Margaret Thatcher: The Authorized Biography (90 page)

Just before Cabinet approval of the MTFS, John Hoskyns sent a note to Mrs Thatcher about the Budget. He recalled the objection by the Governor of the Bank of England, at a meeting the previous week, to the introduction of the MTFS, and attributed it to the ‘subconscious desire to avoid announcing that you’re going to do something difficult, in case you fail’. Hoskyns supported the MTFS because it helped with what he thought should be the ‘main message’ of the Budget – ‘the commitment, over time, to ending inflation’ – but he complained that ‘Our scope here is limited by our failure to de-index [that is, to remove the automatic upward adjustment of wages and benefits to keep pace with inflation] on an adequate scale in public expenditure.’ This weakness on public expenditure had decelerated the private sector but not the government sector: ‘we have tackled it completely the wrong way round.’ He warned, not for the
first time, that the government would have to do ‘something else on more Hayekian lines some time in the next year (i.e. along the lines of the “shock package” I suggested in January)’.
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Geoffrey Howe, by contrast, was rather more optimistic than his Eeyorish countenance, or the facts, suggested. Prompted by Nigel Lawson, who was very suspicious of what he called ‘nonsensical forecasts’,
¹⁰⁹
he told Mrs Thatcher privately that he thought the Treasury’s forecast which predicted ‘a larger drop in output in 1980 than any other forecasting body is expecting’ was too gloomy. He thought, too, that the PSBR would be smaller than expected, but promised not to publish an ‘unduly optimistic’ forecast.
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Perhaps subconsciously, he was using the idea of the MTFS as a way of postponing one or two tough decisions. He warned her that his range for the growth of sterling M3 could not come below 7–11 per cent: ‘I know that this will be a disappointment to you,’ but otherwise interest rates would have to be so high as to be ‘out of the question’.
¹¹¹
The MTFS, which Howe announced in the Budget, set out a path by which the range would fall by 1 per cent annually, reaching a growth rate of 4–8 per cent for sterling M3 in 1983–4. The PSBR would fall from 4 per cent of GDP in 1980–81 to 1.5 per cent in 1983–4. The Treasury published a green paper entitled
Monetary Control
in March, and later, in June, its
Memorandum on Monetary Policy
. The MTFS did not, in itself, change the policy already being pursued, but it did formalize the position and hold the government to its course. The monetarist government now had a monetarist strategy.

But, as Keith Joseph had long before said, ‘Monetarism is not enough.’ Sound money was a necessary but not a sufficient condition of recovery. The successful control of inflation would be a cold comfort unless it was accompanied by a transformation of economic and industrial attitudes and opportunities. As John Hoskyns kept complaining, Clegg’s awards, and the failure to contain public spending at a time when interest rates and the sterling exchange rate were soaring, attacked the private sector ferociously. In June 1980, he backed up his view with a paper submitted to Mrs Thatcher by Douglas Hague, called ‘The Central Problem of Public Expenditure’. Hague wrote: ‘Even if we hold the proportion of output coming from the public sector constant, if private sector productivity rises faster than public, then any “comparability” means that tax rates will rise exponentially … We have designed an arrangement for destroying the British economy.’
¹¹²
Hoskyns saw the process of economic recovery as having three legs – the attack on inflation, the ending of indexing and other
privileges of the state sector, and the curbing of the power of the trade unions. The MTFS had been introduced, but little else had happened. The stool had only one leg to stand on.

The sharpest internal disagreement was about the trade union leg. When the Conservatives had come into office in May 1979, Jim Prior had found it relatively easy to carry the day for his cautious Employment Bill. On 14 May he wrote to Mrs Thatcher, saying that ‘it is absolutely crucial to our whole Administration to get this right,’ and continued, ‘it would be fatal to follow the 1970 pattern and rush things too much. We must live up to our promises to consult.’
¹¹³
Despite the promise in the Conservative manifesto to review the legal immunities of trade unions to ‘ensure that the protection of the law is available to those not concerned in the dispute but who at present can suffer severely from secondary action (picketing, blacking and blockading)’, Prior was firmly opposed to doing anything which would ‘put at risk the support we must seek to win from moderate opinion in the trade union movement itself and more generally’.
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In the view of Lord Gowrie,
*
one of Prior’s junior ministers at this time, ‘The civil servants [in the Department of Employment] were counting the days until a return to incomes policy.’
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Prior had no objection in principle to such a return. To make it easier if it did come, he wanted relations with union leaders to be on a friendly footing.

Although tetchy about Prior’s slowness, Mrs Thatcher was conscious both of the need to carry her Cabinet and of the threat of strikes in the first winter of her government which she was not yet prepared to resist. She therefore let him have most of his way in his first Employment Bill. By the end of 1979, however, the picture of industrial relations had become more desperate. In a court case (McShane v Express Newspapers Ltd) about the extent of permitted trade union action, the Court of Appeal found on 13 December that anything could be considered to be ‘in furtherance of a trade dispute’ if the person doing the disputing thought it was. In other words, the law afforded no protection to firms dragged into a dispute with which they were not concerned. Then, on 2 January 1980, a steel strike began. Against the background of a plan for 52,000 redundancies in the hugely loss-making British Steel Corporation, the steelworkers’ union, the ISTC, called a strike over its pay claim. On 16 January, the union spread the strike to private sector steel producers who were not part
of the dispute. Those already dissatisfied by Prior’s foot-dragging became extremely anxious. On 28 January, Hoskyns sent a note to Mrs Thatcher about a conversation he had held with Keith Joseph, David Wolfson and Leon Brittan, at that time the Minister of State at the Home Office.
*
‘The only way to penalise unions’, it said, ‘is to attack their funds. Never go after the individual … The only thing the union leaders really care about is their funds.’ Unions were ‘financial enterprises which operate on a no-risk basis’. The law on immunities must therefore change because it is ‘a matter of power’: ‘If we don’t act Frank Chapple [the moderate and robust leader of the Electricians Union] will in due course be replaced by militants, and then the switches could be turned off. Similarly, Scargill will eventually succeed Gormley [as leader of the miners].’
¹¹⁶
The government must stand firm in the steel strike, insisted Hoskyns, and act immediately against immunities.

Hoskyns followed this up by reminding Mrs Thatcher that the situation was not unlike that of the previous winter (‘of Discontent’) when, in opposition, colleagues had been divided about whether or not to accept the union status quo. His suggestion, unspoken, was that she should act as she had then, and go public in defiance of Prior’s wishes. On 1 February, Prior wrote to Mrs Thatcher telling her that it would be a terrible mistake to remove the immunities of unions. The immunities, he said, had ‘immense symbolic significance’. He counselled against ‘over-hasty action’. Mrs Thatcher wrote her wiggly line of disapproval under the word ‘over-hasty’.
¹¹⁷
On 3 February, Prior got his retaliation in first by telling the BBC’s
World This Weekend
that he would not rush through changes to immunities: if the government got it wrong on industrial relations, ‘the outlook for our country, and I mean
our
country, is very bleak indeed.’
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With a fierceness of which, despite his ‘dead sheep’ reputation, he was sometimes capable, Geoffrey Howe wrote to Mrs Thatcher the following day, demanding action on immunities. Unless the Conservatives acted, he wrote, ‘we might as well not have fought (and won) the last General Election.’ He agreed with the principle of ‘step by step’, but added that there would be massive union trouble whatever the government did, and so there was no point
trying to avoid it. The union question, said Howe, was ‘the most important issue in the life not just of this Government but of the nation’.
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By now, almost everyone wanted to pitch in. Lord Thorneycroft circulated a hawkish paper to the Cabinet. John Nott inveighed against the union blacking of international shipping. Hoskyns, the Centre for Policy Studies and sympathetic businessmen worked tirelessly against Prior. The
Daily
Express
began to refer derisively to ‘Pussyfoot Prior’. John Methven, the head of the CBI, confused everyone by calling for ‘profound changes’ while also backing Prior. Sir Hector Laing, the chairman of United Biscuits, was a fervent admirer of Mrs Thatcher. ‘I thought she was very attractive a. physically and b. for her command of language,’ he said years later.
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But he was also a friend of Jim Prior, whom he later put on his board. Laing wrote to the Prime Minister thus: ‘You will know what Elizabeth I said to William Cecil: that “without respect of my private will you will give me that counsel you think best.” ’
¹²¹
What he thought best was Jim Prior’s step-by-step approach; otherwise confrontation would be ‘insupportable’. Mrs Thatcher rang Laing at home that weekend. ‘How are you?’ he asked. ‘I was fine until I got your letter,’ she replied.
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In a private letter answering Laing the following week, Mrs Thatcher put her own position very frankly. If the government did not change the law, she said, ‘we should be telling the law-abiding citizen that we prefer to strengthen the powers of those who
inflict
injury rather than to help those who suffer from it. That course is not open to anyone who fought the last election on the Conservative manifesto, and it is therefore not open to me.’ Immunity, she said, should be confined to the primary action, and common law remedies should be restored to those who suffered from secondary action. She thought that now was the time:

If we flinch from this task now, when we have public and massive trade union opinion with us, they are not likely to have much faith in us to do it next winter.

For obvious reasons I have not been able to put this view publicly yet. Judging from my correspondence, a
lot
of industrialists share it and would go much further. Some want a new criminal offence of ‘unlawful picketing’. I would prefer to see what we can do through the civil law.

You quoted a saying to me. Let me counter with another famous quotation: ‘Our doubts are traitors / And make us lose the good we oft might win / By fearing to attempt.’
Measure for Measure
.
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Even as she wrote, however, Mrs Thatcher knew that the practicalities, not to mention Cabinet nervousness, were such that new material on immunities could not be included in Prior’s Bill. On 13 February 1980,
E Committee agreed that the Bill should not be amended, but that ‘trade union immunities should eventually be considered’ and a green paper prepared.
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Prior was in no hurry for this document to be completed, so what Mrs Thatcher had feared was likely to come to pass – another winter without the necessary legislation in place. Although the conventional wisdom has it that Jim Prior was right in his tactics, and that ‘step by step’ was indeed the way to deal with union reform, the difference between him and Mrs Thatcher was not only about pace. Prior believed that the point of the whole exercise was not to undermine the structure of union power but to bring about more moderate attitudes which would produce a new era of co-operation. In his daily press digest for the Prime Minister for 11 March, Bernard Ingham reported: ‘
Mr Prior
on TV stakes his political future on Employment Bill; admits he is on trial politically. No question of attacking union funds while he is Minister.’
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Prior’s ambition at this stage was to be secretary of state for industry
¹²⁶
and he saw establishing a good relationship with the unions as the flip side of doing the same with business, an essentially corporatist approach. Mrs Thatcher, on the other hand, believed that it was only by fundamentally changing the legal rights of trade unions and bringing them under the law which applied to everyone else that progress could be made. Rather than wanting to establish a good relationship with the unions, she wanted to bring about conditions in which government had virtually no need for a relationship with the unions at all. In later years, Prior said, ‘It was really an argument about pace,’ but then added, ‘though perhaps it was more fundamental.’ But he also argued, in retrospect, that the politics of the conflict between himself and Mrs Thatcher worked quite well for the government: ‘It was quite a good position, in government, for her to be pushing Jim Prior and him to be resisting.’
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Mrs Thatcher was now clearly frustrated by slow progress and felt ready to explode. On the weekend of 17 February 1980, she did so. Staying at Chequers that Sunday, she confronted the news that a mass picket at Hadfields, the private steelworks in Sheffield, organized by Arthur Scargill, the militant hero of the Saltley coke depot incident under the Heath government, had succeeded. She took a telephone call that morning from Keith Joseph in which he told her that the picket had been ‘a massive breach of common law’.
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No, she said, it had surely not been a criminal matter, but a civil one. Angry at her government’s impotence, Mrs Thatcher rang Willie Whitelaw, the Home Secretary. ‘The Government could not sit aside and do nothing,’ she told him: there should be a one-clause Bill that week to prevent such picketing.