This outcome was a disaster because, oddly enough, it flummoxed all those taking part. Even Whitelaw had not played his customary role of smoothing Mrs Thatcher’s path. According to Terry Burns, the expectation had been that Mrs Thatcher would agree to look at ERM entry further, but ‘she brought the trap door down sharply’.63 Neither side had prepared the ground with the other. ‘I became aware of more personal animosity than I had realized,’ John Wakeham recalled.64 As a result, it was ‘a bitter, nasty, unpleasant meeting’.65 Foolishly, ‘The bunch of conspirators went next door to No. 11 afterwards and asked “What do we do now? How do we bell the cat?” I stayed outside while the politicians talked,’ recalled Burns.66 From the officials’ point of view, the disagreement was much worse than if the matter had not been discussed at all. ‘It was the end of the consensus since 1976,’ recalled Peter Middleton, ‘a setback on the road to respectability.’67 For Nigel Lawson, it was ‘the saddest event of my time as Chancellor’.68
His choice of words reflected the importance of the issue, but also the effect that the meeting had on his relations with Mrs Thatcher. They never fully recovered. ‘How do I stand as Chancellor when I’ve had a big meeting like that, won the argument, but lost the battle?’ he asked himself. ‘I did think of resignation.’69 For his part, recalled David Norgrove, Nigel Wicks ‘was determined that there shouldn’t be another meeting like that, and therefore policy was never really discussed again between the two. As for Mrs Thatcher, she never wanted to discuss it with Nigel Lawson again if she could avoid it. He tried to raise it now and again with her in bilaterals, but she would quickly cut across him to stop the discussion.’70 In this strange vacuum, Lawson decided to pursue his own policy.
Mrs Thatcher herself subsequently attributed less importance to the meeting than it deserved, and than she had felt at the time. This may have resulted partly from her general desire to conceal moments of humiliation. There was no doubt, in the minds of those closely involved, that the showdown upset her, although she was buoyed up by the adrenalin of arguing so fiercely. She invited Whitelaw and Wakeham up for coffee afterwards and complained to Whitelaw: ‘I do think you and John might have waded in to help me a bit more.’71 Whitelaw and Wakeham protested that no one had briefed them in advance on what would be needed: ‘We would have supported her if we’d known she was in difficulties.’72 Her own officials were acutely conscious that things had gone wrong. ‘Nigel Wicks felt it had fundamentally undermined his relationship with her.’73 In her memoirs, Mrs Thatcher treats it as only one in a series of encounters in which she had to fight against collective error. She sees it as a battle over an important particular issue, but does not recognize how it was bound to affect her general capacity to lead her own government. She does not mention, for instance, Whitelaw’s role in the meeting at all. Nor does she see the significance of her own remark that the arguments which had by this time persuaded her against ERM entry ‘applied to the principle – not just the circumstances’.74 The policy was to enter ‘when the time is right’. If she now rejected the principle, she was effectively opposed to her own government’s policy – the time could never be right. History later showed that, as Terry Burns put it, ‘she was fundamentally correct about this issue all the way through’,75 but being right is not necessarily the same as governing well. The Thatcher–Lawson clash made it increasingly difficult to run the British economy, and the British government, properly.
The fateful ERM meeting came towards the end of a year when politics, for reasons partly related to disappointing economic performance, had persistently gone badly for the government and especially for Mrs Thatcher personally. Although her defeat of Arthur Scargill was arguably the most important single achievement of her entire career as prime minister, it brought her no immediate political benefit. Indeed, public opinion seemed to feel that the great argument for Mrs Thatcher – dire necessity in a crisis – no longer applied. Tired of conflict, voters cast about for something softer. Many thought they might find it in the SDP and their Liberal allies who, in the local elections in early May, gained 302 seats; Labour lost a few and the Tories many. Opinion polls gave strong backing to the SDP leader, David Owen. Even Labour, under Neil Kinnock, and with the miners’ strike out of the way, was starting to look less fractious and less extreme. People spoke of Kinnock’s ‘decency’, contrasting it favourably with Mrs Thatcher’s harshness.
As the external threats to the Conservatives looked more formidable, so internal discontent with Mrs Thatcher naturally grew. The terminology of Wets and Dries now sounded obsolete. People talked instead of ‘consolidators’ and ‘radicals’; but the faultlines were the same. Peter Walker, for example, now politically strong because of his success during the miners’ strike, delivered the Iain Macleod Memorial Lecture on polling day in the local elections. He spoke in favour of full employment. It was well understood – with total unemployment, at 3,272,565 in April,76 still higher than the previous year – that he was criticizing Mrs Thatcher. A little later in May, Francis Pym and other senior Tories displaced by Thatcherism, such as Ian Gilmour and Geoffrey Rippon, launched a grouping called Centre Forward to promote their ideas. This was mocked for its outdated feel* and its disorganization, but it was a symptom of something. The tactic of Centre Forward and of many other critics was to bank Mrs Thatcher’s achievements, praise her courage and determination, but then to look for a more ‘compassionate’ style and a change of tone. There was less outrage against her than in the first term, but more of a sense of being bored. If she was no longer necessary, they implied, she was unnecessary.
Perhaps more worrying for Mrs Thatcher was the lack of stirring support from the new generation of Conservative MPs. She had passed her tenth anniversary as party leader in February 1985, so the number of those backbenchers who had been with her from the first now constituted quite a small minority. With the passage of time and the departure of Ian Gow from her side,† the pool of reliable supporters was not well replenished. This also tended to mean that able Thatcherites were not recognized and given office because, without Gow, they did not have many friends at court. This was a source of growing resentment. Mrs Thatcher found it hard to strike the right balance. She was aware of the dangers of promoting only her supporters: ‘If you just put your own people in … you have all the opposition on the back benches.’77 Reminded in retirement how she had given advancement at this time to Richard Needham,* an inveterate opponent, she said, ‘Did he go in [to government]? Some of them, you see, you put in to shut up.’78 She was actually less good at accommodating her friends than her foes. Oddly, for one who valued ideological affinity highly, she was not skilful at identifying and promoting those who showed it.†
At the beginning of the Parliament, in 1983, those on the back benches who shared Mrs Thatcher’s ideological zeal had begun to organize. Lord (Ralph) Harris of the Institute of Economic Affairs (IEA) had already set up a Repeal Group in the House of Lords to try to get rid of anti-market legislation. Like-minded men in the Commons followed his lead. These included Michael Forsyth,‡ Michael Fallon,§ Francis Maude,¶ Neil Hamilton,* Peter Lilley and Richard Ryder.† They were a sort of counter to the Blue Chip group (see Volume I, pp. 646–7), including Chris Patten and William Waldegrave, which had been a thorn in Mrs Thatcher’s side in the previous Parliament. They wanted to keep up the pressure for Thatcherite market reform and were, according to Gerald Howarth,‡ their convenor, ‘very much designed to help her’.79 After inconclusive discussions about what to call themselves, they noticed that there were twelve of them, and so privately took the title of The Disciples. Disciples of whom, they debated? They eventually agreed that members could choose to be the disciples of ‘Hayek, Friedman, Adam Smith or any other compatible life-force’, rather than explicitly of Mrs Thatcher herself.80 They campaigned for contracting out, privatization, the freeing of rent controls, parental choice in schools and so on. On 18 June 1985, they met Mrs Thatcher in her room in Parliament to explain what they were up
to. They were not a party within a party, they told her, but people who had come together to promote the market economy and did not accept that the Thatcher government was running out of steam: ‘The goodwill is with reform, not with consolidation.’81
Later in the year, in November, The Disciples (not using that name publicly) brought out a pamphlet entitled No Turning Back, which called for ‘a revolution of choice, a revolution of opportunity’. This literally made their name: from then on they became known as the No Turning Back Group. Mrs Thatcher treated them in a friendly manner, but nevertheless ‘failed to secure the supply line’82 with her supporters. At a later dinner with the group at the IEA’s offices, Mrs Thatcher turned to Eric Forth,§ the group’s leading eccentric, and said, ‘Eric, you’ve been untypically silent. What do you have to say?’ ‘Well, Prime Minister,’ said Forth, ‘since you ask, when are you going to appoint some decent people to your government?’83 She seemed a little surprised by this thought. At the end of the dinner, a perplexed Michael Alison, never at ease with political nuance, went round politely asking the guests who these decent people might be.
From May, then, Mrs Thatcher’s unideological counsellors began to plan her administration’s recovery. Stephen Sherbourne urged her that it was not too early to think of the election manifesto. He reminded her that it had been drafted last time by Geoffrey Howe. Who did she want to do it this time?84 The fact that there was no obvious answer implied a problem. So did the unspoken thought that putting Howe in charge of the task which he had performed well in 1983 now seemed unimaginable. Plans for a Cabinet reshuffle had also begun, with Willie Whitelaw and John Wakeham pushing for changes in July. They had supper with Mrs Thatcher for what they called the ‘second reading’ of reshuffle ideas. They were looking for reliability and better presentational skills, not radicalism – George Younger and Kenneth Baker moving up, Patrick Jenkin, Peter Rees and Tom King moving out. ‘My impression’, wrote Robin Butler, who noted the meeting for her, ‘is that the Lord President [Whitelaw] has reservations about a “Night of the Long Knives”.’85* At this stage, there was no plan to shift any of the most senior ministers. The most controversial thought was the return of Cecil Parkinson to his old job at the DTI. Tebbit, its incumbent, would then displace Gummer as party chairman to fight the presentational battle and prepare for the next election, whenever it might come. Mrs Thatcher went along with the drift of her lieutenants’ preliminary thinking. She disagreed with them about the timing, however. It was one of her pet theories that it was kinder to reshuffle colleagues in September rather than July, ‘bearing in mind that they would leave my office without a ministerial salary, without a car and without the prestige’.86 Then they would earn the money for longer, and have less of a media frenzy surrounding them than when Parliament was sitting.
As Mrs Thatcher and colleagues continued to mull over possible changes, a controversial issue arose. Her normally efficient political radar failed to pick up the threatening signals. Lord Plowden, the chairman of the Top Salaries Review Body (TSRB), reported. Looking across the whole range of public pay at the highest levels, he recommended extremely large increases including, for the top two dozen civil servants, rises of between 32 and 46 per cent. He told Mrs Thatcher that by ‘pulling out the concertina’ of permanent secretaries’ salaries (that is, paying more to some than to others), he would ‘improve motivation by giving those lower down something to aim at’.87 Believing that Plowden’s recommendations righted historic anomalies and that his ‘range pay’ concept ‘would make an important contribution to better motivation and management of the Higher Civil Service’,88 Mrs Thatcher seemed to dismiss Nigel Lawson’s obvious objection that the rises were simply much too large for the public to swallow. It was not in the interests of the senior civil servants advising her, all of whom would do well out of Plowden, to warn her of any political dangers; but they betrayed a certain unease by arranging that the government’s favourable response to the TSRB report be put to Parliament only in the obscure form of a Written Answer to a Member’s question.
Sure enough, when the report was published and the Written Answer sneaked out on 18 July, there was political outcry both at its content and at its surreptitious presentation. The following day, the Sun put the story on its front page with the headline ‘£25,000 rises for top people’. The story claimed that there would be ‘massive pay rises’ for ‘judges, civil servants and military top brass’, and named Sir Robert Armstrong as one of the main beneficiaries.89 As Nicholas Owen in Mrs Thatcher’s Policy Unit rather bravely put it to her, ‘The proposals seem outrageous to the many people who look to the Government for a one-nation, even-handed approach to the higher and lower paid. How, they ask, can the Government give the Permanent Secretary of Education a pay rise considerably greater than the salaries of most of the teachers he is in dispute with?’90 The choice of the Education Permanent Secretary was a pointed one, not only because there was an intermittent teachers’ strike in progress, but also because, as Owen well knew, Mrs Thatcher was frustrated at that department’s inability, under Keith Joseph, to secure the improvement of standards she wanted. Owen banged his point home: ‘The Government cannot go into an Election having denied most of its employees any share of the increased prosperity on which the Government stakes its popularity.’91
Despite the huge fuss, Mrs Thatcher did not really back down. When alarmed officials wanted her to indicate to Lord Plowden that the government was not endorsing his ‘range pay’ notion as much as he thought, Mrs Thatcher refused, writing, ‘the range pay proposal is crucial and I endorse it warmly.’92 ‘There was no doubt in my mind’, she wrote in her memoirs, ‘that we could not retain the right people in vitally important posts … unless their salaries bore at least some comparison with their counterparts in the private sector.’93 This showed that she was not, in practice, as hostile to civil servants as she generally gave the impression of being. But it was surprising that she did not see the inconsistency of applying principles of comparability to the pay of top people employed by the government when she had so profitably (though belatedly) abandoned those principles across the public service by stopping the work of the Clegg comparability commission in 1980 (see Volume I, p. 458). As Nigel Lawson put it, arguing for the abolition of the TSRB, ‘Whatever the advantages claimed for having the TSRB or something like it, experience shows that we do not get them. Its existence does not take the pay of these so-called “top people” out of politics; on the contrary it makes the issue even more “political”.’94 All she would concede, in public retrospect, was that the presentation of the salary announcements had been inept.95 Privately, she suggested to the relevant ministerial committee that Lord Plowden ‘might be sent on a sabbatical’.96
The pay row had come on top of a by-election which had made matters worse. On 4 July, the Conservatives fell to third in the previously safe Tory seat of Brecon and Radnor. The Alliance candidate (a Liberal) won and the Conservative share of the vote dropped by 20 per cent. ‘At one point,’ recalled Stephen Sherbourne, ‘I thought we might become the third party in the national polls.* I even thought this could happen at the general election, if the Alliance secured second place in the opinion polls and then got a bandwagon rolling. We were coasting a bit.’97 Conservative MPs had what Mrs Thatcher described as ‘a bad case of the wobbles’:98 there was ‘an unmistakeable whiff of panic’. Before rising at the end of July, the Commons rebuked the Prime Minister by cutting the government’s huge majority to seventeen over the TSRB proposals. In the Lords, on a motion on the same subject without legal force, the government was actually defeated. For Mrs Thatcher this marked an unhappy end to an unhappy episode. ‘I found the outcry was most upsetting and totally unjustified,’ she remarked. ‘And now the House of Lords has joined in.’99
Mrs Thatcher was duly inundated with end-of-term advice from her worried colleagues and officials. Bernard Ingham offered her his thoughts ‘at the end of a rather difficult political year’.100 People still
said, he reported, that the government was ‘arrogant’ and ‘insensitive’ and ‘We have manifestly not disposed of those charges.’ He complained that the government’s obsessive fear of leaks meant that it could not organize its case in advance of going public. He cited the TSRB affair, in which he had learnt the news only half an hour before he had to present the report to the press lobby. ‘My 18 years in the Government service have taught me not to take criticism of presentation too seriously, but I think we must now do so.’ This would require Ingham himself being ‘privy to the sensitive issues before decisions are taken,’ he said. Then he could prepare a presentational plan. He strongly advised her against making anyone in the Commons responsible for presentation. His stated reason was that the person entrusted with the task had ‘to face questioning on the floor of the House’, but the unspoken one was that Ingham did not want any centre of presentational power outside Downing Street. He applied his argument to the coming reshuffle: ‘For real impact … personalities count. The media will be watching to see how you dispose of your presentational resources. Your actions cannot be ruled by presentation; but they must, in my judgment, be seen to recognise its importance.’
Although what Ingham wrote was self-serving, it was also true. In some ways an excellent public presenter herself, Mrs Thatcher was nevertheless more interested, when deciding what to do, in the issues themselves. She often held them too close and gave little thought in advance to how to introduce them to the world. If she were to take up Ingham’s recommendations, this would obviously bring her press secretary much nearer to the heart of government, thus earning him the jealousy and suspicion of Cabinet members. It would also ensure, however, that the actions of government could be rendered more coherent in the minds of the public and of Conservative backbenchers who often felt bewildered and kept in the dark. In essence, though not in every detail, she accepted Ingham’s suggestions. She thus gave him greater power which was bound to be controversial, and made him, in effect and for the first time, a forerunner of the modern ‘spin-doctor’* rather than just a press officer.
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