by Andy McSmith
Yet despite idiosyncrasies that sometimes veered into self-parody, Thatcher was formidably intelligent and quick on her feet, as she demonstrated twice a week during Prime Minister’s Question Time. She was relentlessly hardworking. Though she called herself an instinctive Conservative and a ‘conviction’ politician, she did not rely on either quality to win an argument, but would bludgeon an opponent with her command of detail. She also developed a commanding body language. She would remain very still when movement was unnecessary, as for instance when she was listening to someone speak in the Commons; when she moved, it was with an economy of movement that gave an impression of immense self-belief.40
She took endless care over her appearance and complexion. Soon after her arrival in Downing Street, her voice became less rasping and her hairstyle less severe – on professional advice, no doubt. At close quarters, the skin on her neck looked a decade or so older than her face. She kept her sexuality under tight control, as was expected of women of her generation, but could suddenly become almost flirtatious in private when it seemed appropriate.41 She liked to be surrounded by men who appreciated her femininity, and she could be forgiving of their private peccadilloes. She did her very best to protect her court favourite, Cecil Parkinson, when he was embroiled in a sex scandal, and after he had been forced to resign she brought him back into her cabinet as soon as she decently could.
By contrast, her behaviour towards other ministers could be shockingly rude and aggressive. The worst example was the way she treated Sir Geoffrey Howe, who was chancellor during the first four tumultuous years of her premiership. She owed him more than she owed any other colleague. Had she not been working alongside a stubbornly consistent chancellor with a first-class forensic mind, her first couple of years could have been a disastrous failure. But Sir Geoffrey was a man of no charisma. The most famous remark ever made about him came from Denis Healey, the previous Labour chancellor, who, having sat through Sir Geoffrey’s plodding critique of government policy, remarked that ‘part of his speech was rather like being savaged by a dead sheep’.42 It would never have crossed Howe’s legal mind to flatter or flirt with the prime minister. As the years went by, he increasingly got on her nerves. She could not resist humiliating him in front of others, until the worm turned. His spectacular resignation destroyed her premiership.
Others, who were old enough and sufficiently right-wing, found her combination of cold self-control and latent sexual chemistry irresistible: ‘But goodness, she is so beautiful … quite bewitching, as Eva Peron must have been,’ Alan Clark reckoned.43 After Kingsley Amis had been introduced to Thatcher, he had recurrent dreams about her, saying she was: ‘One of the most beautiful women I have ever met.’44 Calling to congratulate her on her speech at a Conservative Party conference, Woodrow Wyatt, the News of the World columnist, told her: ‘You looked beautiful, so beautiful that I fell in love with you all over again.’45 She was ‘delighted’ by this compliment, he noted. The French president, Francois Mitterand, when briefing his minister for Europe, Roland Dumas, reputedly told him: ‘Cette femme Thatcher! Elle a les yeux de Caligule, mais elle a la bouche de Marilyn Monroe.’46 The Conservative MP Sir Nicholas Fairbairn – not a wholly reliable source, it should be said – told the story of a man who drank too much at a reception hosted by the lord high commissioner of the Church of Scotland, and who approached the prime minister to say that he fancied her, to which she retorted: ‘Quite right. You have very good taste but I just do not think you would make it at the moment.’47
It did not take long for her reputation as a hard-line Conservative to seep into public consciousness. The Soviet authorities did her a great favour by denouncing her as the ‘Iron Lady’, which she naturally took as a great compliment. Yet even as the Conservatives sailed ahead of Labour in the opinion polls prior to the 1979 election, Mrs Thatcher’s personal rating lagged well behind that of the avuncular prime minister, James Callaghan. She was also less trusted by the public than Edward Heath; one NOP poll in November 1978 suggested that whilst the Conservatives had a 3 per cent lead under Thatcher, it would have been 14 per cent if Heath were still leader.48
However, she did not need the public’s affection to win the upcoming general election. The Labour government had been through five dismal years struggling with inflation and industrial decline, hitting its nadir in September 1976 when Chancellor Denis Healey admitted defeat in his six-month struggle to prevent a run on sterling, and applied to the International Monetary Fund for a £2.3 billion loan. It came with a condition that public spending had to be cut. After the experience of the 1930s, all the main British political parties and virtually every government in the capitalist world had accepted the Keynesian view that when unemployment was rising, governments borrowed more to spend their way out of recession. Now a Labour government was being required to do the opposite, with dire consequences for the very people the Labour Party was formed to protect. On his return from Washington, Healey was allotted five minutes on the rostrum at the Labour Party annual conference to explain his decision to the delegates. Tony Benn recorded: ‘There were hisses and boos when he came forward to speak. He then went on to shout and bully and rule out alternative policies … I couldn’t even clap him, his speech was so vulgar and abusive.’49
On that same day, Callaghan delivered the main address to the conference. He warned:
The cosy world which we were told would go on forever, where full employment would be guaranteed by a stroke of the Chancellor’s pen, cutting taxes and deficit spending is gone. We used to think we could spend our way out of recession and increase employment by cutting taxes and increasing government spending. I tell you in all candour that that option no longer exists.50
With those words, a Labour prime minister ushered in the policies now known as Thatcherism.
Government spending peaked in the year 1975–6, when it consumed 49.9 per cent of the nation’s total output, or GDP. That figure fell very quickly as Healey’s IMF-imposed economies took effect, reaching a trough in 1979–80 at 44.8 per cent of GDP. Healey had cut government expenditure by 1 per cent of GDP per year for five years, a feat no other chancellor came near to repeating. This austerity tore apart an already fractious Labour Party.
Worst hit by the cuts were public employees, particularly low-paid council employees, most of whom were members of the National Union of Public Employees (NUPE), a fast expanding, well-organized union whose leaders were driven leftwards by the crisis. It was this which set off the winter of discontent, which Labour sought to defuse by appointing the Clegg Commission to report on public sector wages. It came out with an eye-wateringly generous proposal: council workers’ wages were to be increased by 25 per cent in one year, without any requirement that there should be efficiency savings. This would knock a huge hole in Healey’s efforts to reduce public spending, but Mrs Thatcher and her team were mindful that there was an election looming and that public employees had votes, so they promised to implement Clegg’s recommendations in full. It would be a while before council workers felt the need to go on strike again. Labour’s parliamentary majority had long since been whittled away in by-election defeats and it could not survive without the support of the Liberals, the Scottish Nationalists and a few Ulster MPs. It was defeated by a majority of one when the Scottish National Party perversely tabled a vote of no confidence, forcing a general election that delayed Scottish devolution by eighteen years.
In short, Mrs Thatcher could not claim the 1979 election as a personal victory in the way that she was able to do after the one that followed four years later, and she did not emerge from it in the commanding position that she would later achieve. She had to work with a cabinet dominated by strong-willed men who did not share her new ideology. She would have liked to have appointed the wayward Sir Keith Joseph as her chancellor, but felt that she had to offer him a less sensitive post, as industry secretary, while allocating the two major offices of chancellor and home secretary to Howe and Whitelaw, who had run ag
ainst her. Both served her well. Whitelaw was a stickler for loyalty and a source of sensible, restraining advice, while Howe had become a fervid convert to monetarism. John Biffen, whom Thatcher trusted as an old opponent of Heath, and Nigel Lawson, were Howe’s deputies, thereby ensuring that the Treasury was in Thatcherite hands. So was the Department of Trade, run by John Nott and Norman Tebbit.
The only economic department not under Thatcherite control was the Department of Employment, headed by Jim Prior. This meant that the gelding of the trade unions came about more slowly than Thatcherite outriders such as Norman Tebbit would have liked. During the steel strike, the steelworkers picketed dockyards and privately owned steelworks, whose owners protested to the government that their businesses were being hit by a dispute in which they had no role. The reaction from the Tory right was to demand all secondary picketing should be made illegal immediately, whereas Jim Prior wanted to move one step at a time. When the call was taken up in the House of Lords, the venerable Lord Hailsham, the oldest and most experienced member of cabinet and the only one possibly better known to the country than Margaret Thatcher, was shocked: ‘If I thought the Conservative Party in its manifesto had taken the line that it was going to stop all secondary action, I should certainly not have supported the manifesto myself, and I certainly should not have accepted office in the present government.’51
The most pressing issue was not the trade unions, however, it was the constant decline in the value of money. Inflation had been coming down since 1976, but was still too high and was likely to get worse because the 1979–80 revolution in Iran that brought Ayatollah Khomeini to power had almost tripled the price of oil. Thatcher and Howe set about applying the monetarist remedy with an enthusiasm that was almost masochistic. Howe’s first Budget looked like a wilful application of fuel on the fire. It contained a lavish gift to the rich – a cut in the top rate of income tax from 83 to 60 per cent. To make this giveaway more palatable to those on middle incomes, the standard rate of income tax was also cut, from 33 per cent to 30 per cent. Then, to stop middle-income taxpayers from stoking inflation by spending their tax rebate, interest rates went up by a full 2 percentage points, and when that did not work, they went up another 3 points in November, by which time the basic rate had gone from 12 to 17 per cent in six months. Though the consequences for anyone with a mortgage were dire, the pound was now very attractive to foreign investors. In October 1976, when Denis Healey was forced to go to the IMF for a loan, the pound was worth $1.62; by October 1980, it had risen to $2.42 – that is to say, it had regained half its value against the US dollar. It had risen by similar proportions in relation to other currencies, which was excellent news for Britons who took holidays abroad, but created a vast problem for any firm making British goods for foreign markets.
Meanwhile, at the Department of Trade, John Nott and Norman Tebbit simply abolished the Price Commission because monetarist theory laid that there was no need for governments to attempt to control prices in the private sector. That decision was a shock even to cabinet ministers, not least to Francis Pym, who had pronounced only a few weeks earlier that they were not going to abolish the Commission. Those prices that remained under direct government control were hoisted upwards. The state-owned British Gas Corporation raised its prices by 10 per cent more than the rate of inflation for three consecutive years. Rates, school buses and National Health Service prescriptions all became more expensive. At an election press conference, a week before polling day, Mrs Thatcher accused Labour of running a ‘scare campaign’ that the Conservatives might put 10p on the price of a school meal. As children went back to school after the Christmas break, they discovered that the price of a school meal had indeed gone up by 10p.
When wages in the public sector went up by 25 per cent, as recommended by the Clegg Commission, the private sector unions naturally demanded matching pay rises. The overall effect was to flood the economy with money whilst making everything more expensive. Inflation had been slowly falling in the last years of the Labour government, but started rising within two months of the Tory election victory, going above 17 per cent by the end of 1979. An item that cost £1 when Margaret Thatcher came to power would cost, on average, £1.22 one year on. In the words of Sir Ian Gilmour, a member of the 1979 cabinet: ‘A government whose chief objective was to defeat inflation had in its first year succeeded in doubling it.’52
When the future chancellor Nigel Lawson set out his definition of ‘Thatcherism’ years later, two prominent items on his list were ‘firm control over public expenditure’ and ‘tax cuts’. The new government delivered immediate cuts in income tax, but only in order to switch to a system where people were taxed when they spent money rather than when they earned it. A week before polling day on 3 May 1979, the Daily Mail had filled its entire front page with a story headed ‘Labour’s Dirty Dozen – 12 big lies they hope will save them’,53 exposing the black propaganda allegedly emanating from Transport House, the headquarters of the TGWU. One ‘lie’ was that the Conservatives would double VAT, when Thatcher had promised that very week that they had ‘no intention’ of doing so.54 In fact, they put up VAT from 8 to 15 per cent, so they just avoided doubling it. Public spending as a proportion of GDP, which the Labour government had reduced at such huge political cost, jumped from 44.8 to 47.3 per cent during 1980–1, and continued rising until it reached 48.5 per cent. It took a full seven years to get back down to the 1979 level. In short, the Conservatives had not decreased the tax burden; they had increased it and redistributed it, with the very rich as the main beneficiaries.
One reason that government spending was so high was the cost of keeping people out of work. The most famous political poster of the 1979 election, and one of the most famous in British political history, was produced for the Conservatives by the Saatchi brothers; it showed a snaking dole queue and bore the devastating caption ‘Labour Isn’t Working’. Anyone who saw that poster could be forgiven for believing that it promised lower unemployment under the Conservatives, particularly if they had heard Margaret Thatcher telling an audience in the unemployment-ridden north-east of England during the election campaign: ‘We Conservatives believe in policies that will create real jobs’.55 In May 1979, the official unemployment figure was 1.1m, a shocking number to anyone who remembered the economic stability of the 1960s, but it would never be that low again in the eleven years that Margaret Thatcher was prime minister. Despite the government’s repeated adjustments to the way the figures were compiled, each one designed to nudge them downwards, the lowest unemployment recorded during Thatcher’s reign was 1,596,000, in April 1990. In 1980 alone, the figure rose by 836,000, the highest recorded annual rise since 1930. The January 1986 figure of 3,070,621 represented 12.5 per cent of the working population, but that was only an overall average, brought down by the high level of employment in the south of England. In Northern Ireland, unemployment was 20 per cent, while in some areas dominated by declining industries it was much higher.
As ordinary Britons grappled with the high taxes, high prices and job insecurity, they were given a revealing glimpse of how one rich family had been getting along through these difficult times. The Vestey family had made a vast fortune shipping refrigerated meat from Argentina to the UK, and had become specialists in avoiding tax. Their 7,200 shop assistants started on wages of £2,860 a year, which was above the legal minimum laid down by the wages council, but below average for the retail trade. The Sunday Times employed some fine investigative journalists, including Phillip Knightley, who revealed that for the previous year the firm had reported profits of £4.1m, on which it had paid just £10 in tax. Edmund Vestey said: ‘We paid exactly what we were obliged to pay. We have certainly kept to the letter of the law.’ He was also quoted as saying: ‘Let’s face it, nobody pays more tax than they have to. We’re all tax dodgers, aren’t we?’56 Lord Thorneycroft, a former chancellor whom Margaret Thatcher had brought out of retirement to be chairman of the Conservative Party, agreed and was quoted a
s saying: ‘Good luck to anyone who can make a success of a business.’57
So, in its first year in office, the new government had brought higher unemployment, higher prices, higher public spending and a lavish transfer of wealth to the highest paid. To quote Sir Ian Gilmour’s summary of the two years, 1979–81, when he was in cabinet:
Many of the better off did well even out of the earliest Thatcher period. But monetarist dogma was so cruelly discredited by its results, and Thatcherite economic policy in its opening years so patently disastrous that the survival of either of them, let alone their continuing relentless implementation, provides cause for surprise.58
It hardly needs saying that Gilmour and other cabinet ministers who were not part of the Thatcherite project, the ones she contemptuously nicknamed the ‘wets’, were not asked their opinions ahead of the most sensitive economic decisions. Jim Prior, the leading ‘wet’, first learnt that VAT was to be increased when he was tipped off by the director general of the CBI, John Methven, but did not believe it.59
By the summer of 1980, several cabinet ministers, including Prior, Lord Carrington, Gilmour and the agriculture minister Peter Walker, were in almost open revolt, and in November the defence secretary, Francis Pym, threatened to resign rather than accept the cuts in the defence budget demanded by the Treasury. But, in public at least, Thatcher was unflinching. The acronym Tina – for ‘There is No Alternative’ – was already in circulation. Her speech to the annual Conservative Party conference that year contained one of her most memorable lines, crafted by her speechwriter Ronald Miller: ‘To those waiting with bated breath for that favourite media catchphrase, the “u turn”, I have only one thing to say: “You turn if you want to. The lady’s not for turning”.’60