The Downing Street Years

by Margaret Thatcher

  Leon summed up for the Government in a speech which I hoped would restore his standing in the House and which seemed a modest success. The press, however, still kept up the pressure on him and there was plenty of criticism of me as well. It seemed, though, that given time we were over the worst. It was not to be. On Thursday 23 January I had to make a difficult statement to the House. It outlined the results of the leak enquiry into the disclosure of the Solicitor-General’s letter of 6 January. The tension was great, speculation at fever pitch. The enquiry concluded that civil servants at the Department of Trade and Industry had acted in good faith in the knowledge that they had the authority of Leon Brittan, their Secretary of State, and cover from my office at No. 10 for proceeding to reveal the contents of Patrick Mayhew’s letter. For their part, Leon Brittan and the DTI believed that they had the agreement of No. 10 to do this. In fact I was not consulted. It is true that, like Leon, I would have liked the fact that Michael Heseltine’s letter was thought by Patrick Mayhew to contain material inaccuracies needing correction to become public knowledge as soon as possible. Sir John Cuckney was to hold a press conference to announce the Westland board’s recommendation to its shareholders that afternoon. But I would not have approved of the leaking of a law officer’s letter as a way of achieving this.

  In my statement I had to defend my own integrity, the professional conduct of civil servants who could not answer for themselves and, as far as I could, my embattled Trade and Industry Secretary. I never doubted that as long as the truth was known and believed all would ultimately be well. Yet it is never easy to persuade those who think that they know how government works, but in fact do not, that misunderstandings and errors of judgement do happen, particularly when ministers and civil servants are placed under almost impossible pressure day after day after day, as they were by Michael Heseltine’s antics.

  Alas, Leon’s days were numbered. It was a meeting of the ‘22 Committee, not any decision of mine, which sealed his fate. He came to see me on the afternoon of Friday 24 January and told me that he was going to resign. I tried to persuade him not to; I hated to see the better man lose. His departure from the Cabinet meant the loss of one of our best brains and cut short what would have been, in other circumstances, a successful career in British politics. I hoped that he would return to the Government in due course. But I was by now thinking hard about my own position. I had lost two Cabinet ministers and I had no illusions that, as always when the critics sense weakness, there were those in my own Party and Government who would like to take the opportunity of getting rid of me as well.

  But I also had staunch friends who rallied round. Not the least of these was President Reagan who telephoned me on Saturday evening at No. 10. He said that he was furious that anyone had the gall to challenge my integrity. He wanted me to know that ‘out here in the colonies’ I had a friend. He urged me to go out ‘and do my darndest’. I appreciated his call. I told him that this was indeed a difficult moment but I intended to put my head down and battle through.

  I knew that the big test would come in the House of Commons the following Monday when I was to answer Neil Kinnock once more in an emergency debate on Westland. I spent the whole of Sunday with officials and speech writers. I went through all of the papers relating to the Westland affair from the beginning, clarifying in my own mind what had been said and done, by whom and when. It was time well spent.

  Neil Kinnock opened the debate that Monday afternoon with a long-winded and ill-considered speech which certainly did him more harm than it did me. But I knew as I rose to speak that it was my performance which the House was waiting for. Once again, I went over all the details of the leaked letter. It was a noisy occasion and there were plenty of interruptions. But the adrenalin flowed and I gave as good as I got. The speech does not now read as anything exceptional. But it undoubtedly turned the tide. I suspect that Conservative MPs had by now woken up to the terrible damage which had been done to the Party. They would have found in their constituencies that weekend that people were incredulous that something of such little importance could be magnified into an issue which threatened the Government itself. So by the time I spoke what Tory MPs really wanted was leadership, frankness and a touch of humility, all of which I tried to provide. Even Michael Heseltine deemed it expedient to protest his loyalty.

  Some of the details raised in Westland continued to fascinate the cognoscenti, but they were a small and shrinking band. Westland shareholders accepted the Sikorsky bid and though there were to be some difficult times for the company the doom-laden consequences for it and Britain’s industrial base about which Michael Heseltine had warned so eloquently never materialized.

  Some said I should have sacked Michael weeks before his resignation. Certainly, there is weight in the criticism that I allowed Michael too much leeway, not too little. At a meeting in No. 10 on 18 December, Leon Brittan urged me to sack him and was brutally dismissive of those who on tactical grounds urged the opposite. But it is necessary to remember two things. First, to begin with the issues were not as clear-cut as they became. Although, as I was later to stress to the House of Commons, decisions on defence procurement are for the Cabinet as a whole not just for the Defence Secretary, Michael certainly did have a legitimate role to play in deciding Westland’s future. The problem was that he did not stick to the limits of that role and not only sought to impose his own views on a private company but did so without respect for collective responsibility in the Government. Second, Michael was at that time a popular and powerful figure in the Party. No one survives for long as Prime Minister without a shrewd recognition of political realities and risks. It seemed to me that I should weather the storm best by reacting to events as they occurred, not trying to bring about a crisis, but sticking to the essential issues. In retrospect, I think that this paid off. Michael gained plenty of publicity but did himself great damage by storming out as he did: if he had not gone voluntarily he might have been still more troublesome on the back-benches.

  But the most damaging effect of the Westland affair was the fuel which had been poured on the flames of anti-Americanism. And that fire, once lit, proved difficult to extinguish.

  The kind of rhetoric which had been used by Michael Heseltine and his supporters about the American industrial ‘threat’ in the helicopter industry certainly touched a raw nerve. The Left always thought the worst of American motives because they saw the United States as the most vigorous, powerful and self-confident force for capitalism. Some on the far right — Enoch Powell with whom I so often agreed on other matters was the most obvious example — distrusted America on narrow nationalistic grounds: and for some in the Tory Party the memories of America’s actions at the time of Suez remained for ever fresh. The more fanatical European federalists were anti-American for other reasons: they saw the strong cultural and sentimental links between Britain and the United States as detracting from our commitment to Europe. This was essentially an anti-Americanism of the political élites. But there was also a popular variety, which was more worrying. The British people by and large did not understand or properly appreciate President Reagan. And by now the emergence of Mr Gorbachev in the Soviet Union, someone with an unusual understanding of how to play on western public opinion and who as a communist would always receive the benefit of the doubt from the left-wing media, provided an apparently favourable contrast with President Reagan. There was a feeling that the Soviets were the model of sweet reason, the United States of recklessness. These were the rich seams which Michael Heseltine opened up in the Westland affair and which others were now to exploit.

  BRITISH LEYLAND

  On the heels of Westland came the question of privatizing British Leyland (BL).* Paul Channon, who had been Trade minister at the DTI and whom I appointed to succeed Leon, was faced within days of taking office with a fresh crisis and one which unlike Westland affected the jobs of many thousands of people and concerned a significant number of Conservative MPs, including ministers.


  I had not always seen eye to eye with Norman Tebbit over BL. I felt that the company was continuing to perform badly and wanted to take a tougher line with it. There had certainly been improvements. Productivity was up, days lost by strikes were down, losses were smaller. But the management was still poor. Moreover, the same old bromides were used to justify failure. Next year or the year after was always the time when losses would be turned to profit as long as new investment was provided by the taxpayer today. The only alternative to going along with what BL management wanted was its complete collapse which they rightly thought we could not allow. Forecasts were always being revised downwards — and then not met. UK market share hovered around 17 or 18 per cent in spite of expectations that with its new models BL would have taken 25 per cent. The company’s 1984 results were unsurprisingly much worse than predicted. The Government had to stand behind BL’s large and increasing borrowings under the so-called ‘Varley-Marshall’ assurances.

  I wanted to cut back BL’s investment programme and believed that one way of doing this was to buy in engines from Honda — with which BL planned to develop its existing collaboration — rather than for Austin Rover to develop its own new engines. In spite of several attempts during the spring and summer of 1985, I did not get very far. I did not feel that the DTI was sufficiently serious and I knew that BL itself was positively hostile. In such circumstances there is little a prime minister can do — even one so well advised as I was on these matters by my Policy Unit* and outside experts.

  There must, I felt, be a new management and new Chairman at BL, tighter financial discipline and, above all, a renewed drive for privatization. From October 1985 on Leon Brittan concentrated closely on all these aspects but it was privatization which increasingly took centre stage. Jaguar had already been successfully sold off. Unipart, which handled BL’s spare parts, should have been privatized too, though BL seemed to be reluctant to move ahead with this. But, most important, we had secretly been in contact with General Motors (GM) which was interested in acquiring Land Rover, including Range Rover, Freight Rover (vans) and Leyland Trucks (heavy vehicles). These negotiations too seemed to drag on and on; so I was pleased when Leon sent me on 25 November his proposals for moving ahead with the deal.

  Apart from (though having a bearing upon) the price, there were three tricky questions which required attention.

  First, we had to consider the consequences for jobs of the rationalization of the GM (Bedford) and BL (Leyland) truck businesses, which was undoubtedly one of the attractions for GM of their proposal. We thought that up to 3000 jobs might go: but the choice in an industry where there was great overcapacity was not between job losses and no job losses but between some jobs going and a possible collapse of one or other — or conceivably both — truck producers.

  Second, we had to consider the position of the rest of BL’s operations: the volume car business of Austin Rover, which would be left to pay off the accumulated debt, and which GM had no intention themselves of taking on.

  Third, the thorniest issue would be the future control of Land Rover, which GM were determined to acquire but on which public opinion would require safeguards that it should in some sense ‘stay British’.

  Suddenly, however, we were facing an embarras de richesses. Before we had fully come to grips with the GM offer, code-named ‘Salton’, the still more intriguingly code-named ‘Maverick’ put in an appearance. At the end of November the Chairman of Ford of Europe came to see Leon Brittan to say that Ford were considering making an offer for Austin Rover and Unipart. The company fully recognized the political sensitivity of this and it probably also understood how much opposition to expect from BL, which would much prefer to stick with its cosier relationship with Honda. So Ford wanted the green light from the Government first. Leon Brittan, Nigel Lawson and I discussed what should be done at a meeting on the afternoon of Wednesday 4 December. There was no doubt in our minds of the political difficulties involved. Although Ford said that they intended to keep the main BL and Ford plants open there would be opposition from MPs fearful of job losses in the areas affected. Ford’s productivity was worse than BL’s, their newest models were not selling well and they were worried about Japanese penetration of their European markets. There might be problems about collaboration with Honda on which BL had come to depend. There were possible criticisms as regards the effect on competition in car manufacture. But for all that the Ford offer was certainly worth pursuing. Some people would say that once successful negotiations had taken place with Ford and GM we would have disposed of Britain’s own car-making capacity at a stroke. But others would welcome the privatization, which would end the drain on the public purse and secure a viable future for the car industry in Britain. So contacts with Ford went ahead.

  Whether we could have succeeded in pushing through this ambitious privatization programme in a more favourable political climate must be a matter of speculation. But it could not have come at a worse time. To Paul Channon’s horror — and mine — at the start of February the weekend press was full of details of what was planned. BL had almost certainly leaked it when we were at our most vulnerable as a result of the Westland affair. On Monday 3 February Paul Channon had to confirm these contacts in an emergency statement to the House. All hope of confidential commercial discussion had been destroyed. Irrationality swept through the debate.

  Paul had an almost impossible task, which, however, he undertook with great courage and skill. A kind of pseudo-patriotic hysteria swept politics and the media. Ted Heath talked of our responding to the efforts of workers and management at BL by saying, ‘now we will sell you out to the Americans.’ Not even the Cabinet was immune. Norman Fowler, whose constituency was affected by BL, let it be known that he was fighting the deal. When the Norman Fowlers of this world believe that they can afford to rebel, you know that things are bad.

  I chaired an extremely difficult meeting of the Cabinet on Thursday 6 February in the course of which it became clear to me that there was no way in which the Ford deal could be put through. In these circumstances it was essential to limit the damage and try to press ahead with the negotiations with GM. Paul Channon told the House that afternoon that in order to end the uncertainty we would not pursue the possibility of the sale of Austin Rover to Ford. It was humiliating and did less than justice to Ford, which had provided so many jobs in Britain. But in politics you have to know when to cut your losses.

  The question now was whether, having relieved the immediate pressure, we could still strike a satisfactory deal with GM. I saw Paul after his statement and said that we must push ahead as fast as possible with this and the sale of Unipart. Now the news was out, however, we were faced with a rash of alternative bids. Few of them were serious and all of them were an embarrassment rather than a help at this late stage. Most politically sensitive was the proposal for a management buy-out of Land Rover. GM remained — in our and BL’s view — by far the best option because that company was interested in all, not just some, divisions; because of its financial strength; and because of the access to its distribution network.

  On Wednesday 19 February I set up a small ministerial group — what John Biffen would have called a ‘balanced ticket’ — to consider this increasingly complex and difficult matter. The main members were Willie Whitelaw, Nigel Lawson, Norman Tebbit, Peter Walker, John Biffen, Norman Fowler and of course Paul Channon. Paul remained in charge of the detailed negotiations with GM. These carried on well into March. Sometimes it looked as if we could gain a sufficient undertaking from GM as regards control of Land Rover. We had had to harden our position considerably, insisting that GM could have no more than 49 per cent voting strength and that GM’s right to manage the business would be subject to the overriding control of the (British) board.

  GM in the end were not prepared to wear this and I do not blame them. They were not willing to proceed with a deal for Leyland Trucks and Freight Rover which excluded Land Rover and so the talks ended. When this was announced
by Paul to the House of Commons on Tuesday 25 March, one after another of our back-benchers stood up to say that a great opportunity had been lost and that the GM deal should have gone through. I did not disguise my irritation with them and told several later that they should have spoken up when the going was rough.

  This whole sorry episode had harmed not just the Government but Britain. Time and again I had drawn attention to the benefits Britain received as a result of American investment. The idea that Ford was foreign and therefore bad was plainly absurd. Their European headquarters was located in Britain, as was their largest European Research and Development Centre. All of the trucks and most of the tractors that Ford sold in Europe were made in Britain. Ford’s exports from the UK were 40 per cent more by value than those of BL. Would Britain have really been better off if BL had taken over Ford? The notion is ridiculous. But it was not just a matter of Ford. Over half the investment coming into Britain from abroad was from the United States. Both Ford and GM were offended and annoyed by the campaign waged against them. Britain just could not afford to indulge in self-destructive anti-Americanism of this sort. Yet it would continue and was shortly to be raised to fever pitch — not just in the area of industrial policy but that of defence and foreign affairs, where passions ignite more easily.

  THE US RAID ON LIBYA

  I was at Chequers on Friday 27 December 1985 when I learnt that terrorists had opened fire on passengers waiting on the concourse at the Rome and Vienna Airports, killing seventeen people. It soon became clear that the gunmen were Palestinian terrorists from the Abu Nidal group. They had apparently been trained in the Lebanon, but evidence soon emerged of a Libyan connection. Certainly, the Libyan Government did not stint in its praise for the attacks, describing them as ‘heroic actions’. We and the Americans already had a large amount of shared intelligence about Libya’s support for terrorism. The question was not whether Colonel Gaddafi headed a terrorist state but rather what to do about it. Britain had adopted a much tougher attitude towards Libya than other European countries ever since the murder of WPC Yvonne Fletcher in 1984. But the Americans wanted us and the rest of Europe to go further still by imposing economic sanctions, in particular ending purchases of Libyan oil, 75 per cent of which was bought by the Europeans.