirds of electricity production, were met by coal. And international pressure to keep down the consumption of oil encouraged – in the absence of more nuclear power stations – greater dependence on coal in the future. Although high wage increases (setting a bad example to other nationalized industry workers) had restrained industrial militancy among the miners, the National Coal Board was being told by the government to meet its severe financial targets. In June, a briefing to E Committee from the relevant officials predicted that, by the turn of the year, stocks of five to six weeks would have been built up. They added, though, that the ‘survival period depends on the extent of picketing outside the industry itself and, if there is secondary picketing, the extent of stockholdings that are vulnerable to picketing’.84 The state of the law on the subject did not inspire confidence. As for contingencies, ‘No plan involving servicemen is now considered practicable.’85
In September 1980 the Energy Secretary, David Howell, presented his Strategy for Coal to E Committee. He saw a growth of coal production ‘as supplies of other fossil fuels decline’, but believed this could come from low-cost pits and that many existing, high-cost pits should be closed. He warned that ‘There could be an explosion over closures,’ and recommended that the coming winter pay claim be got out of the way before closure plans were presented to the miners.86 On her copy of the document, Mrs Thatcher wrote: ‘Thin – what I don’t find in these papers is any attempt to cut the costs of production. That is what private industry would have to do.’ She did not, at this point, indicate any anxiety about industrial unrest. Closure plans pressed ahead.
In November, the miners’ annual pay claim was settled. In his daily press digest, Bernard Ingham reported to the Prime Minister thus: ‘Miners settle for 9.8 per cent … for 10 months. Generally portrayed as 13 per cent but as a triumph for government policy …’87 The details of pit closure plans continued to be developed in secret, although the news of a coming, comprehensive closure plan attracted press criticism (‘The Great Pit Blunder’, said the Daily Mail of 17 January) for making it easy for the union to co-ordinate resistance. On 29 January, three days after Keith Joseph had announced his rescue package of £990 million for British Leyland, in a meeting with Sir Derek Ezra, the chairman of the Coal Board, Mrs Thatcher backed the closure plans on the grounds that there was ‘no alternative’.88 Twenty-three pits were to be closed, though rumour quickly raised this number to fifty. At its meeting with the National Union of Mineworkers on 11 February, the NCB still refused to give the precise list of proposed closures, and did not mention the improved redundancy terms which it would offer. It also tried to join the union in pressing the government for more subsidy and more protection from coal imports. The famed ‘triple alliance’ between railwaymen, steelworkers and miners appeared to be in place. Suddenly, a national strike against closures seemed possible.
At this point, because of his background in the Department of Energy, Bernard Ingham stepped briefly outside his normal tasks and sent Mrs Thatcher a note. He counselled that the NCB was doing too much, too quickly, and that Joe Gormley, the moderate miners’ leader, would be forced to act toughly ‘to protect his flank against Scargill’. The public would like the idea of ‘defending one’s livelihood’, he thought, and would therefore be sympathetic to the miners, and he said that ‘behind the scenes we need a much more extensive and vigorous examination of the situation than is implied by an E Committee discussion of coal industry redundancy terms.’89 On 16 and 18 February, Mrs Thatcher had meetings with David Howell at which it became clear that the government was not ready for a strike, and that coal stocks could not withstand one. As Howell remembered the first meeting, Mrs Thatcher held up a copy of the Evening Standard which Bernard Ingham brought in with the words ‘That’s that, then, isn’t it.’ The headline proclaimed, ‘Government dithers.’ Mrs Thatcher said, ‘Bring it to an end, David. Make the necessary concessions.’90 Without Cabinet discussion, she decided to give in. In Howell’s view, though he resented her anger with him for his handling of the matter and for bringing on the crisis ‘out of the blue’, ‘she was right to cut and run’ because ‘we just weren’t ready.’91
After the government’s complete capitulation on 18 February, Ingham minuted Mrs Thatcher on the reaction of the lobby to his briefing. The press, he reported, tried to establish first ‘a massive U-turn’, second whether Howell had been authorized to give in without knowing the cost (he had, in effect), third that there would be ‘profound consequences for the Government’s economic strategy and pay negotiations’ and fourth that there would be ‘an entirely different approach to nationalised industries with flexibility the order of the day’. As Ingham described it, his reply had been that ‘no Government ever gets from A to B in a straight line’.92 With grim relish, Ingham’s press digest that day departed from its usual practice and quoted virtually every headline about the U-turn – ‘ “Surrender to King Coal”. Express. “You’ve won, lads”. D. Star’ and so on. And he informed his boss of the Sun’s judgment: ‘for the first time since you came to power your credibility at stake.’93 At a further meeting with Howell on 19 February, Mrs Thatcher expressed her lack of confidence in Derek Ezra, and said frankly that the government’s policy was ‘to go along, to a large extent, with whatever Mr Gormley proposed in order to ensure that the militants did not regain the ascendancy’.94 The government lost £400–500 million by its concessions, and contributed to the myth that the miners were invincible. It seemed to be following the pattern of the Heath government, which gave in to the miners in 1972. By the same logic, people believed, the next confrontation would result in the fall of the Tory government (as in February 1974). Even the loyal Daily Telegraph said that the recent reverses in the handling of the nationalized industries, ‘taken together, have been a disaster’.95
It was a timely distraction from the government’s woes that on 24 February 1981 the engagement was announced between the Prince of Wales and Lady Diana Spencer.
The next day, Mrs Thatcher flew to the United States as the guest of the new President, Ronald Reagan. Her previous meetings with Reagan, in 1975 and 1978, provided a firm foundation on which to build a close relationship now that he had been elected. During his election campaign, he had even arranged for his aides Bill Casey* and Richard Allen† to visit Mrs Thatcher secretly and brief her on his election strategy and foreign policy stance. ‘It was almost exclusively East–West and NATO-orientated,’ Allen recalled of the meeting, held in July 1980, adding, ‘I think she was quite enthused.’96‡ Allen was right. The day after his inauguration, on 20 January 1981, President Reagan took a call from Mrs Thatcher. She told him that she was ‘thrilled’ by his inauguration speech, and by the release of the American hostages, timed by Iran to deliver maximum humiliation to poor Jimmy Carter. She went on, ‘The newspapers are saying mostly that President Reagan must avoid Mrs Thatcher’s mistakes [about economic policy] so I must brief you on the mistakes.’ Reagan replied genially, ‘I don’t think I have to worry about that,’ and commiserated with her on the ‘uphill battle’ she was fighting in her own country:
MRS THATCHER: Well you know it makes it worth it because you are fighting for the things we are fighting for …
REAGAN: We’ll lend strength to each other.
MRS THATCHER: We will.97
A few days later, Hugh Thomas had reported to Mrs Thatcher on a private conversation with Edward Luttwak,§ then consulting for the new administration. Luttwak summed up the President neatly: he ‘knows much less than he seems to’ but ‘is personally and socially secure’, and is ‘genuinely morally brave’. Mrs Thatcher underlined these last words. Luttwak thought that Britain and America could now have ‘a period of very close friendship if this opportunity were to be seized properly’.98 Mrs Thatcher was determined to seize it.
Months earlier, in July 1980, Reagan’s aides had been talking secretly to British officia
ls about an early meeting with Mrs Thatcher, should Reagan be elected president.99 Contingency planning had been under way well in advance of the election. Mrs Thatcher thus easily fought off an attempt by Helmut Schmidt to become the first to meet Reagan after his inauguration. As she told the Pilgrims’ Dinner at the end of January, ‘next month I shall be visiting the United States at the invitation of President Reagan and as the first European Head of Government to visit him. Perhaps, though it’s for others to say, that too is not altogether a coincidence. I believe that that visit will underline the closeness of the friendship between our two countries but it will also, I am certain, mark the opening of a period of particularly close understanding between the two Heads of Government.’100 Three days later, Reagan cabled to thank her, ‘You are indeed right that we share a very special concern for democracy and for liberty,’101 and he instructed his aides to ‘make the visit special’.102 The aim, as Secretary of State Al Haig put it, was to ‘Demonstrate publicly and privately that Thatcher is the major Western leader most attuned to your views on East–West and security issues. The Prime Minister wants, above all, to build upon her relationship with you and to have her visit perceived as a very strong reaffirmation of the “Special Relationship”.’103 The challenge, in the words of the National Security Advisor Richard Allen, would be to ‘dramatize’ the ‘meeting of minds’ between the two leaders.104 But in reality the situation was more difficult for Mrs Thatcher than these warm words made it sound. Many Americans, even among those who supported Reagan, were coming to the view that Thatcherism was going wrong and had begun to distance themselves from the British approach. Earlier in January, Charles Anson, press officer at No. 10, had written to Mrs Thatcher’s private office noting that ‘There has been a good deal of editorial writing lately in American papers about “the failure of the Thatcher economic experiment” and advising Ronald Reagan not to follow down the same road.’105 The Treasury duly briefed her on these views.
Critics came from different camps. Supply-siders, who believed that tax cuts would bring automatic benefits, disliked Mrs Thatcher’s failure to cut the overall burden of taxes. They preferred what the economist Herbert Stein called ‘the economics of joy’.106 With her greater insistence on prudence and her anxiety about the size of the government deficit, Mrs Thatcher stood, at this time, for the economics of misery. ‘I’m not sure she was as committed as Ronald Reagan was to the idea that if you get taxes low enough you are going to generate increased tax revenues by virtue of increased economic growth,’ recalled James Baker,* then Reagan’s Chief of Staff.107 As she herself wrote, ‘We feared that the new administration’s plans for tax cuts might widen the deficit – though at this stage we were still hopeful that the President would succeed in achieving the large expenditure cuts he had put before Congress.’108 Bernard Ingham remembered a fundamental difference with Reagan about economic matters, almost one of temperament:
I think she probably felt that Reagan was never more wayward than over economic management. She used to worry intensely about the huge propensity for spending and refusal to tax. She felt this was altogether too lax. She said that he believed that it would all come right in the end. That was the sunny disposition, the optimistic outlook on life to which she was not entitled, being a British politician who’d seen 35 years of post-war mismanagement. She was constantly worried about the budget deficit.109
But even those sympathetic to monetarism were highly critical. Paul Volcker, who was chairman of the Federal Reserve Board at the time, recalled: ‘My impression of the UK was that nothing was working very well’;110 his own development of monetary policy owed little to the British example. In advance of Mrs Thatcher’s visit, Reagan’s Treasury Secretary, Don Regan,† requested a last-minute paper from the arch-monetarist Beryl Sprinkel, then his under-secretary for monetary affairs, comparing and contrasting the Thatcher and Reagan plans. Sprinkel pointed out Mrs Thatcher’s tax increases ‘as a percent of national income’, her failure to cut government spending and the apparent ‘soaring’ of the money supply, in the form of M3, by a government committed to its tight control.
Sprinkel went on, however, to report on a conversation with ‘Messrs Allen [sic] Walters and Terry Burns’ after which he was ‘convinced that in fact the UK has been through a period of severe monetary restraint’. He concluded, ‘I should add that Mrs Thatcher’s government has the same overriding objectives that we have, namely reducing the public sector while increasing the private sector, cutting government spending, cutting taxes and reducing inflation by reducing monetary growth. So far results have been mixed but I am confident that the lady will not turn, and that if she can hang on politically somewhat longer as I believe is the probable case, she will make further progress.’111
The State Department’s briefing for Mrs Thatcher’s visit was more ambivalent still: ‘so far she has failed to implement effectively her tactical policy goals of reducing the budget deficit, government consumption and the growth in the money supply, but it is too early to say whether or not she will eventually succeed.’ A core objective for the visit, the briefing continued, would be to ‘Exchange views with Thatcher on her experience, in part to learn from British mistakes.’112*
It was the new President himself who ignored all these difficulties. He liked Mrs Thatcher, and he knew that he and she were essentially on the same side. ‘You know what I want to do in the United States is what Margaret Thatcher has started to do in the United Kingdom,’ Reagan had told one of Mrs Thatcher’s associates during his election campaign, ‘to get the government off the backs of the people.’113 He was not interested in second-order or technical disagreements. To the question, ‘Where did the President stand in the debate over how to implement economic policy?’ Paul Volcker answered, ‘I think the President stood nowhere in all this. He had a few basic convictions. Fortunately one of these convictions was that inflation was a bad thing.’114 This worked to Mrs Thatcher’s advantage. Briefing Reagan in advance of his meeting with the Prime Minister on 26 February 1981, Richard Allen began with an exordium about the relationship between the two leaders which could read equally well as its epitaph:
Your reunion with British Prime Minister Margaret Thatcher – whom Nico [sic] Henderson, her old-pro Ambassador here, calls a ‘committed monetarist’ – will dramatise something rare in the exchanges between US and West European leaders these past few years: a meeting of minds which encompasses not only philosophical affinities, similar economic outlooks, and a common allegiance to the idea of revitalized defense efforts, but also a tough, pragmatic determination to do something about them.
In Allen’s view,
Mrs Thatcher’s problems [he listed her economic and trade union woes] merely accentuate what I feel should be the major theme, both public and private, of your meeting with her. The image which could most usefully emerge from these talks is of two like-minded leaders who have taken the measure of the difficulties their nations confront, who underestimate none of the situation’s gravity, but who are neither daunted by such problems nor doubtful of our ultimate success in dealing with them. Sleeves-rolled-up, sobriety-with-optimism is the main message you should be getting across with this visit; politically it can prove an especially effective chord both at home and abroad.115
The woman Prime Minister who flew into what The Times called a ‘lavish, colourful ceremony of the kind not seen in the American capital for the past four years’116 had a packed schedule, but was also careful to make the right impression.* Her office set aside forty minutes each day for hairdressing (with rollers), and submitted her personal details in preparation for receiving an honorary degree at Georgetown University: ‘Height 5’4”;† Weight 10.5 stone; Coat 14 English; Hat size 7’. In the White House, Reagan welcomed her, declaring, ‘we share laws and literature, blood, and moral fibre’,117 and she responded, ‘The message I have brought across the Atlantic is that we, in Britain, stand with you. America’s successes will be our successes. Your problems will be
our problems, and when you look for friends we will be there.’118 The private reception was equally warm, which encouraged Mrs Thatcher to be frank. In his diary, Reagan recorded: ‘We had a private meeting in Oval office. she [sic] is as firm as ever re the Soviets and for reduction of govt. Expressed regret that she tried to reduce govt. spending a step at a time & was defeated in each attempt. Said she should have done it our way – an entire package – all or nothing.’119
But not everyone in the Reagan administration was willing to be as supportive as the President. On the same day, Don Regan testified before a Congressional committee. Mrs Thatcher, Regan said, had failed to control the money supply, produced ‘an explosive inflationary surge’ by her pay increases to public employees and kept taxes too high, which ‘provides little incentive to get the economy started again’. ‘She failed’, he added, ‘in the effort to control the foreign exchange market and the pound is so high in value that it ruined their export trade.’120 Here was a clear effort to distance the administration’s policy from the perceived mistakes associated with Margaret Thatcher. Such perceptions were commonplace in US media reports throughout the visit.* Regan then left Capitol Hill to hurry over to the British Embassy for lunch with Mrs Thatcher.
She did not react unfavourably, but publicly praised President Reagan, giving a sanitized version of what she had told him privately: his attack on expenditure was ‘the one thing which I could have wished that we had been even more successful at’.121 Reagan recorded in his diary that Mrs Thatcher ‘Went up to the hill [Capitol Hill] and was literally an advocate for our ec. program. Some of the Sen’s. tried to give her a bad time. She put them down firmly & with typical British courtesy.’122
Margaret Thatcher: The Authorized Biography Page 73
