Margaret Thatcher: The Autobiography (48 page)

Here, too, we seemed to be running up the ‘Down’ escalator. On 15 November we accordingly raised Minimum Lending Rate (MLR – the successor to Bank Rate) to 17 per cent. (Measured by the RPI, inflation at this time was running at 17.4 per cent.) Other measures to help fund the PSBR were also announced.

Of course, the Opposition had a field day, attacking our whole strategy as misguided and incompetent. The fact of the matter was not that our strategy was wrong but that we had yet to apply it sufficiently rigorously and get a grip on public spending and borrowing. That in turn was increasing the pressure on the private sector through higher interest rates.

I knew that we had to break this vicious spiral, otherwise private enterprise would have to bear a crushing burden of public sector profligacy. Geoffrey and I accordingly decided that we had no alternative but to seek further spending reductions in 1980–81 and in subsequent years. He brought forward a paper proposing an extra £1 billion reduction in 1980–81, and £2 billion in each of the following years. From what I had seen of departmental ministers’ fierce defence of their own budgets, I knew that this would provoke trouble. But I also knew that the great majority in the Party were determined to see the strategy succeed.

When Geoffrey Howe delivered his second budget on 26 March 1980, he was able to announce that we had found over £900 million in further savings in 1980–81 (though part of that was absorbed by an increase in the contingency reserve). Overall, at current prices this was over £5 billion less than Labour had planned to spend. In the circumstances, it was a formidable achievement, but also a fragile one. As the economy sank deeper into
recession, there would be fresh demands, some difficult to resist, for higher public spending on programmes like social security and the loss-making nationalized industries. In a paper he wrote for me in June 1979, John Hoskyns, now head of my policy unit, had used a memorable phrase about governments ‘trying to pitch [their] tent in the middle of a landslide’. As we moved into the 1980–81 public expenditure round and the forecasts worsened, I could hear the canvas strain and the ground rumble.

The second half of 1979, though dominated by economic policy and by the intense round of diplomatic activity, was also a time darkened by terrorism. Barely a fortnight after entering No. 10 I had delivered the address at the Memorial Service for Airey Neave. Not long afterwards, IRA terrorists struck another blow.

I was at Chequers for the Bank Holiday Monday of 27 August when I learnt of the shocking murder of Lord Mountbatten and, that same day, of eighteen British soldiers. Lord Mountbatten was killed by an explosion on board his boat off the coast at Mullaghmore, County Sligo. Three other members of his party were killed and three injured.

The murder of our soldiers was contemptible. Eighteen were killed and five injured in a double explosion triggered by remote-controlled devices at Narrow Water, Warrenpoint, near Newry, close to the border with the Republic. The IRA had exploded the first bomb and then waited for those who came by helicopter to rescue their comrades before detonating the second. Among those murdered by the second bomb was the Commanding Officer of the Queen’s Own Highlanders.

I decided immediately that I must go to Northern Ireland to show the army, police and civilians that I understood the scale of the tragedy and to demonstrate our determination to resist terrorism. Having returned to London from Chequers, I stayed there on Tuesday to allow those involved to deal with the immediate aftermath while I held two meetings with colleagues to discuss the security requirements of the province. That evening I wrote personally to the families of the soldiers who had died; such letters are not easy to write. There were, alas, to be many more of them during my time in office.

I flew to Ulster on Wednesday morning. I went first to the Musgrave Park Hospital in Belfast and talked to the injured soldiers, then visited the Lord Mayor of Belfast at City Hall. I had insisted that I must meet the ordinary citizens of the city, and since the best way to do so was to walk through Belfast’s shopping centre, that is where I went next. I shall never
forget the reception I received. It is peculiarly moving to receive good wishes from people who are suffering and I formed then an impression I have never had reason to revise, that the people of Ulster will never bow to violence.

After a buffet lunch with soldiers of all ranks from 3 Brigade, I received a briefing from the army and then departed by helicopter to the ‘bandit country’ of South Armagh. Dressed in a camouflage jacket, I saw the bomb-battered Crossmaglen RUC station – the most attacked RUC-Army post in the province – before running back to the helicopter. It is too dangerous for either security force personnel or helicopters to remain stationary in these parts.

My final visit was to Gough barracks, the RUC base in Armagh. It is difficult to convey the courage of the security forces whose job it is to protect the lives of us all from terrorism. In particular, members of the UDR, who do their military duty living in the community where they and their families are always vulnerable, show a quiet, matter-of-fact heroism which I have never ceased to admire.

Back in London, there were two major questions. How were we to improve the direction and co-ordination of our security operations in the province? And how were we to get more co-operation in security matters from the Irish Republic? On the first, we decided that the difficulties of co-ordinating intelligence gathered by the RUC and the army would be best overcome by instituting a new high-level security directorate. On the second, we agreed that I would tackle the Irish Prime Minister, Jack Lynch, when he arrived for Lord Mountbatten’s funeral.

Accordingly, we arranged a day’s talks with Mr Lynch and his ministerial colleagues at No. 10 on the afternoon of Wednesday 5 September. The first session was a tête-à-tête between the two Prime Ministers; then we were joined by our respective ministers and officials.

Mr Lynch had no positive suggestions of his own to make at all. When I stressed the importance of extradition of terrorists from the Republic, he said that the Irish constitution made it very difficult. Mr Lynch pointed out that under Irish law terrorists could be tried in the Republic for offences committed in the UK. So I asked that RUC officers – who would have to amass the evidence for such prosecutions – be able to attend interrogations of terrorist suspects in the south. He said they would ‘study’ it. I knew what that meant: nothing doing.

We also lost no opportunity to use the revulsion the killings provoked in the US to inform public opinion there about the realities of life in
Ulster. The emotions and loyalties of millions of decent Irish-Americans are manipulated by Irish Republican extremists who have been able to give a romantic respectability to terrorism that its sordid reality belies. As a result, there has been a continuing flow of funds and arms which helps the IRA to continue its campaign, whereas in 1979 we were faced with the absurd situation that the purchase of 3,000 revolvers for the RUC was held up by a State Department review under pressure from the Irish Republican lobby in Congress.

I visited the province again on Christmas Eve. It made the troubles of a political life seem very trivial.

Foreign affairs during the first eighteen months in 1979–1980

M
Y FIRST
E
UROPEAN
C
OUNCIL
took place in Strasbourg on 21 and 22 June 1979.

I was confident that Chancellor Schmidt had taken away from our earlier discussions a clear impression of my determination to fight for large reductions in Britain’s net budget contribution. I was hoping he would pass the message on to President Giscard, who was to chair the summit; both men were former Finance ministers and should be well able to understand Britain’s point of view. (I could not help noticing too that they spoke to one another in English: but I was too tactful to remark on it.)

The background to the British budget problem is quickly described, though the precise details were extremely complicated. At the time of the negotiations for Britain’s accession we had received an assurance (as I would continue to remind other member states) that:

The reason why such an assurance had been necessary was that Britain’s unique trading pattern made her a very large net contributor to the EC budget – so large that the situation was indeed unacceptable. We traditionally imported far more from non-EC countries than did other
Community members, particularly of foodstuffs. This meant that we paid more into the Community budget in the form of tariffs than they did. By contrast, the Community budget itself is heavily biased towards supporting farmers through the Common Agricultural Policy (CAP): indeed when we came into office more than 70 per cent of the budget was spent in this way. The CAP was – and is – operated in a wasteful manner. The dumping of these surpluses outside the EC distorts the world market in foodstuffs and threatens the survival of free trade between the major economies. The British economy is less dependent on agriculture than that of most other Community countries and our farms are generally larger and more efficient than those of France and Germany; consequently we receive less in subsidy than they do. Britain traditionally received a fairer share of the receipts of the Community’s non-agricultural programmes (such as the regional and social funds), but the growth of these programmes had been limited by the power of the farming lobby in Europe and by the international recession.

The previous Labour Government had made a great play of ‘renegotiating’ the terms of Britain’s original entry. In 1975 a Financial Mechanism to limit our contribution had been worked out in principle: but it had never been triggered, and never would be, unless the originally agreed conditions were changed. As a result, there was no solid agreement to which we could hold our Community partners.

One other development had worsened the overall position: Britain’s prosperity, relative to that of our European neighbours, had steadily declined. In spite of North Sea oil, by 1979 Britain had only the seventh highest GDP per head of population among the member states. Yet we were expected shortly to become the largest net contributor.

So from the first my policy was to seek to limit the damage and distortions caused by the CAP and to bring financial realities to bear on Community spending. But at the Council meeting in Strasbourg I also had two short-term objectives. First, I wanted to have the budget question raised now and to gain acceptance of the need for action. Second, I wanted to secure a firm undertaking that at the next Council meeting in Dublin the Commission would bring forward proposals to deal with the problem.

If the budget issue was to concentrate minds as I wished, it had to be raised on the first day, because the communiqué is always drafted by officials overnight, ready for discussion the following morning. Over lunch I spoke to President Giscard about what I wanted and gained a strong impression that we would be able to deal with the budget early on.

But when we resumed, it quickly became clear that he was intent on following his previous agenda. At least I was well briefed and took an active part in the discussion about energy and the world economy. I pointed out that Britain had not flinched from the hard decisions required to ride out these difficulties and that we were making large cuts in public spending. By twenty minutes to seven that evening, we had decided, if we could, to hold Community imports of oil between 1980 and 1985 at a level no higher than that of 1978. We had committed ourselves to keep up the struggle against inflation. Inevitably, I suppose, we had agreed to say something about ‘convergence’ between the economic performance of member states (a classic piece of Euro-jargon). In fact, we had done almost everything except what I most wanted us to do – tackle the budget issue.