Margaret Thatcher: The Autobiography (28 page)

I could not have become Leader of the Opposition, or achieved what I did as Prime Minister, without Keith. But nor, it is fair to say, could Keith have achieved what he did without the Centre for Policy Studies and Alfred Sherman. Apart from the fact of their being Jewish, Alfred and Keith had little in common, and until one saw how effectively they worked together it was difficult to believe that they could co-operate at all.

Alfred had his own kind of brilliance. He brought his convert’s zeal (as an ex-communist), his breadth of reading and his skills as a ruthless polemicist to the task of plotting out a new kind of free market Conservatism. He was more interested, it seemed to me, in the philosophy behind policies than the policies themselves. He was better at pulling apart sloppily constructed arguments than at devising original proposals. But the force and clarity of his mind, and his complete disregard for other people’s feelings or opinion of him, made him a formidable complement and contrast to Keith. Alfred helped Keith to turn the Centre for Policy Studies into the powerhouse of alternative Conservative thinking on economic and social matters.

I was not involved at the beginning, though I gathered from Keith that he was thinking hard about how to turn his Shadow Cabinet responsibilities for research on policy into constructive channels. In March Keith had won Ted’s approval for the setting up of a research unit to make comparative studies with other European economies, particularly the so-called ‘social market economy’ as practised in West Germany. Ted had Adam Ridley put on the board of directors of the CPS (Adam acted as his economic adviser from within the Conservative Research Department), but otherwise Keith was left very much to his own devices. Nigel Vinson, a successful entrepreneur with strong free enterprise convictions, was made responsible for acquiring a home for the Centre, which was found in Wilfred Street, close to Victoria. It was at the end of May 1974 that I first became directly involved with the CPS. Whether Keith ever considered asking any other members of the Shadow Cabinet to join him at the Centre I do not know: if he had, they certainly did not accept. His was a risky, exposed position, and the fear of provoking the wrath of Ted and the derision of left-wing commentators was a powerful disincentive. But I jumped at the chance to become Keith’s Vice-Chairman.

The CPS was the least bureaucratic of institutions. Alfred Sherman has caught the feel of it by saying that it was an ‘animator, agent of change, and political enzyme’. The original proposed social market approach did not prove particularly fruitful and was eventually quietly forgotten, though a pamphlet called
Why Britain Needs a Social Market Economy
was published.

What the Centre then developed was the drive to expose the follies and self-defeating consequences of government intervention. It continued to engage the political argument in open debate at the highest intellectual level. The objective was to effect change – change in the climate of opinion and so in the limits of the ‘possible’. In order to do this, it had to employ another of Alfred’s phrases, to ‘think the unthinkable’. It was not long before more than a few feathers began to be ruffled by that approach.

Keith had decided that he would make a series of speeches over the summer and autumn of 1974 in which he would set out the alternative analysis of what had gone wrong and what should be done. The first of these, which was also intended to attract interest among potential fundraisers, was delivered at Upminster on Saturday 22 June. Alfred was the main draftsman. But as with all Keith’s speeches – except the fateful Edgbaston speech which I shall describe shortly – he circulated endless
drafts for comment. All the observations received were carefully considered and the language pared down to remove every surplus word. Keith’s speeches always put rigour of analysis and exactitude of language above style, but taken as a whole they managed to be powerful rhetorical instruments as well.

The Upminster speech infuriated Ted and the Party establishment because Keith lumped in together the mistakes of Conservative and Labour Governments, talking about the ‘thirty years of socialistic fashions’. He said bluntly that the public sector had been ‘draining away the wealth created by the private sector’, and challenged the value of public ‘investment’ in tourism and the expansion of the universities. He condemned the socialist vendetta against profits and noted the damage done by rent controls and council housing to labour mobility. Finally – and, in the eyes of the advocates of consensus, unforgivably – he talked about the ‘inherent contradictions [of the] … mixed economy’. It was a short speech but it had a mighty impact, not least because people knew that there was more to come.

From Keith and Alfred I learned a great deal. I renewed my reading of the seminal works of liberal economics and conservative thought. I also regularly attended lunches at the Institute of Economic Affairs where Ralph Harris, Arthur Seldon, Alan Walters and others – in other words all those who had been right when we in government had gone so badly wrong – were busy marking out a new non-socialist economic and social path for Britain. I lunched from time to time with Professor Douglas Hague, the economist, who would later act as one of my unofficial economic advisers.

At about this time I also made the acquaintance of a polished and amusing former television producer called Gordon Reece, who was advising the Party on television appearances and who had, it seemed to me, an almost uncanny insight into that medium. In fact, by the eve of the October 1974 general election I had made a significant number of contacts with those on whom I would come to rely heavily during my years as Party Leader.

Keith delivered a further speech in Preston on Thursday 5 September. After some early inconclusive discussion in Shadow Cabinet of Keith’s various ideas, Ted had refused the general economic re-evaluation and discussion which Keith wanted. Keith decided that he was not prepared to be either stifled or ignored, and gave notice that he was intending to make a major speech on economic policy. Ted and most of our colleagues were
desperate to prevent this. Geoffrey Howe and I were accordingly dispatched to try to persuade Keith not to go ahead, or at least to tone down what he intended to say. In any case, Keith showed me an early draft. It was one of the most powerful and persuasive analyses I have ever read. I made no suggestions for changes. Nor, as far as I know, did Geoffrey. The Preston speech must still be considered as one of the very few which have fundamentally affected a political generation’s way of thinking.

It began with the sombre statement: ‘Inflation is threatening to destroy our society.’ At most times this would have seemed hyperbole, but at this time, with inflation at 17 per cent and rising, people were obsessed with its impact on their lives. That only made more explosive Keith’s admission that
successive
governments bore the responsibility for allowing it to get such a grip. He rejected the idea embraced by the Shadow Cabinet that inflation had been ‘imported’ and was the result of rocketing world prices. In fact, it was the result of excessive growth of the money supply. Explaining as he did that there was a time lag of ‘many months, or even as much as a year or two’ between loose monetary policy and rising inflation, he also implicitly – and accurately – blamed the Heath Government for the inflation which was now beginning to take off and which would rise to even more ruinous levels the following year. He also rejected the use of incomes policy as a means of containing it. The analysis was subtle, detailed and devastating.

Keith then put his finger on the fundamental reason why we had embarked on our disastrous U-turns – fear of unemployment. It had been when registered unemployment rose to one million that the Heath Government’s nerve broke. But Keith explained that the unemployment statistics concealed as much as they revealed because they included ‘frictional unemployment’ – that is, people who were temporarily out of work moving between jobs – and a large number of people who were more or less unemployable for one reason or another. Similarly, there was a large amount of fraudulent unemployment, people who were drawing benefit while earning. In fact, noted Keith, the real problem had been labour shortages, not surpluses. He said that we should be prepared to admit that control of the money supply to beat inflation would temporarily risk some increase in unemployment. But if we wanted to bring down inflation (which itself destroyed jobs, though this was an argument to which Keith and I would subsequently have to return on many occasions), monetary growth had to be curbed. Keith did not argue that if we got the
money supply right, everything else would be right. He specifically said that this was not his view. But if we did
not
achieve monetary control, we would never be able to achieve any of our other economic objectives.

The Preston speech was, of course, highly embarrassing for Ted and the Party establishment. Some still hoped that a combination of dire warnings about socialism, hints of a National Government and our new policies on mortgages and the rates would see us squeak back into office – an illusion fostered by the fact that on the very day of Keith’s speech an opinion poll showed us two points ahead of Labour. The Preston speech blew this strategy out of the water, for it was clear that the kind of reassessment Keith was advocating was highly unlikely to occur if the Conservatives returned to government with Ted Heath as Prime Minister. Keith himself discreetly decided to spend more time at the CPS in Wilfred Street than at Westminster, where some of his colleagues were furious. For my part, I did not think that there was any serious chance of our winning the election. In the short term I was determined to fight as hard as I could for the policies it was now my responsibility to defend. In the longer term I was convinced that we must turn the Party around towards Keith’s way of thinking, preferably under Keith’s leadership.

The Conservative Party manifesto was published early, on Tuesday 10 September – about a week before the election was announced – because of a leak to the press. I was taken by surprise by a question on it when I was opening the Chelsea Antiques Fair. The release of the manifesto in this way was not a good start to the campaign, particularly because we had so little new to say.

I had never had so much exposure to the media as in this campaign. The Labour Party recognized that our housing and rates proposals were just about the only attractive ones in our manifesto, and consequently they set out to rubbish them as soon as possible. On Tuesday 24 September Tony Crosland described them as ‘a pack of lies’. (This was the same press conference at which Denis Healey made his notorious claim that inflation was running at 8.4 per cent, calculating the figure on a three-month basis when the annual rate was in fact 17 per cent.) I immediately issued a statement rebutting the accusation, and in order to keep the argument going, for it would highlight our policies, I said at Finchley that evening that the cut in mortgage rates would be among the first actions of a new Conservative Government. Then, in pursuit of the same goal, and having consulted Ted and Robert Carr, the Shadow Chancellor, I
announced at the morning press conference at Central Office on Friday that the mortgage rate reduction would occur ‘by Christmas’ if we won. The main morning papers led with the story the following day – ‘Santa Thatcher’ – and it was generally said that we had taken the initiative for the first time during the campaign. On the following Monday I described this on a Party Election Broadcast as a ‘firm, unshakeable promise’. And the brute political fact was that, despite my reservations about the wisdom of the pledge, we would have had to honour it at almost any cost.

It was at this point that the way in which I was presenting our housing and rates policies first began to run up against the general approach Ted wanted to take in the campaign. At his insistence I had made the policies I was offering as hard and specific as possible. But the manifesto, particularly in the opening section, deliberately conveyed the impression that the Conservatives might consider some kind of National Government and would therefore be flexible on the policies we were putting forward.

At the Conservative press conference on Friday 2 October Ted stressed his willingness as Prime Minister to bring non-Conservatives into a government of ‘all the talents’. This tension between firm pledges and implied flexibilities was in danger of making nonsense of our campaign and dividing Shadow ministers.

On Thursday I continued when campaigning in the London areas with the vigorous defence of our housing policies and combined this with attacks on ‘creeping socialism’ through municipalization. In the evening I was asked to come and see Ted at Wilton Street. His advisers had apparently been urging him to actually start talking about the possibility of a Coalition Government. Because I was known to be firmly against this for both strategic and tactical reasons, and because I was due to appear on the radio programme
Any Questions
in Southampton the following evening, I had been called in to have the new line spelt out to me. Ted said that he was now prepared to call for a Government of National Unity which, apparently, ‘the people’ wanted. I was extremely angry. He had himself, after all, insisted on making the housing and rates policies I had been advocating as specific as possible: now, at almost the end of the campaign, he was effectively discarding the pledges in the manifesto because that seemed to offer a better chance of his returning to Downing Street.

Why he imagined that he himself would be a Coalition Government’s likely Leader quite escaped me. Ted at this time was a divisive figure, and although he had somehow convinced himself that he represented the
‘consensus’, this accorded with neither his record, nor his temperament, nor indeed other people’s estimation. For myself, I was not going to retreat from the policies which at his insistence I had been advocating. I went away highly disgruntled.

The last few days of the campaign were dominated by all the awkward questions which talk of coalitions brings. But I stuck to my own brief, repeating the manifesto pledges sitting alongside Ted Heath at the last Conservative press conference on Tuesday 7 October. The general election result two days later suggested that in spite of the natural desire of electors to give the minority Labour Government a chance to govern effectively, there was still a good deal of distrust of them. Labour finished up with an overall majority of three, which was unlikely to see them through a full term. But the Conservative result – 277 seats compared with Labour’s 319 – though it might have been worse, was hardly any kind of endorsement for our approach.