The Story of Britain: From the Romans to the Present (110 page)

These momentous events sounded the death-knell of the Marxist system and heralded a new post-ideological age. They have had endless international repercussions, not least of which is that they have left the United States the only superpower in the world. America immediately agreed a series of arms-limitation treaties, as there were around 27,000 warheads in the new republics. Many eastern European countries applied to join the European Union, and ten who were accepted as members after signing the Treaty of Accession in 2003 are set to join the fifteen existing members on 1 May 2004. Former Soviet-bloc countries also joined NATO, the organization originally set up to counter the threat they presented as members of the Warsaw Pact.

In Britain the break-up of the Soviet system only underlined to the small group of Labour modernizers the desperate need for change if the party wanted to avoid becoming a dinosaur like the Soviet Communist party. Neil Kinnock saw that Labour must become more moderate if they wanted to return to office. Alarmed by the success of the SDP, whose electoral pact with the Liberals began eating away at the Labour vote in the mid-1980s, he spent the rest of the decade cleaning out the hard left from the Labour party. With the help of a communications director of genius, a young television producer named Peter Mandelson, grandson of the 1945 Labour home secretary Herbert Morrison, Kinnock began changing Labour’s image. In 1986 at the party conference the outmoded revolutionary Red Flag was swapped for a softer red rose as the party’s emblem. The next few years would see Labour abandon CND, nationalization and punitive taxation.

Kinnock’s greatest challenge was the Trotskyist organization Militant, which had become entrenched within the Labour party. Militant believed in permanent revolution rather than Parliamentary democracy and were especially powerful in local government. They would prove extremely difficult to dislodge. Kinnock found an unexpected ally against Militant in Mrs Thatcher. In her second term of office, she embarked on her great experiment of controlling expenditure at local government level.

Militant had given town-hall funding a bad name by insisting on giving money to increasingly esoteric projects which suited their extremist beliefs, and this began to infuriate taxpayers. In 1984 with the introduction of rate-capping–enabling central government to ‘cap’ the rates if it considered them to be too high–Mrs Thatcher hoped to put an end to Militant’s activities. Councils which overspent had their grants reduced, while those which kept within their limits would also have their grants reduced–it was a late-twentieth-century version of Morton’s Fork and just about as popular. Although Britons were getting tired of strange projects belonging to what was now being called the loony left, they also disliked the way rate-capping limited local services. School buildings suffered, as did social services, housing and homeless shelters. In 1985
Faith in the City
, a report by a Church of England commission, urged emergency action by the government to relieve the plight of inner cities.

In areas like Liverpool where many of the councillors were members of Militant, they refused to accept rate-capping and went on spending. This had been made illegal so that council leaders would be personally liable for costs, but Liverpool Council elected to go bankrupt when central government withheld its funds. The council had to borrow the unheard of sum of £30 million from a foreign bank to cover its debts. But the council still could not pay many of its workers. Militant’s irresponsible behaviour enraged ordinary Labour supporters.

In June 1987 Mrs Thatcher won her third successive election with a reduced but still substantial majority of 101. Her final push to control local expenditure demonstrated that she had rather lost her political touch. She had already outraged liberal opinion with an attack on local freedoms in the form of Section 28 of the 1988 Local Government Act which forbade the promotion of homosexuality by local authorities. This provision was her response to media reports that local councils were promoting the idea of families with two gay parents.

Moreover in the late 1980s the gilt had begun wearing off the economic miracle of Thatcherism which had so mesmerized the world, with inflation reduced to 2.5 per cent in 1986. What had been boom was turning to bust. In 1987 the pro-European chancellor Nigel Lawson slashed interest rates as the economy soared. He was shadowing the European Monetary System, the first step on the way to a single currency for the whole of Europe. At the same time a huge tax cut took the basic rate of income tax from 27 per cent to 25. Lawson believed the boom would last forever but low interest rates, low tax rates and double tax relief sparked a property-buying frenzy and house prices suddenly started rising by 34 per cent a year. Interest rates had to be sharply raised to cool the overheating economy as retail price inflation rose to 10 per cent in 1990–and the Lawson boom was over.

In an excess of centralizing zeal Mrs Thatcher had abolished the Greater London Council in 1986 when it refused to reduce its expenditure. Now as Labour councils carried on raising the rates to counter the squeeze from central government, she decided that the only solution was to abolish the rates. In their stead she introduced the poll tax–poll being an ancient world for head. This tax had caused a revolt in the time of Richard II. It would have the same sort of effect in the reign of Elizabeth II.

Like many aspects of the Thatcher Revolution, the poll tax made logical sense to the Thatcherites but was hard for unbelievers to grasp. This time the Thatcherites’ proud reputation for thinking the unthinkable was simply unthinkable, and a public-relations disaster. Mrs Thatcher and her researchers had hit on the fact that only a minority of the population were paying local taxes, less than half of the electorate of thirty-five million. Every man and woman able to vote would pay the one-off poll tax (its formal name was actually the community charge). That would soon keep council taxes down as voters hit in their pockets would vote for lower-spending (and so no doubt Conservative) councils.

Mrs Thatcher and her Cabinet believed the poll tax would unleash the angry citizenry on the town halls determined to curb their spending. But the government had badly miscalculated: instead the angry citizenry turned on the government in widespread poll-tax riots. The message which the British people picked up on was that the duke and the dustman were going to have to pay the same tax, and their sense of fair play was outraged.

Nevertheless Mrs Thatcher would not draw back. Her motto, she had once said, was ‘This lady’s not for turning.’ But many in the Conservative party began to worry about her increasing inability to listen to the electorate or to the Cabinet. In 1989 Nigel Lawson resigned, chiefly because of Mrs Thatcher’s reluctance to join the European Exchange Rate Mechanism, or ERM, although she had signed the Single European Act in 1986 which provided for greater European Community economic and social integration from 1992.

The poll-tax riots took place in March 1990. In August that year the dictator of Iraq, Saddam Hussein, invaded Kuwait, thus threatening Europe’s oil supplies, and despite a UN Security Council resolution, failed to withdraw. Mrs Thatcher was at her courageous best encouraging the new United States president George Bush to lead a multinational coalition under UN auspices to war against Saddam when he refused to obey the UN. But disaffected Tories were worried by the way their party’s lead was dropping in the opinion polls. The Thatcher revolution was running out of steam, even for her followers. Three months later Mrs Thatcher was to find herself stabbed in the back by a challenge to her leadership. That November John Major became British prime minister.

Mrs Thatcher had been in power for eleven years. There is no disputing her lion heart. Not only had she changed Britain almost overnight. Under her education minister Sir Keith Joseph, who was responsible for much of her regime’s intellectual daring, she had paved the way for the greater testing and standardizing of education which began with the introduction of the national curriculum system in 1988. Tests for children at seven, eleven and fourteen, designed to show where schools were failing, signalled the end of thirty years of progressive teaching that had derailed into an undisciplined belief that it was more important for children to explore or ‘find themselves’ than to take in information.

Mrs Thatcher’s Hillsborough Agreement in 1985 setting up an experimental inter-governmental Anglo-Irish Council was the beginning of the political solution that Catholic leaders had warned was the only way of ending the civil war in Northern Ireland. When half of the British Cabinet only just escaped death when their hotel was blown up in Brighton at the party conference in October 1984, Mrs Thatcher accepted that Britain could never win a war against the IRA. She was extremely shaken by the explosion. Even so she insisted that the local Marks and Spencer open early to provide outfits for ministers who had had to leave the hotel in their nightclothes. She was determined to chair a Cabinet meeting that morning. ‘Business as usual,’ she said, though two of her friends were dead and the trade and industry secretary Norman Tebbit’s wife badly injured.

Despite protests from republicans and loyalists, the British government began to consult the Irish government on an official and regular basis about the administration of Northern Ireland and to hammer out a common policy for border security and justice. Eight years of Anglo-Irish co-operation would lead in 1993 to the Downing Street Declaration by the Irish and British premiers Bertie Ahern and John Major that welcomed Sinn Fein to all-party talks and ushered in an IRA ceasefire.

But, for all Mrs Thatcher’s great gifts, by the early 1990s members of the Cabinet desired it to be more collegiate, for she had become increasingly dictatorial. There was also bitter disagreement over Britain’s relations with Europe. The Thatcher years coincided with a movement in France and Germany to accelerate the process of ‘ever closer union’ within the European Common Market, transforming it into a European superstate. The movement was led by Jacques Delors, the French president of the European Commission, and assisted by Chancellor Kohl of Germany and President Mitterrand of France. All three were on record as hoping that 80 per cent of legislation would soon be made by the European Parliament instead of at national level.

Mrs Thatcher fought Britain’s corner on the principle of subsidiarity–a piece of EC jargon proclaiming the belief that all decisions should be taken at the lowest effective level, but used by the British as a euphemism for national decision-making. In October 1990, however, anxious not to lose her new chancellor of the Exchequer John Major and the equally pro-European foreign secretary Douglas Hurd, she took Britain into the ERM, a preliminary to joining the European Monetary System, itself the first step on the way to a single currency for the whole of Europe. The ERM was a system set up to create currency harmonization between EC members at the level of their national banks, and required national governments to intervene in foreign exchange markets to make sure that their currency kept its value within the system.

With Mrs Thatcher gone, a month later it was left to the new prime minister John Major and his chancellor Norman Lamont to weather the vicissitudes of the ERM. Unfortunately neither man had Mrs Thatcher’s genius or political luck to ride out the two stormy years that followed. The high interest rates of the bust after the Lawson boom had already begun to strike at the heart of the enterprise economy that Mrs Thatcher had brought into being. But after Britain joined the ERM with the pound pegged to the German Deutschmark, the strongest currency in Europe, British interest rates started to go through the roof, with the British economy in deep recession. Germany’s interest rates had to be kept high because of her economy’s problems arising out of the reintegration of impoverished East Germany. By August 1992 her interest rates were forcing Britain’s into double figures, way beyond what the economy could sustain. The economic miracle of the 1980s was on its way to becoming the economic disaster of the early 1990s. And on 16 September, Black Wednesday, Major and Lamont were forced into the ignominious decision to pull sterling out of the ERM immediately. At a stroke Britain’s economy and European strategies were in tatters.

Despite the débâcle Lamont saw no reason to fall on his sword. But Black Wednesday had not only convinced Eurosceptics that Britain could never flourish in a single currency, it lost the Conservatives the reputation for being the safe managers of the economy which had been their greatest asset. From September 1992 Labour began to overtake the Conservatives in the opinion polls, while the Tories began a civil war over Europe which slowly tore them apart. In fact, after the initial shock, the effects of pulling out of the ERM were beneficial. Britain went on to enjoy ten years of low inflation, steady growth and falling unemployment, her economy grew faster than those of France and Germany, her inflation was lower and her jobless figures were lower.

Half the Conservative party had become violently anti-European and embarked on an internecine war in the media against pro-European Tories who composed much of the Cabinet. Nevertheless John Major did not pull back from his insistence on having the Treaty of Maastricht, which he had signed that February, approved by Parliament. The treaty revised the European Community’s founding Treaty of Rome and turned the EC into the EU, the European Union–a further step towards ‘ever closer political union’. But Major won the concession that Britain need not ultimately substitute the European single currency for sterling nor need she accept Delors’ social charter (or Chapter, as it became known) guaranteeing minimum EU working standards, which it was believed would increase Britain’s labour costs.

John Major was the son of an impoverished trapeze artist. He had reacted against his exciting origins and, as one wit said, ran away from the circus to join a bank. Perhaps memories of poverty in Brixton made him more compassionate than his old boss. Benefits were raised in line with inflation, and the poll tax was transformed into a council tax banded according to property values. The radical Thatcherite principles of privatization and reform of vested interests continued as before. But after Black Wednesday many felt that the Conservatives’ day was drawing to an end.