The Iron Lady

by John Campbell

  A second criticism of Mrs Thatcher’s enthusiasm for arms sales is that it distorted the allocation of the aid budget – a charge highlighted by the saga of the Pergau Dam project in Malaysia. Mrs Thatcher visited Malaysia in April 1985. On that occasion she ‘got on rather well’ with the Prime Minister, Dr Mahathir. Three years later she went back and negotiated – without reference to the Foreign Office – a deal whereby Britain financed the construction of an economically unviable and environmentally damaging hydroelectric power station in northern Malaysia in return for an agreement to buy British defence equipment worth £1.3 billion. Subsequently a pro-Third World pressure group took the Government to court, alleging that this was an improper diversion of ‘aid’ for commercial purposes, and in 1994 won their case when the High Court ruled the deal illegal. Douglas Hurd, then Foreign Secretary in John Major’s Government, was obliged to refund the aid budget £65 million from Treasury reserves.

  The Pergau affair threw a murky light on Mrs Thatcher’s cavalier way with aid. In December 1994 Hurd was forced to reveal that three more aid projects – in Turkey, Indonesia and Botswana – had been found to breach the criteria of the 1980 Overseas Development and Co-operation Act. The money wasted on the Pergau project was more than Britain gave over the same period to Somalia, Ethiopia and Tanzania combined, while wealthy Oman alone received more British ‘aid’ than Ethiopia. Moreover, it emerged that nearly half the money expended under the Aid and Trade Provision (ATP) for projects in Third World countries went to finance contracts won by a handful of favoured companies all of which were major contributors to the Conservative party.43 In short, British aid was recycled to the Prime Minister’s friends and supporters at home and abroad.

  The third charge against Mrs Thatcher’s pursuit of arms sales is that much of it was carried on secretly, in contravention of the Government’s declared policy. The most glaring instance was the supply of military equipment to Saddam Hussein’s Iraq throughout the eight years of the Iran – Iraq war when Britain was supposed to be restricting the flow of arms to both sides. This turned into a major embarrassment in 1990 when Saddam invaded Kuwait and Britain and her allies found themselves at war with a country they had been busily arming just a few weeks earlier. But this is an occupational hazard of the arms trade: much the same had happened with Argentina in 1982.The real scandal was the secrecy – duplicity – with which the policy had been conducted for the previous ten years.

  Officially the West was neutral in the bloody war of attrition which began in 1980 when Iraq launched its troops against Iran: up to 1985 Britain continued to train pilots and supply low-level equipment impartially to both sides. In practice, however, both Britain and the United States covertly supported Iraq. Saddam was a revolting tyrant, but he was a tyrant of a familiar sort whom they could get along with: Iran’s fanatical Ayatollah Khomeini, on the other hand, seemed much more dangerous. With the trauma of the Teheran hostage crisis still fresh in American minds, Iran outranked even Gaddafi’s Libya as Washington’s ‘public enemy number one’. As Mrs Thatcher told Caspar Weinberger in 1984, ‘the West did not need another success by Moslem fundamentalists’.44 Moreover, the war provided a tempting opportunity. So long as the Shah was on the Peacock Throne, Britain had been a major supplier of arms to Iran. But Khomeini’s Islamic revolution had closed that market. British manufacturers were now keen to get into Iraq instead. Their American counterparts were hamstrung by Congress, which not only imposed an embargo on trade with both sides, but actually enforced it, so the Reagan administration was happy to see Britain secretly supply Baghdad. It was easier to deceive the House of Commons than it was to deceive Congress.

  Officially Britain followed the American lead by banning the export of ‘lethal’ equipment to either side. But a meeting of the Cabinet’s Overseas and Defence Committee (OD) on 29 January 1981, chaired by Mrs Thatcher, agreed to define the critical word ‘as flexibly as possible’.45 Before the end of the year the MoD’s arms-trade subsidiary International Military Services (IMS) had won a contract to build an integrated weapons complex at Basra in southern Iraq; and this was just the beginning. Over the next four years ‘something like ten times as much defence equipment [was] exported to Iraq than to Iran’.46

  For a time in 1983 – 4, when an Iranian victory seemed likely, however, the Foreign Office worried that this ‘tilt’ to Iraq might be imprudent and began to hedge for a more balanced neutrality. In November 1984 Richard Luce proposed more detailed ‘guidelines’ to restrict the supply of arms to either side. By the time Howe disclosed them to Parliament in October 1985 they had already been in operation for nearly a year.

  Except that they never really operated at all. Giving evidence at the Matrix Churchill trial in 1990, Alan Clark dismissed them with typical candour as ‘tiresome and intrusive’, mere ‘Whitehall cosmetics’. 47 They were framed to be deliberately ambiguous. Only finished weapons were classed as ‘lethal’. Every other sort of military equipment, from aircraft spares to laser range-finders, and above all lathes for manufacturing artillery shells, went through without difficulty. They were made by a number of firms, all of which enjoyed a close relationship with the MoD, with little effort to disguise either their purpose or their destination. One of those most heavily involved, Matrix Churchill in Coventry, was actually acquired in 1987 by a subsidiary of the Iraqi Government, presumably to get round the fact that Britain had just signed a pact banning the export of ballistic missile technology to the Third World. Matrix Churchill was then developing the Condor 2 missile with a range of 1,000 kilometres and capable of carrying nuclear warheads, in which Baghdad was known to be interested.48 When questions were asked in Parliament they were batted away by junior ministers.

  On 2 December 1986, when there was some question of changing the guidelines, Charles Powell wrote to the Foreign Office that Mrs Thatcher found them ‘very useful’ when answering questions in the House of Commons and had no wish to alter them.49 Two days later she gave a perfect example of what he meant when she told the House that ‘British policy on arms sales to Iran and Iraq is one of the strictest in Europe and is rigidly enforced, at substantial cost to British industry. That policy has been maintained scrupulously and consistently.’50 Presumably this formula accorded with her reading of the guidelines. But the reality was very different from the impression given to Parliament.

  Is it possible that she did not know what was really going on? There is no doubt that some individuals in all the relevant departments knew. But did Mrs Thatcher know? Quite apart from the fact that no Prime Minister so prided herself on knowing what was going on in every corner of Whitehall, the involvement of the intelligence service is the clearest indication that she was fully informed. After the scandal broke, the Scott Inquiry set up by John Major concentrated – so far as Mrs Thatcher was concerned – on whether she knew that the 1985 guidelines were secretly relaxed in 1988, when the Iran – Iraq war ended. But this was a very minor issue. More important is the overwhelming evidence that she knew – she must have known – that the guidelines had been worthless ever since 1985.

  For one thing she received a quarterly report listing arms sales, country by country, all round the world, and she had given explicit approval to a substantial (and unannounced) level of exports to Iraq. Of course the undercover trade might have been omitted from this list. But she also received intelligence reports, and we know that she read them avidly. More specifically, Scott quotes an intelligence digest dated 29 March 1988 – before the guidelines were changed – summarising the British machine-tool industry’s involvement in Iraqi weapons manufacture and singling out Matrix Churchill as ‘heavily involved’. This was initialled by Mrs Thatcher.51

  Then there was the fact that large amounts of British equipment reached Iraq indirectly via other countries – notably Jordan. In her evidence to the Scott Inquiry, Mrs Thatcher claimed to have been deeply shocked by the discovery of this ‘glaring loophole’ (as Scott called it).52 She attached great importance to
Britain’s relationship with Jordan and took pride in the three big arms deals she had made with King Hussein since 1979 – suspiciously large for such a tiny country. Other ministers followed her lead in claiming to have no idea that much of this equipment was destined for Iraq. But as usual there was one exception. Alan Clark told Scott that it was common gossip in the MoD that ‘more than half the material purchased by Iraq was actually consigned to Jordan’. An instance came to light in 1983 when HM Customs intercepted a consignment of 200 sub-machine guns bound for Iraq via Jordan: three men were charged and fined, but their conviction was later set aside.53 But Mrs Thatcher did not need customs to tell her that this was happening. In October 1985 the Joint Intelligence Committee circulated a confidential document entitled ‘Use of Jordanian facilities for the transshipment of war material to Iraq’; and the Scott Inquiry was given details of twenty-five more intelligence reports on the same subject between 1986 and 1991.54 Is it possible that the Prime Minister read none of them? She had certainly done so by July 1990 when she commissioned from the Cabinet Office a document known as the ‘Iraqnote’ tracing the history of defence exports to Iraq, which stated: ‘Iraq systematically uses Jordan as a cover for her procurement activities almost certainly with the connivance of senior figures within the Jordanian administration.’55 Her pretence that this came as a great shock to her the following month is demonstrably untrue.

  The scandal of the arms trade to Iraq only began to unravel in the last months of Mrs Thatcher’s premiership, and the Scott Inquiry concentrated largely on when she had known what after 1988. But the covert arming of Iraq had begun very much earlier, in 1981, and was well established during her second term, when British manufacturers were given every encouragement and assistance to export military equipment energetically to Iraq, both directly and (via Jordan) indirectly, in cynical contradiction of the Government’s professed policy of scrupulous restriction. There is ample evidence that Mrs Thatcher both knew of and encouraged this policy: it would have been very remarkable if she had not. So why did she do it? She was not normally cynical, and she prided herself on her high ethical standards. The answer is twofold.

  First, she genuinely believed that every country was entitled to purchase the means to defend itself, that a free trade in armaments promoted peace, not war, and that others would sell them if Britain did not. Second, however, her Manichean world view disposed her to the dangerous doctrine that ‘my enemy’s enemy is my friend’. If Iran was the enemy of the West, then it was in Britain’s interest to help arm Iraq. In her own mind she knew that it was right, even though it might be difficult to defend the policy to Parliament. So she closed her mind to the impropriety of deceiving Parliament, and probably also deceived herself. But there can be no doubt that she both willed the end and winked at the means. The policy stemmed from the same robust world view that she applied to every area of her foreign policy, from the Falklands war to nuclear disarmament, from the bombing of Libya to the ending of apartheid. But in all those theatres she stood up boldly for what she believed. In the case of Iraq the execution of her policy required that Parliament was systematically misled over a period of eight or nine years. This was a major stain on her record.

  18

  Enemies Within

  A need for enemies

  ONE of Margaret Thatcher’s defining characteristics as a politician was a need for enemies. To fuel the aggression that drove her career she had to find new antagonists all the time to be successively demonised, confronted and defeated. This is unusual: the normal instinct of politicians the world over is to seek agreement, defuse opposition and find consensus. The taste for confrontation is particularly alien to the British Tory party, whose traditional preference has always been to emphasise national unity around common values. By contrast Mrs Thatcher actively despised consensus: she needed always to fight and to win. She viewed the world as a battleground of opposed forces – good and evil, freedom and tyranny, ‘us’ against ‘them’. The overriding global struggle between capitalism and Communism was reflected at the domestic British level by the opposition of Conservative and Labour, and more generally in a fundamental distinction between, on one side, ‘our people’ – honest, hard-working, law-abiding, mainly middle-class or aspiring middle-class taxpayers, consumers and home-owners – and, on the other, a ragtag army of shirkers, scroungers, socialists, trade unionists, ‘wets’, liberals, fellow-travelling intellectuals and peace campaigners. All these anti-social elements had to be taken on and beaten to make a world safe for Thatcherism.

  The second term was the time to deal with her domestic opponents. For most of her first term she was on the back foot. But once the Falklands had helped her to survive the crises of her first three years, Mrs Thatcher returned to office with a clear intention to take the offensive. She had routed the Labour party at the polls. But socialism was a many-headed hydra, which still held important citadels of power beyond Westminster, and which must be reduced before the Thatcherite vision of Britain could be fully realised. Two, above all, threatened her authority. First, left-wing Labour councils still controlled local government in most of the country’s major cities: most visibly, just over the river from Westminster, the leader of the Greater London Council, Ken Livingstone, was mounting a cheekily provocative challenge which she could not endure. She had already determined in the 1983 manifesto to deal with Livingstone by the simple expedient of abolishing the GLC (and with it the other metropolitan councils). That, however, would require legislation. Meanwhile, she faced a still more dangerous challenge from the Tories’ old nemesis, the National Union of Mineworkers, now headed by the militant class warrior and would-be revolutionary Arthur Scargill, openly bent on destroying her government as he had previously destroyed Heath’s. Having prudently backed off in 1981, Mrs Thatcher was now ready for this challenge too. But first she signalled a tough new attitude to trade unionism by picking a fight with the small but significant group of white-collar workers employed at the Government’s top-secret satellite listening post, Government Communications Headquarters, based at Cheltenham.

  The problem of trade unionists at GCHQ had caught her attention during the 1981 Civil Service strike. The fact that striking tax collectors cost the Government £350 million in lost revenue merely irritated her; but the idea that intelligence personnel could endanger national security by industrial action enraged her, confirming her suspicion that trade unionism was fundamentally anti-patriotic. Codebreakers, she believed, should no more be unionised than members of the armed forces. She wanted to ban unions from GCHQ there and then, but at that time she was talked out of it. The Americans had been alarmed by the disruption of intelligence, however, and Mrs Thatcher placed the highest priority on Britain’s intelligence relationship with the US. Particularly after the Falklands and Grenada crises she wanted to assure them that it would not be repeated. So in January 1984, with no prior consultation with the unions concerned, she persuaded Howe to announce an immediate ban on GCHQ employees belonging to unions.

  The case was a reasonable one – MI5 and MI6 were not unionised, and it was something of an historical anomaly that GCHQ was different. But the abrupt way in which the Government proposed to end the anomaly seemed high-handed and unreasonable. The right to union membership, she told the Commons, was a ‘privilege’ which did not extend to security personnel.1 To the unions this was tantamount to accusing their members of treason. The left claimed that the Government was removing a basic civil right and won a temporary victory when the High Court declared the ban illegal on the ground that the lack of consultation was ‘contrary to natural justice’. This judgement was later overturned in the Court of Appeal, but the case of the handful of GCHQ workers who chose to be sacked rather than give up their membership remained a live grievance for the rest of the Thatcher years.

  Scargill and the miners

  The skirmish over GCHQ was no more than a curtain raiser to the real battle which overshadowed the whole of 1984: the Government’s life-or
-death showdown with the NUM. Mrs Thatcher had always known that she would have to face a miners’ strike sooner or later. In February 1981, she accepted temporary humiliation by postponing a confrontation she was not yet ready to win. Since then, however, the Government had been quietly making its dispositions. An ad hoc committee, MISC 57, met ‘in conditions of extreme secrecy for most of 1981’ to devise ways to ensure that the Government would be able to sit out a long strike whenever it came. Over the next two years cash limits on the Central Electricity Generating Board (CEGB) were relaxed to allow the unobtrusive build-up of large stocks of coal in the power stations, which had been lacking in 1981. At the same time power stations were converted where possible to burn oil instead of coal, and fleets of road hauliers were recruited to move coal if the railwaymen should come out in support of the miners.2 This, as Hugo Young pointed out, was a very rare example of strategic foresight on Mrs Thatcher’s part.3

  Then, in February 1983, Nigel Lawson signalled that the Government was ready by appointing Ian MacGregor from British Steel to become chairman of the National Coal Board. Fresh from turning round the steel industry, with the loss of almost half the workforce, MacGregor was plainly being sent to do the same for coal: his track record in the United States included the defeat of a two-year strike by the United Mineworkers. Finally, in her post-election reshuffle Mrs Thatcher persuaded Peter Walker to take on the Department of Energy with the explicit expectation that he would face a challenge from Scargill.

  The economic case for shrinking the coal industry was incontestable. The rundown had been going on under governments of both parties since the 1960s. The moderate President of the NUM from 1971 to 1982, Joe Gormley, had broadly accepted it. But the industry was still overproducing coal that could not be sold. When MacGregor took over, the NCB was heading for a loss of £250 million in 1983–4. If the Government’s policy towards nationalised industries was to mean anything this had to be stopped. But to achieve economic viability the NCB would have to close loss-making pits in traditional mining areas in Yorkshire, Scotland and South Wales and concentrate production in profitable modern pits. Coal mines, however, cannot be closed as easily as factories; whole communities with a proud and deeply rooted way of life depend on them. The new NUM leaders, Arthur Scargill and his saturnine Vice-President Mick McGahey, were not only militant left-wingers looking to break another Tory Government: they also came from Yorkshire and Scotland respectively. They took their stand on the view that the union could not allow the closure of any pit at all except on grounds of safety or geological exhaustion: they did not accept the concept of an uneconomic pit. This was the economics of the madhouse.