The Downing Street Years

by Margaret Thatcher

  A theory, coined after the collapse of communism to justify the policy of ‘doves’ in the Cold War, holds that because the Soviet Union was comparatively weak in the late 1980s, after almost a decade of western economic and military revival, it must have been a hollow threat in the late 1970s. Quite apart from the logical absurdity of placing a cause after its effect, the history of the Soviet Union from 1917 until just the other day refutes this argument. The Soviet Union was a power which deliberately inflicted economic backwardness on itself for political and ideological reasons, but compensated for this by concentrating resources on its military sector and by using the power this gave it to obtain further resources by force or the threat of force. It would extort subsidized credits from a West anxious for peace in periods of ‘thaw’, and seize new territories by subversion and conquest in periods of ‘chill’. By the late 1970s, the US, Britain and our European allies were faced by a Soviet Union in this second aggressive phase. We were neither psychologically, nor militarily, nor economically in shape to resist it.

  Taken together, these three challenges — long-term economic decline, the debilitating effects of socialism, and the growing Soviet threat — were an intimidating inheritance for a new Prime Minister. I ought perhaps to have been more cowed by them in my imagination than in fact I was as we drove back to Flood Street. Perhaps if I could have foreseen the great roller-coaster of events in the next eleven years, described in this volume, I would have felt greater apprehension. Perversely, however, the emotion I felt was exhilaration at the challenge. We had thought, talked, written, discussed, debated all these questions — and now, if all went well in the next few weeks, we would finally get the chance to deal with them ourselves.

  Some of this exhilaration came from meeting a wide range of my fellow-countrymen in four years as Opposition Leader. They were so much better than the statistics said: more energetic, more independent, more restive at the decline of the country, and more ready than many of my parliamentary colleagues to support painful measures to reverse that decline. We would incur more odium, I believed, by reneging on our promises of radical conservatism with a U-turn than by pressing firmly ahead through whatever attacks the socialists hurled against us. I sensed, as apparently Jim Callaghan also sensed in the course of the campaign, that a sea change had occurred in the political sensibility of the British people. They had given up on socialism — the thirty-year experiment had plainly failed — and were ready to try something else. That sea change was our mandate.

  And there was a more personal factor. Chatham* famously remarked: ‘I know that I can save this country and that no one else can.’ It would have been presumptuous of me to have compared myself to Chatham. But if I am honest, I must admit that my exhilaration came from a similar inner conviction.

  My background and experience were not those of a traditional Conservative prime minister. I was less able to depend on automatic deference, but I was also perhaps less intimidated by the risks of change. My senior colleagues, growing to political maturity in the slump of the 1930s, had a more resigned and pessimistic view of political possibilities. They were perhaps too ready to accept the Labour Party and union leaders as authentic interpreters of the wishes of the people. I did not feel I needed an interpreter to address people who spoke the same language. And I felt it was a real advantage that we had lived the same sort of life.** I felt that the experiences I had lived through had fitted me curiously well for the coming struggle.

  I had grown up in a household that was neither poor nor rich. We had to economize each day in order to enjoy the occasional luxury. My father’s background as a grocer is sometimes cited as the basis for my economic philosophy. So it was — and is — but his original philosophy encompassed more than simply ensuring that incomings showed a small surplus over outgoings at the end of the week. My father was both a practical man and a man of theory. He liked to connect the progress of our corner shop with the great complex romance of international trade which recruited people all over the world to ensure that a family in Grantham could have on its table rice from India, coffee from Kenya, sugar from the West Indies and spices from five continents. Before I read a line from the great liberal economists, I knew from my father’s accounts that the free market was like a vast sensitive nervous system, responding to events and signals all over the world to meet the ever-changing needs of peoples in different countries, from different classes, of different religions, with a kind of benign indifference to their status. Governments acted on a much smaller store of conscious information and, by contrast, were themselves ‘blind forces’ blundering about in the dark, and obstructing the operations of markets rather than improving them. The economic history of Britain for the next forty years confirmed and amplified almost every item of my father’s practical economics. In effect, I had been equipped at an early age with the ideal mental outlook and tools of analysis for reconstructing an economy ravaged by state socialism.

  My life, like those of most people on the planet, was transformed by the Second World War. In my case, because I was at school and university for its duration, the transformation was an intellectual rather than a physical one. I drew from the failure of appeasement the lesson that aggression must always be firmly resisted. But how? The ultimate victory of the Allies persuaded me that nations must co-operate in defence of agreed international rules if they are either to resist great evils or to achieve great benefits. That is merely a platitude, however, if political leaders lack the courage and farsightedness, or — what is equally important — if nations lack strong bonds of common loyalty. Weak nations could not have resisted Hitler effectively — indeed, those nations that were weak did not stand up to him. So I drew from the Second World War a lesson very different from the hostility towards the nation-state evinced by some post-war European statesmen. My view was — and is — that an effective internationalism can only be built by strong nations which are able to call upon the loyalty of their citizens to defend and enforce civilized rules of international conduct. An internationalism which seeks to supersede the nation-state, however, will founder quickly upon the reality that very few people are prepared to make genuine sacrifices for it. It is likely to degenerate, therefore, into a formula for endless discussion and hand-wringing.

  I held these conclusions very tentatively at the war’s end. But they hardened into firm convictions in the 1940s and ’50s when, in the face of the Soviet threat, those institutions like NATO which represented international co-operation between strong nation-states proved far more effective in resisting that threat than bodies like the United Nations which embodied a superficially more ambitious but in reality weaker internationalism. My concern in 1979 was that the resistance of NATO to the latest Soviet threat was less adequate than I would have liked precisely because national morale in most NATO countries, including Britain, was so depressed. To resist the Soviet Union effectively it would be necessary to restore our own self-confidence (and, of course, our military strength) beforehand.

  I recalled a similar collapse of national morale from my first days in active politics as a Young Conservative fighting the 1945–51 Labour Government. Some nostalgia for the austerity period apparently lingers. That is, I believe, an exercise in vicarious sacrifice, always more palatable than the real thing. Seen from afar, or from above, whether by a socialist gentleman in Whitehall or by a High Tory, socialism has a certain nobility: equal sacrifice, fair shares, everyone pulling together. Seen from below, however, it looked very different. Fair shares somehow always turn out to be small shares. Then, someone has to enforce their fairness; someone else has to check that this fairness does not result in black markets or under-the-counter favouritism; and a third person has to watch the first two to make sure that the administrators of fairness end up with no more than their fair share. All this promotes an atmosphere of envy and tittle-tattle. No one who lived through austerity, who can remember snoek, Spam, and utility clothing, could mistake the petty jealousies, minor tyrannies, ill
-neighbourliness and sheer sourness of those years for idealism and equality. Even the partial dismantling of the ration-book state in the early 1950s came as an immense psychological relief to most people.

  I particularly remember the political atmosphere of those years. Although the Tory rethinking associated with Rab Butler and the Conservative Research Department was important in reviving the Tory Party’s intellectual claims to office, there was a somewhat more robust and elementary rethinking going on at the grass roots. Our inspiration was less Rab Butler’s Industrial Charter than books like Colm Brogan’s anti-socialist satire, Our New Masters, which held up the moral pretensions of socialists to relentless and brilliant mockery, and Hayek’s powerful Road to Serfdom, dedicated to ‘the socialists of all parties’. Such books not only provided crisp, clear analytical arguments against socialism, demonstrating how its economic theories were connected to the then depressing shortages of our daily lives; but by their wonderful mockery of socialist follies, they also gave us the feeling that the other side simply could not win in the end. That is a vital feeling in politics; it eradicates past defeats and builds future victories. It left a permanent mark on my own political character, making me a long-term optimist for free enterprise and liberty and sustaining me through the bleak years of socialist supremacy in the 1960s and ’70s.

  I was elected to the House of Commons in 1959 as the Member for Finchley, and later served in the Governments of Harold Macmillan, Alec Douglas-Home and Ted Heath. I enjoyed my early ministerial career: it was an absorbing education both in the ways of Whitehall and in the technicalities of pensions policy. But I could not help noticing a curious discrepancy in the behaviour of my colleagues. What they said and what they did seemed to exist in two separate compartments. It was not that they consciously deceived anyone; they were in fact conspicuously honourable. But the language of free enterprise, anti-socialism and the national interest sprang readily to their lips, while they conducted government business on very different assumptions about the role of the state at home and of the nation-state abroad. Their rhetoric was prompted by general ideas they thought desirable, such as freedom; their actions were confined by general ideas they thought inevitable, such as equality.

  At the start, as an inexperienced young minister, I had to live with this. When we went into Opposition after the 1964 and 1966 defeats, I joined with Ted Heath in a rethinking of party policy which seemed to foreshadow much of what we later came to call Thatcherism. ‘Selsdon Man’ won the 1970 election on a radical Conservative manifesto.* But the Party’s conversion to its own philosophy proved skin-deep. After two years of struggling to put it into effect, the Heath Government changed course equally radically and adopted a programme of corporatism, intervention and reflation. I had my doubts, but as a first-time Cabinet minister I devoted myself principally to the major controversies of my own department (Education), and left more senior colleagues to get on with their own responsibilities. Yet all my instincts chafed against this. Perhaps because of my very unease, I noticed earlier than most that the very policies adopted as concessions to reality were also the least successful. Incomes policy, in addition to restricting people’s freedom, was invariably the prelude to a wages explosion. And that was one among many. Almost all the policies hawked about by ‘practical’ men on ‘pragmatic’ grounds turned out in the end to be highly impractical. Yet this fact never seemed to dent their enthusiasm. Indeed, Ted Heath responded to the defeat of his Government on the issue of incomes policy in the first 1974 election by proposing a still more ambitious scheme of interventionist government in the second.

  While I was pondering on this mystery, Keith Joseph made a remark which reverberated powerfully in my mind. ‘I have only recently become a Conservative,’ he said, meaning that for his first twenty years in politics, many of them at the top, he had been a sort of moderate Fabian. I recognized both the truth of Keith’s remark and also that my own case was subtly different: I had always been an instinctive Conservative, but I had failed to develop these instincts either into a coherent framework of ideas or into a set of practical policies for government. And the faster the illusions of practical men crumbled before the onrush of reality, the more necessary it was to set about developing such a framework. Keith and I established the Centre for Policy Studies to do just that.

  With Keith, I had come to see ever more clearly that what appeared to be technical arguments about the relationship between the stock of money and the level of prices went right to the heart of the question of what the role of government in a free society should be. It was the job of government to establish a framework of stability — whether constitutional stability, the rule of law, or the economic stability provided by sound money — within which individual families and businesses were free to pursue their own dreams and ambitions. We had to get out of the business of telling people what their ambitions should be and how exactly to realize them. That was up to them. The conclusions I reached fitted precisely those which my own instincts and experience themselves suggested. But I was aware that all too few of my colleagues in the Shadow Cabinet and in the House of Commons saw matters like this. I knew that I would have to go carefully to persuade them of what needed to be done and why.

  The years in Opposition had often been frustrating, but at least they had given me the chance to see that our policies for government reflected my priorities and had been worked out in sufficient detail. We had published the outlines of our policy in The Right Approach in 1976 and The Right Approach to the Economy the following year. We had toyed with the idea of other similar documents, but had in fact come down in favour of speeches to set out our policy proposals. Behind the public pronouncements lay years of intense work by policy groups, usually chaired by the relevant Chief Shadow Spokesmen, whose conclusions were brought before the Leader’s Consultative Committee, as the Shadow Cabinet was formally known, where policies were discussed, modified, rejected or approved.

  There were three points to which I had returned again and again during this period. First, everything we wished to do had to fit into the overall strategy of reversing Britain’s economic decline, for without an end to that decline there was no hope of success for our other objectives. This led on to the second point: all policies had to be carefully costed, and if they could not be accommodated within our public expenditure plans they would not be approved. Geoffrey Howe and his very talented Shadow Treasury team combed through everything in great detail to ensure this was the case. Finally, we had to stress continually that, however difficult the road might be and however long it took us to reach our destination, we intended to achieve a fundamental change of direction. We stood for a new beginning, not more of the same.

  I was again asking the Conservative Party to put its faith in freedom and free markets, limited government and a strong national defence; I knew that we would be able to keep the Party united around this programme for the election campaign. But in the dark days which would precede tangible success I would have to struggle to ensure that this time the Conservative Government kept its nerve. If we failed, we would never be given another chance.

  I was preoccupied by these reflections as we drove home, had a small family celebration at Flood Street, and finally turned in for the night. My last thought was: the die is cast. We had made every sensible preparation for the election and for governing afterwards. If honest endeavour were the test, we would not fail. In the end, however, Man proposes and God disposes. We might deserve success, but we could not command it. It was, perversely, a comforting thought. I slept well.

  * A political term dating from the early 1950s, denoting a consensus politician combining the moderate Conservatism of R. A. Butler with the moderate socialism of Hugh Gaitskell.

  * The eighteenth-century statesman and prime minister, 1766–8.

  ** The first fifty years of my life will be related in a second volume.

  * The term was Harold Wilson’s, derived from the name of the Selsdon Park Hotel where the C
onservative Shadow Cabinet finalized its right-wing programme for the 1970 general election.

  CHAPTER I

  Over the Shop

  First days and early decisions as Prime Minister

  TO THE PALACE

  We knew we had won by the early hours of Friday 4 May, but it was not until the afternoon that we gained the clear majority of seats we needed — 44 as it eventually turned out. The Conservative Party would form the next government.

  There were many friends with me as we waited for the results to come in during those long hours in Conservative Central Office. But I can remember an odd sense of loneliness as well as anticipation when I received the telephone call which summoned me to the Palace. I was anxious about getting the details of procedure and protocol right; it is extraordinary how on really important occasions one’s mind often focuses on what in the cold light of day seem to be mere trivia. But I was haunted by tales of embarrassing episodes as one prime minister left and his successor entered office: Ted Heath’s departure from No. 10 was a case in point. I now could not help feeling sorry for James Callaghan, who just a little earlier had conceded victory in a short speech, both dignified and generous. Whatever our past and indeed future disagreements, I believed him to be a patriot with the interests of Britain at heart, whose worst tribulations had been inflicted by his own party.