Margaret Thatcher: The Authorized Biography (81 page)

The CPRS, as was its role, gave a broader context: ‘our industrial performance has been so poor for so long that in Western industrial terms we have now become a low productivity, cheap labour, country.’ It noted that unemployment was at present accepted ‘with surprising equanimity’, but foresaw that ‘if unemployment were to increase sharply, the present equable acceptance might break down, especially in the Inner Cities, with large numbers of young coloureds unable to find jobs.’ The world trade situation was bad, and ‘The UK is now exposed to the “Dutch disease” – the tendency
of oil and gas revenues to raise the exchange rate,’ a tendency which would be reinforced, it said, by monetarist policies. It recommended leaving more oil in the ground, loosening exchange controls and joining the ERM. Income tax thresholds should rise, the high rates should be cut (though this could be delayed), and indirect taxes should be put up. Public spending should be cut, partly by means of ‘staff cuts’, and also by the ‘contentious’ means of indexing benefits to prices rather than earnings. There was ‘consensus’, said the Think Tank, which clearly did not yet know Mrs Thatcher’s allergy to that word, that the main problems facing the nation were ‘inflation, industrial performance, and unemployment, in that order’.
²
The paper did not mention trade union reform as a remedy for any of the above.

The dismal economic news was not unexpected for Mrs Thatcher, though Tim Lankester, who, as her economics private secretary, had to lay it before her, did note, slightly surprised, that ‘she wasn’t terribly well briefed on the macroeconomic problems when she arrived’.
³
In a way, it was helpful to Mrs Thatcher that things were so bad. Only disaster had led voters to reject the soothing approach of Jim Callaghan. Only disaster would incline them to accept the nasty medicine that the strict new nurse was offering. The Conservatives had fought the election on the need for economic change, and now had a decent mandate for bringing it about. Although the Tory old guard were known to be worried by monetarism, economic liberalism and public spending cuts, they had no alternative analysis or programme. The scope for radicalism seemed clear.

But there was an enormous gulf between the seriousness of the situation and the practical readiness of the new government to do something about it. There was a potentially fatal combination of the natural complacency of the Conservative Party and the ingrained pessimism of a bureaucracy that had managed decline for more than a generation. Mrs Thatcher was instinctively alert to this problem, and feared, from the moment that she first sat at her desk, that events might run away from her. She began immediately to scribble with frantic energy over the briefs she received. Civil servants quickly came to recognize that her repeated underscoring of a passage with straight lines signified approval. A wavy line meant the opposite. Virtually never writing separate memoranda of her own, she preferred the margins of the document she received from others. There she would express her feelings with some violence. ‘No!!’, or ‘
No
’ (underlined three times), or even, as was much later to become famous in another context, ‘No. No. No.’ In his initial memo of 4 May 1979, John Hunt asked her to confirm that ‘comparability (properly carried out) is the key to establishing
public sector pay.’
⁴
‘No’, she wrote, choosing to ignore the fact that she had committed her party to honour the findings of the Clegg Comparability Commission which were due in August. And when Hunt drafted her a memorandum for Cabinet discussion on pay and cash limits, setting out the options on the subject, she wrote on his covering note: ‘Discussion on this paper in Cabinet would be
futile
– and on any other paper which raises such enormous questions and supplies so few answers! It would weaken our hand – not strengthen it.
Delete from Agenda
.’
⁵
From the very beginning, she dreaded using the Cabinet as a place where people, especially people who did not agree with her, could merely air opinions: she wanted it to focus on action.

Over the future of Clegg, in fact, Mrs Thatcher was determined to avoid further commitment. She saw the basic principle of comparability – the idea that wages could be determined by comparing them with those of other workers rather than being based on productivity and affordability – as wrong and financially ruinous. The institutional bias in favour of keeping the arrangement was very strong, however, and during the election campaign she had committed the Tories, despite Geoffrey Howe’s opposition, to honouring Clegg’s findings. A plan was in place to appoint a successor to Professor Clegg when he stepped down, and the expectation was that some sort of overall machinery for comparing and determining public sector pay would have to continue. On 16 May, Hunt wrote to Mrs Thatcher to say that ‘arguments against dismantling the Commission at
this
stage look conclusive.’
⁶
But she was determined to avoid anything but a short-term commitment. She also wanted to alter the way Clegg did his work. She went through the biographies of the proposed new members of the Commission trying to suggest people more sympathetic to her stance. What about Professor Patrick Minford,
*
she asked, or the businessman Frank McFadzean ‘or someone of similar
views
[underlined three times]?’ And she tried to change Clegg’s terms of reference to ‘consider the economic consequences of any award’.
⁷
When she realized that such changes might serve only to entrench Clegg, she got the Cabinet to agree to a holding position in which no new members should be added since this might imply government support for an ongoing role for the Commission. Presented with a draft parliamentary answer to a question asking whether Clegg would be abolished, she struck out the word ‘No’, but left the rest about ‘completing its existing work’ to stand.
⁸
Clegg clung to life because
of the fear of industrial disruption from winding it down too quickly. It was not until August 1980 that its abolition was announced.

Pursuing the subject of pay, Jim Prior submitted a memorandum recommending early talks between the government and the TUC and, separately, the government and the CBI, to consider ‘objectives’. Beside this, Mrs Thatcher wrote, ‘
No
.’ Prior also urged that the Clegg Commission be allowed to continue its work after it had next reported. ‘We simply cannot take the required decisions on a flimsy paper like this,’ Mrs Thatcher scrawled.
⁹
At her request, it was taken off the Cabinet agenda. The main forum of discussion was moved from the full Cabinet to E Committee, with a memo from the Chancellor to be used as the basis for discussion. This memo, however, fared little better. In it, Geoffrey Howe recommended that the government should await the completion of the Clegg round in August and then ‘take stock’ before deciding how much Rate Support Grant (RSG) should be paid to the local authorities (‘i.e.
follow
the settlements!’ wrote Mrs Thatcher derisively). Once that decision had been made, he said, ‘the local authorities would themselves be left to negotiate without interference.’ ‘This is a mistake,’ Mrs Thatcher noted. ‘He who pays the piper must have some say in calling the tune.’
¹⁰
As for comparability itself, Howe argued that the whole question of whether it should be a permanent feature of pay bargaining should be left open until after the end of the Clegg round.

Howe also canvassed the subject of some kind of economic and industrial forum after which he still hankered, and to which the Tories were, vaguely, committed. Although he rejected the idea that such a body should be used to set pay norms or limits, he went on, ‘The question is whether it [a forum] would be useful in conveying better public understanding of the processes and prospects of the economy’.
¹¹
The TUC must not be given a platform for formal confrontation, Howe argued, but there should be ‘informal contacts’ with union leaders. As time passed, the concept of the forum became weaker and weaker.
*
The Chancellor sought endorsement from Cabinet colleagues of the principles contained in his first three paragraphs. ‘There aren’t any
principles
in those paras,’ wrote Mrs Thatcher crossly, and she covered the document with a note which said, ‘This is a very poor paper and we can only charitably assume that the Treasury is “otherwise occupied” at the present … we certainly cannot wait until
Clegg has finished all his work.’
¹²
On 31 May 1979, having effectively gatecrashed a meeting originally planned for Professor Clegg and Prior alone, Mrs Thatcher told Clegg that he should add considerations of efficiency and overmanning to his remit. When he objected that this would be impossible, ‘The Prime Minister said that she was very disappointed to hear what Professor Clegg had to say about efficiency. This only confirmed her fears that the commission’s first reports would produce inflationary settlements. She asked Professor Clegg to consider the implications for the future reputation of the Commission.’
¹³

The matter in which the Treasury was ‘otherwise occupied’ was the Chancellor’s first Budget. Mrs Thatcher was determined not to repeat the mistake of the Heath government which, coming into office in June 1970, had waited until the customary time the following spring before presenting its first Budget. The same applied to public spending, which the government was determined to cut even though the spending year had already begun. The date of 12 June was chosen for the Budget, so there was great haste.

Before this, however, there had to be a Queen’s Speech, with its announcement of the legislative programme. In preparing this programme, Mrs Thatcher revealed how, despite having firm objectives and a clear philosophy to govern its approach, her government did not yet have an agreed strategy. This was visible in the matter of the Price Commission, a statutory body whose attempt to control prices artificially contradicted Thatcherite principles. On his first day at work, the new Trade Secretary, John Nott, wrote to Mrs Thatcher to urge immediate abolition. Mrs Thatcher, though she did not put it in so many words, was worried about the sudden effect on the RPI. She noted, on a letter from her private secretary:

I must tell you at the outset that I favour metamorphosis rather than extinction. The two main purposes of our strategy are

i. to restore incentives by direct tax cuts and consequently to tolerate indirect tax increases and

ii. to establish credibility and authority by the necessary amendments to trade union law. It would be unwise to jeopardise these objectives.

Finally decisions reached in haste tend to be repented later.
¹⁴

This version of her own strategy was strangely partial, leaving out the attack on inflation and on public spending. It was also, at least as she applied it to the Price Commission, abandoned. Keith Joseph intervened in support of Nott and immediate abolition was agreed at E Committee on 14 May. In her memoirs, Mrs Thatcher writes: ‘Perhaps the first time our opponents truly realised that the Government’s rhetorical commitment
to the market would be matched by practical action was the day we announced abolition.’
¹⁵
This is correct, but at the time her confusion about what to do in which order had come close to preventing it.

At the State Opening of Parliament, in which the Commons are summoned to wait upon the Queen in the House of Lords, Mrs Thatcher, in a white hat, set a new tone of smartness. She was seen, as MPs sat waiting for Black Rod to call them to the Upper House, brushing specks of scurf from Norman St John-Stevas’s collar. On 15 May, she led the debate on the Loyal Address in the Commons. In political terms, her words were combative. This had been, she said, ‘a watershed election’,
¹⁶
in which a clear choice had been made in favour of the individual and against government. She gleefully quoted the right-wing Labour ex-minister Bill Rodgers
*
who had declared: ‘Above all the Labour Party has let the idea of freedom be filched.’ Commenting on the unhappy state of inner cities, she blamed municipal socialism: ‘where one finds poverty in inner cities, there one finds that socialist government has operated for many years.’
¹⁷
Mrs Thatcher announced the quick abolition of the Price Commission. She ordered the National Enterprise Board to dispose of its holdings in profitable companies. Inter-city coach services were to be deregulated, immigration controls tightened. She promised a Bill to give tenants the right to buy their council house and the introduction of a new shorthold tenure to liberalize the private rented sector. And she foreshadowed what was later called the Assisted Places Scheme, which would pay for talented state school pupils to be educated in independent schools. There was the hint of compromise about the future of Rhodesia, and a hint of confrontation over the EEC budget. The increases in police and armed services pay, promised in the election campaign, were presented as the defence of ‘freedom under the law’ and justified because ‘security is essential to our survival as a free nation’. Their implications for the public purse were not discussed.

Treating the subject of trade unions ‘under the heading of the rule of law’, Mrs Thatcher also introduced the most controversial measure of the speech – the Bill to reform some of their practices. It was not, in reality, very radical, continuing to reflect the compromise within the party between the conciliator Jim Prior and those who wanted a complete reordering of British industrial relations. Prior, being the minister responsible, got the
better part of the bargain. The Bill tried to restrict picketing to the place of work (but did nothing about blacking – the boycotting of goods and firms breaking a strike), gave individuals the right of appeal against closed-shop membership (without undermining the institution of the closed shop itself) and made public funds available for postal ballots for union elections. In avoiding the criminal prescriptions that had undone Heath’s approach to industrial relations, and in signalling a direction of travel, the Bill had some significance. But it would have little practical effect on the conduct of industrial disputes. It was not enough to establish the ‘credibility and authority’ which her strategy sought.