In the House of Commons she faced uproar every month when the latest figure was published: Labour MPs accused her of creating ‘an industrial desert’ and using unemployment deliberately to cow the unions. She responded with a mixture of angry retaliation, recalling that unemployment had doubled under Labour too, and patient lectures on the facts of economic life.
She insisted that there was no painless remedy. Only by becoming competitive would new jobs in the new industries eventually be created. Cutting public expenditure, far from exacerbating unemployment, was actually the way to reduce it by releasing resources for the private sector, which was the productive sector. ‘It is the sector from which the jobs will come.’26 As the recession endured and deepened, she increasingly accepted an obligation on the Government to ‘cushion the harsher effects of change’ by promoting enterprise zones, training schemes and new technology.27 But finding that she could not prevent the numbers of the jobless rising remorselessly, Mrs Thatcher found a way of turning the pain of unemployment to her advantage. Skilfully seizing on one of the most positive role models peculiarly available to a woman Prime Minister, she portrayed herself as a nurse – or sometimes a doctor – administering nasty medicine to cure the country’s self-inflicted illness. ‘Which is the better nurse?’ she asked:
The one who smothers the patient with sympathy and says ‘Never mind, dear, there, there, you just lie back and I’ll bring you all your meals… I’ll look after you.’ Or the nurse who says ‘Now, come on, shake out of it… It’s time you put your feet on the ground and took a few steps…’ Which do you think is the better nurse?… The one who says come on, you can do it. That’s me.28
This was clever presentation, and it worked. After the dismal spiral of inflation, strikes and steadily mounting unemployment through the 1970s, the public was at least half ready to believe that any effective cure for the nation’s sickness was bound to be painful, and was masochistically ready to endure it. The figure of the strict Nurse Thatcher struck a chord in the British psyche. Though the Conservatives had not campaigned on any such prospectus, and opinion polls showed the Government’s popularity sinking ever lower, Labour was increasingly distracted and marginalised by its bitter internal power struggle, which the left was clearly winning. In November 1980, when Callaghan retired, the party abdicated any claim to be a serious opposition by electing the sentimental old left-winger Michael Foot in preference to the robust and realistic Denis Healey. At a level deeper than opinion polls the electorate seemed to accept that there was indeed, as Geoffrey Howe asserted, ‘no alternative’.29 The phrase was originally the Chancellor’s, but the nickname TINA – ‘There Is No Alternative’ – quickly attached itself to the Prime Minister. She declared in a confidence debate just before the House rose in July 1980: ‘We are doing what the country elected us to do. The Government will have the guts to see it through.’30
Three months later, at the party conference in Brighton, she made her most famous retort to the fainthearts who were calling for a U-turn, supplied as usual by Ronnie Millar. ‘You turn if you want to,’ she told the delighted representatives, then paused while they laughed, thinking that was the punchline. ‘The Lady’s not for turning.’31[d] Privately she had already given the same assurance to her staff. ‘She made it absolutely clear,’ John Hoskyns recalled, ‘she would really rather be chucked out than do a U-turn.’32 Whether the policy was economically right or wrong, whether or not it was true that there was no alternative, her resolution conveyed itself to the country and won its grudging admiration. After the Wilson – Heath – Callaghan years of drift and compromise, Mrs Thatcher’s sheer defiance was a bravura performance which deflected – or at least suspended – criticism.
Softly, softly
But the heart of Thatcherism was not in monetarism anyway. Monetarism was merely an economic theory which few ministers, let alone commentators or the public, fully understood.To Mrs Thatcher monetarism was essentially a tool, not a dogma, to be discarded if it did not work. Her real purpose was much more political: purging what she called socialism from the economy by encouraging enterprise in place of subsidy and regulation, cutting overmanning and restrictive practices, particularly in the public sector, and above all curbing the power of the overmighty unions.
Union power was the great symbolic dragon which she had been elected to slay. It was the unions which had humiliated and ultimately destroyed the last Conservative Government in 1972–4, and union-fostered anarchy which had done more than anything else to bring the Conservatives back to power in 1979, with a clear mandate to bring the bully-boys to heel.
Nevertheless this was another area in which Mrs Thatcher proceeded cautiously. Her treatment of trade-union reform, indeed, offers a casebook example of prudence overruling instinct, her head ruling her heart. For one thing she needed Prior in her first Cabinet. He had invested heavily in his consensual approach to industrial relations and enjoyed the support of other old Heathites like Willie Whitelaw and Peter Carrington. Mrs Thatcher had little choice but to confirm him as Employment Secretary in May 1979, and having once appointed him she could not afford to lose him, so she had to go along with his approach, frustrating though it was to her backbench zealots.
At the same time she recognised that Heath had courted disaster in 1971 by trying to reform the whole of industrial relations law in one comprehensive Bill. The political climate was much more propitious now than then. But still there was a shrewd argument for tackling the problem one step at a time, carrying public opinion with the Government and denying the unions a single emotive cause to rally round. Her strategy, therefore, was not to confront the unions but to outflank them by appealing over the heads of the unrepresentative and timewarped leaders to the rank-and-file members who had voted Conservative in unprecedented numbers in May and who – polls showed – overwhelmingly supported reform. Her constant theme was that it was not only the public but ordinary trade unionists who suffered from the abuse of union power. These ordinary members had voted Tory, she believed, because they recognised that ‘our policy represents their ambition for their own future and for their families, for a better standard of living and better jobs’.33 The purpose of the Government’s reform was to encourage those ordinary Tory-voting trade unionists to reclaim their unions from the control of the militants.
She further marginalised the union barons by ignoring them. The TUC Secretary-General, Len Murray, complained that Mrs Thatcher ‘rejected the idea of trade unions as valid institutions within society… which, even if you didn’t like them, you were stuck with and had to come to some sort of agreement’.34 For her part she firmly denied them the role they had come to see as their right by eschewing any form of pay policy, refusing to intervene in industrial disputes and letting economic realities and the rising toll of unemployment educate the workforce and emasculate the militants.
Legislation played only a supporting role in this process. Following a consultation document in July, Prior published his Employment Bill in December 1979. Its scope was modest, proposing only what had been promised in the Tory manifesto. Secondary picketing – that is, picketing workplaces not directly involved in a dispute – was outlawed, but not secondary strike action. Employees who refused to join unions were given increased rights of appeal and compensation against the operation of closed shops; but the closed shop itself was not banned (despite Mrs Thatcher repeating that she was ‘absolutely against the closed shop in principle’).35 Thirdly, Government money was made available to encourage unions to hold secret ballots. There was no mention in the Bill of any of the more draconian measures demanded by the Tory right: cutting strikers’ entitlement to benefits, making union funds liable to action for civil damages, or making members who wished to support the Labour party ‘opt in’ to paying the political levy, instead of requiring those who did not to opt out. All these were more or less explicitly left to further Employment Acts further down the road.
The skill of this approach was demonstrated by the
unions’ predictably exaggerated response. By vowing ‘total opposition’ to what Murray called ‘a fundamental attack’ on workers’ rights, the TUC only confirmed its reputation as an unthinking dinosaur.36 Prior’s strategy was perfectly designed to demonstrate that the union leaders were out of touch with their members. When the TUC tried to revive the memory of its successful campaign against Heath’s Industrial Relations Bill by calling a ‘Day of Action’ in May 1980, it failed dismally when no more than a few thousand activists stayed off work. ‘People will have no truck with political strikes,’ Mrs Thatcher asserted in the House of Commons. ‘They would rather get on with the job.’37
Up to the end of January 1980, Mrs Thatcher stoutly defended Prior’s ‘modest and sensible’ Bill as ‘a very good start’. Even after the steel unions began a bitter strike against the British Steel Corporation’s plans to rationalise the industry, she specifically ruled out – ‘for the moment’ – action on secondary strikes and strikers’ benefits. 38 In February, however, the situation was transformed. First, the steel dispute spread, with secondary picketing of private steelmakers leading to violent scenes reminiscent of the previous winter. At the same moment the House of Lords’ judgement in an important test case, Express Newspapers v. McShane, confirmed the trade unions’ legal immunity from liability for the consequences of their members’ actions. These events increased the pressure on the Government to widen the scope of Prior’s Bill. The papers built up the issue as the critical first test of the Government’s mettle. ‘If you don’t act now,’ the Daily Express warned, ‘the writing will be on the tombstone of the Tory Government.’39
Mrs Thatcher was bound to respond. She accordingly pressed Prior to add a new clause outlawing secondary action. Since that would not have immediate effect on the steel strike, she also wanted to rush forward a single-clause Bill to ban secondary picketing immediately, without waiting for the Employment Bill to go through all its stages. But Prior resisted both proposals, and was supported in Cabinet by a powerful combination of senior ministers. Defeated in Cabinet in the morning, however, Mrs Thatcher got her own back the same afternoon by simply announcing at Prime Minister’s Questions that plans to cut strikers’ benefits were going ahead after all, and provision for cutting strikers’ benefits was duly included in Howe’s budget six weeks later.
Meanwhile – before his Bill was even on the Statute Book – Prior was pressured to publish a Green Paper foreshadowing further curbs on the closed shop and other measures. But he still firmly resisted ending the unions’ legal immunity. Mrs Thatcher missed no opportunity to repeat that she intended to go further: ‘The Bill is a first step,’ she said in July. ‘It is not a last step.’40 But it was clear that the next step would have to await a new Employment Secretary; and she was not yet strong enough to be rid of Prior.
In this way she got the best of both worlds. On the one hand she saw a significant first measure of reform enacted without provoking serious union opposition, and opened the way for another, while gaining credit for moderation and keeping her Cabinet intact. On the other she contrived to preserve her reputation with her core supporters as a radical who would have liked to do more, were she not constrained by her colleagues. Her blatant undermining of Prior was an early instance of what became a familiar tactic whereby she distanced herself from her own Government, running with the hare while hunting with the hounds. It was clever politics, but it was essentially two-faced and disloyal to colleagues who never felt they could rely on her support. In the short run this skilful ambiguity helped establish her authority over colleagues, many of whom were not naturally her supporters. But over time it strained the loyalty even of her handful of ‘true believers’, undermined the cohesion of her Government and ultimately wrought her downfall.
Over the whole decade 1979 – 90, curbing the power of the unions was perhaps the Thatcher Government’s most unarguable achievement, ending a culture of institutionalised abuse which had hobbled enterprise and broken three previous Governments – Labour and Conservative – in the previous ten years. The Government’s legislation was successful partly because it was introduced against a background of high unemployment which weakened the unions’ industrial muscle and shrank their membership from thirteen million to ten million over ten years, but also because it was implemented in cumulative instalments which offered the unions no popular cause on which to make a stand. The result vindicated Prior’s gradualism – but also Mrs Thatcher’s caution in backing him.
Joseph on the rack
The second great dragon waiting to be tackled was the nationalised sector of the economy. Here again the Government’s first steps disappointed its keenest supporters. The fact that privatisation on the scale that occurred after 1983 was not foreshadowed in the 1979 manifesto subsequently gave rise to a belief that it was not on the Government’s agenda when Mrs Thatcher first came to power, but was merely a sort of opportunist afterthought. There is enough truth in this to give the story an ironic piquancy, but it is not the whole truth.
It was always a central part of the vision of an enterprise economy that the nationalised sector, if it could not be wholly eliminated, should at least be substantially reduced. Mrs Thatcher was instinctively much keener on privatisation than Heath had ever been. She believed that the public sector was inherently inefficient and a drag on the wealth-creating enterprise of the private sector, and talked freely in private about the need to reduce it. But up to 1979 her overriding concern was not to alarm the voters by striking attitudes that could be labelled ‘extreme’.
There is no question that privatisation did take off unexpectedly after 1983. That is not to say, however, that finding ways of cutting the public sector was not a high priority from the beginning. In her very first speech as Prime Minister, Mrs Thatcher spoke of making a start ‘in extending the role of private enterprise by reducing the size of the public sector’ – adding emphatically: ‘It needs reducing’;41 and a few weeks later she promised proposals for ‘attempting to have less public sector ownership and more private sector ownership’.42 Her language constantly suggests that she did not think it would be easy. What she mainly meant in these early days was selling shares in profitable state-owned companies like BP – where Labour had already shown the way – and dismantling the ragbag portfolio of odd companies taken into public ownership by Labour’s National Enterprise Board (NEB). She was particularly keen to give priority to the workers employed in these firms, so that ‘those who work in industry… should make great strides towards being real capital owners’.43 Neither she nor anyone else at this stage envisaged selling whole industries, mainly because their concern was less with ownership than with promoting competition. The Government’s early effort was concentrated on selling off profitable ancillary parts of the nationalised industries, like gas and electricity showrooms, British Rail hotels and the cross-Channel hovercraft. They did not see how the core utilities themselves could be sold. ‘In those industries,’ Mrs Thatcher told the Commons in November 1981, ‘we must ensure that the absence of market forces is replaced by other pressures to induce greater efficiency.’44 While clear about the desirability of the objective, she remained persistently cautious, always talking of ‘trying’ to denationalise ‘wherever possible’ and stressing the practical difficulties.45
Nevertheless a very substantial start was made in 1979–82. Only by comparison with what came later can it be represented as small beer. Norman Fowler, as Transport Secretary, duly sold the National Freight Corporation, but also deregulated long-distance coach travel, creating new private competition with the state-owned railways. Keith Joseph began the process of selling British Aerospace. Several large NEB holdings were successfully sold. As Energy Secretary, David Howell began the process of turning the British National Oil Corporation (BNOC), the North Sea oil exploitation company, into Britoil as a first step to privatising it. The sale of British Airways was also planned, under the dynamic leadership of John King, one of Mrs Thatcher’s favourite bus
inessmen, but had to be delayed for commercial reasons. Most significantly, Joseph split up the Post Office, creating a separate telecommunications company (British Telecom), initially as a way of attracting private money to pay for new technology; he also licensed a private telephone company, Mercury, to inject some competition into the telecommunications business.
By any standard except that of the bonanza years 1983–90, this was a remarkable record. Moreover, in November 1981 Lawson announced the principle that ‘No industry should remain under State ownership unless there is a positive and overwhelming case for it so doing.’46 The momentum of privatisation was well under way before the 1983 election. The Tory manifesto for that election targeted British Telecom, British Airways and the profitable parts of British Steel, British Shipbuilders and British Leyland. Yet ministers themselves did not realise the scale of the revolution that was around the corner.
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