The Iron Lady

by John Campbell

  U-turns

  Mrs Thatcher’s wider role as a member of the Heath Government subsequently came to embarrass her. Not only did she pursue policies in her own department which she later repudiated, and fail to promote others which in retrospect she wished she had embraced more vigorously; she also conspicuously failed to dissent from economic policies which she soon came to regard as disastrously flawed and which, she now implied, she had instinctively known to be wrong all along. For someone who would later make so much of being a ‘conviction politician’ this was a singularly unheroic performance, which she and her biographers had to expend much effort trying to explain or deny.

  The Government notoriously made two major U-turns in economic policy, both in 1972. First, in response to rising unemployment – which in January 1972 passed the symbolic and at that time politically intolerable figure of one million – Heath reversed the policy of not bailing out ‘lame ducks’ on which he had fought the 1970 election and started to throw money indiscriminately at industry in a successful (but inflationary) effort to stimulate the economy into rapid growth. Second, when inflation rocketed – as a result partly of sharp increases in the price of imported commodities (copper, rubber, zinc and other raw materials) even before the 1973 oil price shock, but also, it was almost universally believed, of excessive domestic wage increases – the Government abandoned its apparently principled rejection of incomes policy and introduced, from November 1972, an increasingly complex system of statutory wage and price control. Both policies commanded wide support on the Conservative benches and in the press. A handful of eccentric monetarists warned that the Government was itself fuelling the very inflation it was attempting to cure; while a rather larger number of more traditional right-wingers were disturbed by the socialistic overtones of the Government’s increasing interference in the economy. But in the short term both policies appeared to be working: the economy boomed, unemployment fell and inflation was contained. Until the double blow of the oil crisis and the miners’ strike at the end of 1973 the Government seemed to be surmounting its problems with a good chance of re-election in the autumn of 1974 or spring of 1975.

  There is little evidence that Mrs Thatcher offered any serious objection to either U-turn. Indeed, she positively supported what many regarded as the forerunner of the later reversals, the nationalisation of the aircraft division of Rolls-Royce in 1971. It is true that a report in The Times in 1972 named her as one of a number of Cabinet Ministers who ‘frankly confess their uneasiness about the socialist implications’ of the Government’s new industrial strategy; but that was all.22 She stoutly defended prices and income control as ‘absolutely necessary’.23 Cabinets did not leak so freely in those days, nor did ministers brief the press with their private views. Mrs Thatcher uttered no public indication of dissent, unless there was a coded message in her speech to the party conference in October, when she declared pointedly that ‘I believe it is right for any Government to honour the terms of its manifesto. That is precisely what we are doing in education.’24

  The third major issue of the Heath Government on which Mrs Thatcher expressed no contrary view at the time was Britain’s entry into the European Community. Heath’s achievement in persuading President Pompidou to lift de Gaulle’s veto, negotiating acceptable terms, winning a substantial bipartisan majority in the House of Commons and forcing the enabling legislation through against the determined opposition of a section of his own party, finally joining the Community on 1 January 1973, was the one unquestioned success of his ill-fated Government. Despite her later change of heart, Mrs Thatcher was firmly and conventionally supportive of the European project throughout, as she had been since Macmillan first launched it in 1961.

  She had no reservations, either, about supporting the Government in its stand against the miners. While she condemned the miners’ leaders and attacked Communist influence in the NUM, she insisted that the Government’s offer to the miners – in the range of 13 – 16 per cent – was ‘generous’ and argued that the Government had ‘kept faith with the miners’ when it could have switched to other energy sources. She appealed to the miners in turn to vote against a strike. At the same time she pointed out that North Sea gas and oil would soon give the Government alternatives to both coal and imported oil. ‘The prospects are enormous.’25 In the prevailing mood of almost apocalyptic gloom, this was an unusually optimistic message.

  On 4 February 1974, however, the miners voted overwhelmingly to step up their action, and Heath finally bowed to the clamour for an election, though still seeking a settlement of the dispute by referring the miners’ claim to the Pay Board while the election was in progress. He was honourably determined not to fight a confrontational campaign against the miners, even though that would almost certainly have given him his best chance of winning. Mrs Thatcher in all her published and reported statements loyally followed her leader’s line.

  Boundary changes meant that she could no longer take her seat for granted. Moreover, she had a potential problem with the Jewish vote as a result of Heath’s even-handed policy of refusing to supply Israel with military parts, or even allow American planes to supply Israel from British airfields, during the Yom Kippur war. This issue allied Mrs Thatcher with Keith Joseph, the only Jewish member of the Cabinet. Together they protested, but Heath and Alec Douglas-Home were determined to avert an Arab oil embargo by maintaining strict neutrality. She met the Finchley branch of the Anglo-Israel Friendship League to assure them that she opposed the Government’s policy.26 This was the most difficult period in her long and close relationship with her Jewish constituents; but her position was not seriously threatened.

  This was an election the Tories confidently expected to win. Indeed, one reason Heath fought such a poor campaign was that he was afraid of winning too heavily. In the event he failed to polarise the country sufficiently. By referring the miners’ dispute to the Pay Board the Government seemed to call into question the point of having an election at all. Labour was still in disarray over Europe and beginning to be torn apart by the new hard left: Wilson did not expect to win any more than Heath expected to lose. In these circumstances the electorate called a plague on both their houses and turned in unprecedented numbers to the Liberals.

  Out of office

  Mrs Thatcher was still perfectly safe in Finchley. As usual the Liberal hype could achieve only so much. On a reduced poll (and revised boundaries) her vote was 7,000 down, the Liberals nearly 4,000 votes up, but Labour still held on to second place. Her majority was nearly halved but the two opposition parties cancelled each other out.

  Nationally it was a different story. The Liberals won an unprecedented six million votes, nearly 20 per cent of the poll. They were rewarded with just fourteen seats, but their advance fatally damaged the Tories, helping Labour to scrape a narrow majority – 301 seats to 297 – despite winning a slightly lower share of the poll – 37.1 per cent against 37.9 per cent. Heath held a last Cabinet before being driven to the Palace to resign. It was by all accounts a bleak occasion: he was determined that it was not the end of his Government, merely a temporary interruption, so there were no thanks, tributes or recriminations. Only one minister felt she could not let the moment pass without a word of valediction. It was Margaret Thatcher who insisted on speaking ‘in emotional terms of the wonderful experience of team loyalty that she felt she had shared since 1970’.27

  From her time at the DES, however, she had learned a number of lessons which she would carry back with her into government in 1979. First, as she reflected on her experience, she became convinced of the malign power of officials to block, frustrate and manipulate all but the most determined ministers. Secondly, she learned from the failure of the Government as a whole to maintain its sense of direction and purpose in the face of mounting political pressure. At its simplest this expressed itself as a determination not to duplicate Heath’s notorious U-turns. But this was not so much an ideological point as a political one.

  Heath lost the
ability to control events, paradoxically, because he tried to control too much: all the complex machinery of prices and incomes control – the Pay Board, the Price Commission and the rest – left the Government still helpless in the face of soaring imported food and commodity prices on the one hand, and the industrial muscle of the miners on the other. The lesson Mrs Thatcher took from the Heath Government was not so much monetarism, which she grasped later as a useful technical explanation, but rather a compelling affirmation of an old Tory article of faith – the self-defeating folly of overambitious government. Government – she instinctively believed – must be strong, clear, decisive; but the experience of the Heath Government taught that it could only appear strong by holding itself above the economic fray, not taking responsibility upon itself for every rise in unemployment or inflation. It was that lesson, more than any other, which enabled her Government to rise above the economic devastation of the early 1980s.

  6

  The Peasants’ Revolt

  The roulette wheel

  LESS than a year after losing office in March 1974 Margaret Thatcher was elected leader of the Conservative party. This was a stunning transformation which no one would have predicted twelve months earlier: one of those totally unexpected events – which in retrospect appear predestined – that constitute the fascination of politics. One of the most extraordinary things about Mrs Thatcher’s seizure of the Tory leadership is that scarcely anyone – colleague or commentator – saw her coming. Even after the event her victory was widely disparaged as a freak of fortune of which she was merely the lucky beneficiary. As Enoch Powell put it, with a mixture of envy and grudging admiration: ‘She didn’t rise to power. She was opposite the spot on the roulette wheel at the right time, and she didn’t funk it.’1

  But the fact that she did not funk it was crucial, and not at all an accident. It should have been foreseen by anyone who had worked closely with her over the previous twenty-five years, for she had been quietly preparing for the opportunity all her life. When it came she was ready. It takes extraordinary single-mindedness and stamina to reach the topmost rung of British politics, an obsessive dedication to the job to the exclusion of other concerns like money, family, friendship and the pursuit of leisure. Like Harold Wilson, like Ted Heath, but more than any of her Conservative contemporaries, Margaret Thatcher possessed that quality of single-minded dedication to her career. She never made any secret of her ambition: it was only because she was a woman that the possibility that she might go right to the top was not taken seriously. No one who had known her at Oxford, at Colchester or Dartford should have been surprised that when the chance offered she left her male rivals at the post.

  Yet it was still an unpredictable combination of other factors which created her opportunity. First, she benefited from an intellectual revolution – or counter-revolution – in Tory thinking which had been building over the previous ten years but which was suddenly brought to a head by the shock of electoral defeat, creating the opening for a radical change of direction. This was a development in which she played very little part, yet one which reflected her most deeply held convictions, so that she had no difficulty taking advantage of it. At the same time a fortuitous pattern of personal circumstances ruled out of contention virtually all the other candidates who might, a year earlier, have hoped to harness this opportunity to their own careers.

  The revolution in Tory thinking had two strands – economic and political. On the one hand there was a sudden revival of interest in the free-market economic ideas quietly propagated for years on the margins of serious politics by the Institute of Economic Affairs but largely derided by the conventional wisdom in both Whitehall and the universities. Throughout the 1960s the fact that the only prominent politician to preach the beauty of the unfettered market was Enoch Powell was enough to tar the message with the taint of crazed fanaticism.

  From the middle of 1972 onwards, however, the Government’s U-turns in economic policy had begun to make converts for the Powellite critique. Treasury mandarins attached little importance to the money supply. But in Fleet Street an influential group of economic journalists led by Samuel Brittan on the Financial Times and Peter Jay and William Rees-Mogg on The Times took up the cause and began to expound it in their columns. When the Heath Government fell, therefore, there was quite suddenly a fully-fledged monetarist explanation of its failure available for disillusioned Tories – including ex-ministers – to draw upon.

  At the same time there was among ordinary Tories in the country a more generalised mood of mounting frustration at the failure of successive Conservative Governments to halt or reverse what seemed a relentless one-way slide to socialism. Not only in the management of the economy but in almost every sphere of domestic and foreign policy – immigration, comprehensive schools, trade unions, Northern Ireland, Rhodesia – Heath had appeared almost deliberately to affront the party’s traditional supporters while appeasing their tribal enemies. Strikes, crime, revolting students, pornography, terrorism, inflation eating away at their savings – all stoked a rising anger that the country was going to the dogs while the Tory Government was not resisting but rather speeding the process. By the time Heath lost the February 1974 election an ugly mood had built up in the Tory party which lacked only heavyweight leadership to weld together the two elements – the political backlash and the economic analysis – to form a potent combination which ultimately became known as Thatcherism.

  The unlikely catalyst was Keith Joseph – hitherto no one’s idea of a rebel or a populist, but a former Cabinet Minister of long experience and unimpeachable integrity who was almost uniquely qualified to lend intellectual rigour to political revolt. He subsequently described how he had thought he had been a Conservative for the past thirty years, but now realised that he had been a ‘statist’ all along, bewitched by the delusive power of government.2 Having seen the light, he set out with a religious fervour rare in high-level politics to atone for his past sins by bringing the Tory party – and ultimately the country – to a realisation of the true faith.

  Mrs Thatcher by contrast never pretended to be a thinker. She was a politician, and – unlike Joseph – an intensely practical and ambitious one. It is not the job of politicians to have original ideas, or even necessarily to understand them. Professional economists like Peter Jay used to sneer that Mrs Thatcher never really understood monetarism. But she did not need to. It was enough that she saw its importance; she possessed – as Joseph did not – the much more important and rare ability to simplify complex ideas and mobilise support for them. No intellectual herself, she was nevertheless unusual among politicians in acknowledging the importance of ideas. She had always believed that politics should be a battle between fundamentally opposed philosophies; it was a characteristic of her leadership that she systematically used intellectuals and academics – those whom she thought were on her side – to underpin her policies and furnish her with arguments and intellectual ammunition. As Prime Minister she developed an informal think-tank of her favourite academics to advise her.

  The result of the February election had left the Tory party in a sort of limbo. With another election certain within a few months – as soon as Wilson saw an opportunity to increase his precarious majority – there was no early possibility of challenging Heath’s leadership, even if there had been an obvious challenger in waiting. The lesson he drew from the debacle of confrontation with the miners was that the Conservatives must try harder than ever to show themselves moderate and consensual in order to unite the country and win back the votes lost to the Liberals. This was the opposite of what his party critics wanted.

  The one area in which Heath saw a need for new policies was housing. He told the Shadow Cabinet that the voters he met wanted ‘some radical and drastic changes in policy aimed particularly at the problems of ordinary people’ – specifically the cost of mortgages and the burden of the rates – ‘which should take priority over rather more abstract principles’.3 The key job of developin
g and selling these shiny new policies which would form the centrepiece of the party’s appeal at the next election he entrusted to Margaret Thatcher: an indication that he still saw her as an efficient and amenable agent of his will, not as a potential troublemaker.

  Shadow Environment Secretary

  In fact, up to October 1974 he was not wrong. The job of shadow Environment Secretary was a high-profile opportunity in an area of policy she had always been interested in but had not previously covered. It took her all her time to get on top of it. An Oxford contemporary who had known her in the Department of Education ran into her soon after she had taken it over and found her uncharacteristically harassed, complaining that the wide-ranging DoE empire – taking in transport as well as housing and local government – was too big to master in her usual detail.4 Parliamentary opposition, however, was just a matter of going through the motions – more than ever this summer when the Conservatives had to hold back for fear of precipitating another election before they were ready for it. Mrs Thatcher’s real brief was to come up with the bright new housing policies which Heath wanted to put in the forefront of the party’s next manifesto to win back the middle-class voters who had cost the Tories the February election by defecting to the Liberals. Frankly, what he was seeking was a short-term electoral bribe, but one which could be presented as consistent with the long-standing Conservative philosophy of encouraging home-ownership.

  Suppressing her doubts, Mrs Thatcher loyally complied. The package she eventually announced at the end of August comprised three different forms of housing subsidy. First she promised to hold mortgages to a maximum interest rate of 9.5 per cent, to be achieved by varying the tax rate on building societies. Second, council tenants were to be helped to buy their houses at a 33 per cent discount. Third, first-time buyers would be encouraged to save by a direct Government bribe of £1 for every £2 saved. Most significant for the long term, however, was her fourth commitment: a promise to abolish domestic rates.