Margaret Thatcher: The Authorized Biography (112 page)

In the middle of this, Bernard Ingham wrote to Francis Pym in his (Pym’s) capacity as head of government presentation. ‘I held a meeting yesterday,’ he explained, with the heads of information in the economic departments. ‘The consensus can be summarised in two words: deeply worried.’ July was always a dangerous time, and now there were riots, the Warrington by-election with its first test of the new SDP approaching, bad unemployment figures expected, and the possibility for the royal wedding at the end of the month of a ‘national atmosphere soured’. The Tories, he said, would go into the parliamentary recess ‘in a state of profound agitation’.
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At Cabinet on 9 July, Whitelaw reported from the riot zone. ‘The area is shattering,’ he said. ‘The damage is worse than Belfast in 1972.’ He called for better headgear for the police. Mrs Thatcher asked for the return of the Riot Act, which, once read out at the scene of a disturbance, had given extensive powers to the police to arrest, disperse and even open fire. She wanted summary courts too. Whitelaw murmured that these would have ‘little real effect’. Michael Heseltine reported how much damage left-wing penetration of the Labour Party and of councils was doing in the riot areas, and called for ‘ways of giving Government support for job creation and wealth creation’. There were several calls for intervention, on the model of Harold Macmillan, who had sent Lord Hailsham as special minister for the depressed north-east in the early 1960s. Mrs Thatcher was unconvinced: ‘We have poured money into big employments in Merseyside; a failure,’ Labour authorities had created problems with ‘horrible housing, high rise etc’ and ‘We have a whole generation brought up on 5 hours a day of TV.’ ‘Perhaps,’ she ended rather lamely, ‘we must call some of the
media together.’ Heseltine returned to the charge, demanding a Hailsham-style minister, with the unspoken implication that he was the man for the job. Mrs Thatcher asked for time to think.
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On 13 July she visited Liverpool herself where, as Ingham’s press digest put it, she was ‘pelted with tomatoes and toilet rolls; most [newspapers] feature your 10 most worrying days since you took office.’
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By the time the Cabinet met a week after its previous meeting, she had decided to send Heseltine to Liverpool for a fortnight to see what could be done, though she emphasized cautiously that this was not ‘a special, ministerial appointment’ but a ‘pilot, prototype scheme’.
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This was the day of the Warrington by-election. Although the Conservatives did badly, losing their deposit, this fact was overshadowed by the damage to Labour. Challenged, with huge publicity, by the SDP candidate, Roy Jenkins, in the previously rock-solid Labour seat, Labour clung on with a majority of only 1,759 and a swing against it of 13.3 per cent. On polling day, the inflation rate was announced as 11.3 per cent, the lowest since Mrs Thatcher took office.

The Cabinet met on 23 July to discuss the public expenditure survey for 1981. Mrs Thatcher had just returned from the summit of the G7 in Ottawa. There, the final communiqué had pleased her by its emphasis on the role of the market and on the need ‘urgently to reduce public borrowing’. In private, Mrs Thatcher had told President Reagan how worried she was about high US interest rates because of their effect on Britain: ‘It would be difficult to get it [inflation] down any further now that the pound had fallen against the dollar because of US interest rates. We were, in effect, importing inflation.’
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But in the sessions of the summit she had resisted French and German attempts (Helmut Schmidt spoke of the highest interest rates ‘since the birth of Jesus Christ’) to gang up on Reagan about this. She felt protective towards the President, who had only recently appeared on the public stage after having been shot and badly wounded by a lone, crazed gunman on 30 March. Her view was that Reagan, facing his first summit of this kind, needed support in his attempt to persuade Congress to cut taxes and spending. ‘President Reagan was the new kid on the block, and most of the Europeans thought he was a Hollywood character without a brain,’ recalled Reagan’s close aide Mike Deaver. ‘Margaret Thatcher not only helped Reagan to learn the ropes, but was the right flank.’
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As the summit began, it was Reagan, and Reagan alone, who received a very public kiss on the cheek from Mrs Thatcher.
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Over dinner with his fellow
world leaders, the President tried to explain his own economic approach, but was criticized, if not ridiculed, from all sides. As Reagan later recalled it, the only person who came to his defence was Margaret Thatcher. After dinner, he caught up with her to express his thanks. As he told the story, ‘she leaned over to me and patted my elbow and said, “Don’t worry about it, Ronnie, it’s just boys being boys.” ’
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She stored up much goodwill. On his way home from the summit, Reagan expressed his due gratitude in an interview: ‘There were times in those meetings when Margaret Thatcher spoke up and put her finger on the thing we were trying to resolve.’
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In his diary, he wrote: ‘It was a successful summit – not divisive although it could have been with regard to our interest rates … Margaret Thatcher is a tower of strength and a solid friend of the U.S.’
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Mrs Thatcher told the Cabinet that it had been ‘quite the best economic conference the Government could have had’.
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The Cabinet, however, was not placated. It wanted a showdown. Fresh from his Liverpudlian experience, Michael Heseltine took up the charge, previously led by the Wets, against Geoffrey Howe’s plans for cuts of £5 billion. ‘Reducing taxes’, he said, ‘has nothing to do with problem of Merseyside. Colleagues don’t understand how bad it is … We have a society which is close to much more violence.’ He described Howe’s paper on public spending as ‘deeply disappointing’ and said that the government should ‘get a grip on the national economy’ by going for a pay freeze and thus having ‘£5 billion at our disposal’. What was he proposing, cried Mrs Thatcher, a pay freeze, a pensions freeze, a social security freeze? ‘I want the maximum of that package I can get,’ said Heseltine, whose use of the first person singular was not calculated to make Mrs Thatcher comfortable about his motives. Ever conscious of the terrible Heath example, she said, ‘it must not get out of this room that a pay freeze is being talked about’.
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All the Cabinet critics pitched in. The problem was ‘desperate’, said Peter Walker. Unemployment was much more of a worry than inflation, said Francis Pym. ‘This paper points to the decline and fall of the Tory Party,’ said Ian Gilmour. Jim Prior warned that the problem might ‘overwhelm us, and destroy what we stand for as a party and as a country’. Carrington said that support was melting away. John Nott and John Biffen, intellectually committed to ‘monetarism’ though they were, sided with the Wets. Only Joseph backed the Treasury team. Willie Whitelaw played for time
by pointing out that July was always a bad time to make any final decision, but he did tell Mrs Thatcher that ‘There comes a moment in politics when you have pushed the tolerance of a society too far. We aren’t there, but we aren’t far from it.’ He thought that ‘We just aren’t going to make these cuts.’ It was the Lord Chancellor, Lord Hailsham, always mercurial, but also respected for his intelligence and experience, who made the most wounding intervention. He drew a comparison with the America of the 1930s, and the President at the beginning of the Great Depression, Herbert Hoover. ‘Hoover succeeded in destroying the Republican Party,’ said Hailsham; ‘we are in danger of destroying our own. Almost all Roosevelt’s policies were wrong, but political economics is applied psychology, and they worked.’ Geoffrey Howe hit back that the 1980s were not like the 1930s, because inflation was ‘still rampant’. Mrs Thatcher responded with her own historical example: ‘We have been here before. We reflated in 1972/3 – it led to Barber boom, property market boom and collapse, 6 years of socialism.’ Interest rates were on the way up again and yet people were speaking of increasing public expenditure. ‘The most frightening thing I’ve heard is that we should abandon policy of keeping inflation down. OK for people with muscle … The rest would see savings being confiscated.’ She concluded, ‘Let’s get a paper with both sides of the balance sheet. We must not get to a pocket money society [her phrase for a socialist, high-tax economy]. That’s the end of us.’
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On the same day, Mrs Thatcher gave her end-of-term talk to the 1922 Committee, of which the message, according to Ingham’s digest of the next day’s press, was ‘Now or never for Government’s economic policies; stick to our guns; we can do it; no phoney boom.’
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But, although she was combative as ever, she was also ‘very upset’ by the Cabinet arguments, and especially by Hailsham’s comparison with Hoover.
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She minded the disagreement with her policies less than the suggestion that she was destroying her party. The press duly reported the split in the public spending Cabinet, and some mentioned Francis Pym as an alternative leader to Mrs Thatcher. A reshuffle was expected in the autumn, they said. Discontent was public. The US Ambassador, John Louis, reported home under the title ‘Britain drifts’. ‘The problems begin with Thatcher and her government. It has visibly lost its grip on the rudder in recent weeks … the recent riots were a sharp shock. All along, the moderates in the party have insisted Thatcher was sacrificing too much to the fight against inflation. Last week, these moderates won a hard cabinet fight to achieve a youth employment package. Now they feel vindicated, but they’re also frustrated: the moderates themselves have no better prescriptions than creeping reflation and more soothing rhetoric …’
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And yet, at this grim time, the atmosphere changed. On 27 July it became clear that the Civil Service dispute which had been running since March would be called off, a return to work presented as a defeat for the unions. On 29 July the Prince of Wales married Lady Diana Spencer, amid scenes of general happiness not witnessed since the Coronation. For Mrs Thatcher’s amusement, Ingham included in his digest Soviet TV’s reaction to the occasion: ‘People of London hope the sound of wedding bells will drown out the rioting in Ulster and the shouts of young people being beaten mercilessly in Liverpool.’ In the same day’s report, Mrs Thatcher put a large arrow of approval beside the news that the House of Representatives had voted for Reagan’s tax cut.
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Ingham himself, who had written so gloomily to Francis Pym at the beginning of the month, wrote again at the end of it. He reported the conclusion of a meeting with his colleagues that ‘we had emerged from a most difficult month … in far better shape than we might have reasonably expected, considering.’ Warrington had been worse for Labour than for the government. Inflation, unemployment and industrial disputes had ‘all turned out better than expected’, and the Royal Wedding had been a ‘national tonic’.
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No sooner were the words out of Ingham’s typewriter than the row restarted. Geoffrey Howe’s public announcement on the same day that the recession was now over was too much for some of the critics. Francis Pym denied that this was the case and called for remedial measures. The party chairman, Lord Thorneycroft, said in an interview that a ‘survival package’ was needed and played on the Wet/Dry division: he felt in himself ‘a little rising damp’.
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These were damaging criticisms from the two men charged with the public presentation of policy, but for that very reason they rebounded upon them. It looked as if they were plotting, and as if they had a vested interest in bad news. Tory supporters were outraged. The
Sun
said that a reshuffle was planned, which would include the sacking of Thorneycroft.
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An opinion poll gave an SDP–Liberal Alliance 45 per cent, Labour 29 per cent and the Conservatives 25 per cent. It was time for the recess, which would work to Mrs Thatcher’s advantage.

At the public spending Cabinet in July, Mrs Thatcher had said that the recess would allow time for ‘fresh examination’. But, as Jim Prior put it, ‘It wasn’t fresh examination: it was fresh faces.’
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The summer had shown her that it had become impossible to govern with her existing team. She railed against the Wets in private, calling them ‘dumb bunnies’.
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The impossibility of the existing Cabinet was even more visible to some of those advising her than it was to her. Willie Whitelaw and Michael Jopling, the Chief Whip, had been particularly ‘outraged’ by the challenge to her authority in the Cabinet
of 23 July. Despite the fact that both men leant to the ‘moderate’ tendency in the party, they urged her that a Cabinet that did not support her was ‘intolerable’.
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Some of her supporters thought she was too passive in the face of insurrection. Charles Douglas-Home,
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the deputy editor of
The Times
, wrote to her privately to tell her that he had been talking to her senior colleagues – Prior, Pym, Nott and Whitelaw himself – and had found their tone ‘pretty depressing’. ‘You cannot let them go on like this,’ he said. ‘The whole thrust of the government is crippled … by your ministers parading their consciences, frustrations, hysteria, snobberies, masculinities or ambitions before an audience.’
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He recommended that she confront each critic individually and ask him to state his case. She did not follow his advice. The woman who had the reputation of being too dictatorial was really suffering from the opposite problem. With a shudder, she envisaged her own political mortality. ‘I could always scrub floors,’ she told her private secretary.
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Although Mrs Thatcher saw the process of the reshuffle in retrospect as a straightforward matter of weeding out dissidents and waverers and promoting true believers, it was rather more wayward than that. At first, she was sufficiently shaken by what had happened in the course of the summer to think seriously of getting rid of Geoffrey Howe. ‘She came quite close to accepting this in private discussion,’ remembered Clive Whitmore. Implicitly rebuking her for her tendency to see ‘the government’ as an entity from which she was somehow separate, Whitmore told her that she could not distance herself from her Chancellor’s economic decisions: ‘If Geoffrey Howe goes, you’ve got to go.’
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‘She frequently behaved when in government as if she was still leading the Opposition,’ he said. This was partly because she was ‘shrewd politically and she always wanted to be in an “I told you so” position.’
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But the strength of her position, such as it was, came from the fact that no one could drive a wedge between her and her Chancellor: it would have been fatal for her to have done the work of destruction herself. Howe himself got wind of the threat to his position, and warned his new private secretary, John Kerr,
^†
that he might be gone by the party conference that October.
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In the view of the Chief Whip, Michael Jopling, she was never serious about getting rid of Howe, but she did harbour suspicions about him because he was ‘instinctively on the moderate side’.
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She was
right in sensing this, but unwise to consider getting rid of Howe. Although Howe did not disagree with her, at this stage, about the main policies, his attitude was very different. He believed that his Welsh background gave him a stronger understanding than Mrs Thatcher of the pain of unemployment.