by Andy McSmith
It says something for Thatcher that she never felt the need to be seen with rock stars or other celebrities, but a less appealing side to her was her utter indifference to world poverty. Under other prime ministers, international development was the responsibility of a government department headed by a cabinet minister, but not under Thatcher. Her lengthy memoirs have nothing to say on Africa, Third World aid, Live Aid or Bob Geldof, subjects that just did not interest her.
CHAPTER 10
LOADSAMONEY
The act that defined the second half of the 1980s was Harry Enfield’s routine, performed on Channel 4’s Friday Night Live in 1988, as an anonymous plasterer boasting about his money. He had so much that the cash machine jumped out of the wall and legged it down the pavement in a vain attempt to prevent him drawing any more. This creation was inspired by seeing the behaviour of Tottenham fans near his flat, waving £10 notes at supporters of clubs from the unemployment-stricken north. Enfield’s act was so popular that he made a spin-off record that was featured on Top of the Pops, and ‘loadsamoney’ became the catchphrase of the year. Neil Kinnock adopted it. Enfield, a Labour supporter, did not mind that, but he did not like it when the Sun took it up as a celebration of Thatcherism, using ‘£oadsamoney’ to plug its Lotto and Bingo games. He instructed his solicitors to try to warn them off, but gave up after the Sun counterattacked, telling him to ‘buy yourself a sense of humour’.1
The phenomenon that Enfield was observing did not originate in Tottenham’s White Hart Lane. It came out of the City of London, which in a few dramatic years was transformed from a club run by an old-boy network of public-school alumni to a place where the ambitious sons of working-class families were given free rein to make a great deal of money quickly. This development could be said to have begun when Margaret Thatcher called Cecil Parkinson to her office in June 1983 to reward him for his valiant work as chairman of the Conservative Party, presiding over the party’s best election result since the 1930s. She offered to make him foreign secretary, but he had to confess that he could not ask his wife Ann to accompany him to the many functions to which a foreign secretary is invited because he had made another woman pregnant, and she was trying in vain to hold him to a promise to marry her. Thatcher promoted him generously nonetheless, by giving him charge of the merged departments of trade and industry. Not knowing when a scandal might break over his head, Parkinson arrived in a hurry to achieve something. He decided to end a seven-year dispute between the government and the London Stock Exchange.
The Stock Exchange was one of the nation’s least loved cartels, with its brokers and jobbers who never crossed one another’s demarcation lines under rules introduced after the South Sea Bubble of 1720. Brokers handled accounts for clients outside the Stock Exchange; jobbers did no business with anyone on the outside, but made their money by standing on pitches in the City like racecourse bookies, buying shares off the brokers if they thought the price was right, and selling when the price went up. There were also specialist investment houses to advise companies that wanted to f oat their shares on the Exchange. The investment houses charged fees, the jobbers made money from speculation, but the brokers’ only income was from their commissions. To protect the brokers’ livelihoods, Stock Exchange rules banned anyone from undercutting the standard commission and, to keep outsiders from upsetting this time-honoured system, no outside interest was allowed to own more than 10 per cent of a firm operating within the Exchange.
Within the City, there was an ossified class structure that seemed to belong to another century. Stockbrokers were public-school educated; jobbers might be the sons of barrow boys – hard-edged, hard-working gamblers – though the people at the top of the firms that employed them were, for the most part, also from public school. In one stockbroking house, Cazenove, the partners were allowed to give their sons jobs in the firm, as of right. Peter York observed:
The class divisions were completely staggering. Them and Us were written in letters a mile high, down every street, in every doorway. Posh chaps got panelled boardrooms and beautiful wool suits and proper signet rings and patronized crushingly old-fashioned restaurants that dished up boiling coronary food; yobs (separated by no more than a wall, but at the same time, a thousand miles away) got sweaty chipboard work stations, grimy white socks, horrible shat-upon pubs and winebars where they got arsed out their heads . . . and red Ferraris.2
In 1976, the Labour government had passed a law to break up such cartels, and the Office of Fair Trading (OFT) had pronounced that the Stock Exchange’s protective demarcation lines were illegal. This led to a seven-year legal stand-off, until Parkinson sent for Sir Nicholas Goodison, the chairman of the London Stock Exchange, and offered a deal: he would instruct the OFT to call off its legal action if the Stock Exchange could come up with a reasonable scheme to set its own house in order. The only catch was that he wanted a reply before July 1983, when the Commons started its long summer break. Sir Nicholas knew a good offer when he saw one. It was very likely that the Stock Exchange would lose the court case that OFT was bringing, which was due to be heard in January, and would have to disentangle its centuries-old customs in one chaotic Big Bang. After consultation, he came back to Parkinson and said that the Stock Exchange would comply with the law, and organize its own Big Bang, but not yet. Instead of doing it almost overnight, as Wall Street had already done, they would have a gentle three-year changeover. Parkinson agreed.
There followed a slow explosion in the City. Size was going to count in a deregulated money market, so firms merged and recruited, and salaries spiralled, sweetened by huge golden hellos, golden handcuf s and other perks. House prices shot up within miles of the City as banks and finance houses encouraged their young employees to take on huge mortgage commitments in the hope of tying them down. This gold rush would not have lasted so long and would probably not have produced such rich rewards if Parkinson had not allowed the City those three years of preparation, which financial commentators did not think he needed to have done. ‘The government has caved in to pressure from the City at an odd time,’ the Economist commented.3 The financial editor of the Financial Times concurred:
There was not much to be said for the hasty cobbling together of a settlement by Mr Cecil Parkinson and Sir Nichol as Goodison behind closed doors and constrained by a wholly artificial deadline imposed by the holidays of the courts and Parliament . . . The agreement has turned into something of a public relations disaster.4
However, by the time Parliament reassembled in the autumn, Cecil Parkinson was in no position to defend his decision, because a paragraph in Private Eye, which wrongly named another Tory MP as the father of Sara Keays’ baby, had forced him to own up. Thatcher would have overlooked the offence because her favourite minister had done what she regarded as the right thing by staying with his lawful wife, but representatives at the annual Conservative conference in Blackpool were outraged. Reluctantly, she accepted his resignation. It was the number one sex scandal of the year.
Amid all this excitement, the Stock Exchange was presented by an obliging government with the biggest share issue in living memory, when half of British Telecom went on sale in November 1984, with almost half the available shares set aside for individual buyers. More than 2m people joined the bonanza, and everyone made a prof t except the short-changed taxpayer. The government had set the share price so low, at 130p, that it rose by 43p on the first day and never fell back to its starting point. Anyone who bought £1,250 worth of shares on the day they were issued had made a £1,000 prof t in just two years. The sale was so popular that some applicants fraudulently put in multiple applications, under different names, so that they could buy more shares than the law allowed. One who got caught was Keith Best, the Conservative MP for Ynys Mon, who was f ned £4,500 and subsequently lost his seat.
But no shareholder did so well out of the sale as BT’s chairman, Sir George Jefferson, whose pay doubled to £172,206 in two years. This set the pattern for all future privatiz
ations. Overnight, mediocre managers of mismanaged public utilities became world-class entrepreneurs on world-class pay, assuming that the salaries they awarded each other were an accurate measure of their worth. By 1990, Sir George’s successor at BT, Iain Vallance, was on a salary of £400,000, to which was added a £150,000 bonus, which Mr Vallance donated to charity. The next year his salary rose to £450,000, plus a bonus worth up to £225,000. When British Gas was privatized in 1986, its chief executive, Robert Evans, was on a salary of £50,000. By 1990, Mr Evans, who had taken on the additional role of company chairman, had seen his annual salary rise to £370,000, and had £20,000 worth of free gas appliances f tted at his private home. Less than ten years after privatization, Mr Evans’s successor as chief executive, Cedric Brown, was being paid a basic salary of £475,000, plus a £600,000 incentive deal, £1m worth of share options and the promise of a £180,000 annual pension on his retirement. This had little to do with increased competitiveness, because British Gas was still the monopoly supplier to British homes; nor had it anything to do with what Mr Brown could earn anywhere else, because he had never worked for any other company. The executives of the privatized water and electricity companies also did well, so well that the maverick right-wing Tory MP Anthony Beaumont-Dark was moved to remark that, ‘All that Mr Vallance and his cohorts in the water and electricity industries are doing is bringing capitalism into disrepute.’ Unimpressed by the news that Mr Vallance had given away his bonus, Mr Beaumont-Dark snorted: ‘He can afford to sound like Goody Two-Shoes at the same time as acting like the wicked baron.’5
If the aforementioned Keith Best felt that his services as an MP were not properly rewarded by an MP’s basic salary, he was by no means alone in his grievance. Many years later, a scandal would explode in the faces of British politicians as it emerged that they had been systematically supplementing what they regarded as their inadequate pay through expenses claims that did not stand up to public scrutiny. This was not something new. It originated in the Thatcher years, or possibly even earlier, and went undetected for more than a quarter of a century. In 1982, an MP’s salary was £14,510. It had fallen back year by year, in comparison with other professional salaries, because as successive governments took unpopular measures to suppress inflation they were not prepared to attract the kind of public reaction that a generous pay rise for MPs would have invoked. In 1982, an all party committee suggested that MPs should at least get an annual rise in line with the national increase in annual earnings. The government turned that down, but the leader of the House, John Biffen, agreed to have the Top Salaries Review Body report on MPs’ salary the following year, 1983. That body compared MPs’ pay with that of senior civil servants and recommended that it should shoot up by more than 30 per cent, to £19,000 a year. Their proposal came out just as Mrs Thatcher was ready to hold the post-Falklands general election, so there was no hope of the government implementing it. Instead, as the MPs reassembled after the election, their pay went up a miserly 4 per cent, to £15,308.
However, their finances were eased by a little-publicized arrangement under which they were paid £6,000 a year as an allowance for having to maintain two homes, one in London and one in their constituencies. The allowance was taxable, but they could also claim expenses against tax, including a daily amount for meals on days when they were working in the Commons. It is not clear whether the Fees Office had the authority to ask to see receipts or any other evidence of costs incurred; what is certain is that they never did. One MP routinely claimed £19.40 for meals for every day that Parliament sat during 1981–2, thereby pocketing £3,395. Another claimed £2,693 in 1980–1 for ‘renewal of carpets’. The next year, another MP claimed £1,109 for ‘dining table and large fronted bookcase and sideboard’. Yet another claimed £7,306.60 for everything from bedroom furniture to spare towels and sheets.6
The public knew nothing of this. The Inland Revenue knew, but until 1982 they overlooked it, changing its policy only when a few MPs started putting in expenses that exceeded their £6,000 allowance, so that they were not only paying no tax on that, but were claiming the right not to be fully taxed on their basic salary either. Then the Revenue started sending MPs backdated tax demands, some of which ran to four figures, producing a predictably outraged reaction from the affected MPs. There was then a prolonged exchange of memos, involving Sir Geoffrey Howe and Nigel Lawson (the successive chancellors of the exchequer), the chief whip, the leader of the House, the financial secretary to the Treasury, a young political adviser named Michael Portillo who worked in 10 Downing Street and others, including, finally, Margaret Thatcher herself. ‘If details of what was being allowed and disallowed became public knowledge, the House would be brought into ridicule,’ Nigel Lawson warned Thatcher, twenty-five years before exactly that happened.7 She summoned a meeting, at which it was decided that, in future, MPs would be entitled to make expenses claims up to £6,000 tax free, but would be taxed on any claims over that limit, which would mean a drop in net income for about fifty MPs with the highest claims. The next problem was how to change the rules without attracting the public’s attention. Nigel Lawson did not want to do it on Budget day, lest it ‘cast an undesirable shadow’ over his speech,8 therefore it could not be included in the original draft of the Finance Bill. Instead, an extra clause was slipped into the Bill as it was going through its committee stage in the Commons.9
When the Big Bang came, on 27 October 1986, the separate tribes of jobbers and brokers merged and huge multinational finance houses moved in. The City of London regained its competitive edge, at the cost of ending what had been, for many, a cosy way of staying prosperous. On the day of the Big Bang, Sir Nicholas Goodison was sharing a lift with Guy Farage, a well-known character in the city, who accepted that the changes had to happen, but regretted them. Asked for his opinion, he told Sir Nicholas: ‘You have destroyed the finest gentleman’s club in the world.’10
The City became a draw for American investment banks that were going through a stage of aggressive expansion, backed by a US administration as keen on deregulation as Mrs Thatcher. In the three years from December 1985, the number of staff employed in London by the Wall Street investment bank Salomon Brothers rose from 150 to 900, with state-of-the-art new premises near Victoria Station to accommodate them. Michael Lewis, a Salomon Brothers trader seconded to London in December 1985, wrote: ‘London became the key link in this drive for world domination. Its time zone, its history, its language, its relative political stability, its large pools of dollar-hungry capital and Harrods (don’t underestimate the importance of shopping opportunities in all this) made London central to the plans of all American investment bankers.’11
It is of en suggested that the 1980s, or at least their second half, were years of rampant greed, let off the leash by a government that encouraged people to grab what they could and enjoy it. Mrs Thatcher had staked out her position when she was first elected leader of the Conservative Party. She declared that ‘the pursuit of equality itself is a mirage . . . opportunity means nothing unless it includes the right to be unequal and the freedom to be different’.12 Her mentor, Keith Joseph, put the case for inequality more bluntly: ‘Making the rich poorer does not make the poor richer, but it does make the state stronger . . . The pursuit of income equality will turn this country into a totalitarian slum.’13
The audiences for Caryl Churchill’s verse play, Serious Money, which opened at the Royal Court in spring 1987, were notoriously swollen by the City types that the drama satirized, who all loved it. The crooked American financier Ivan Boesky, who told an audience at Berkeley University that ‘greed is healthy’, was seen as the voice of the times in the USA. In 1989, Gordon Brown wrote an assessment of Thatcher’s record, to which he gave the title ‘Where Greed is Good’. Yet, having grown up in reasonable comfort, and having married a rich man when she was young, Mrs Thatcher herself was not greedy; the political historian, Mark Garnett, who is a long way from being a Thatcherite, concluded that ‘a verdict
of “greedy” could only be brought in by a jury which was biased against her for other reasons’.14 It would be an exercise in futility to try to measure whether the British were more or less greedy after 1985 than in other periods since the war.
What had changed was that the middle classes could no longer fulminate about the greed of working men who went on strike for higher pay, because the power of the unions had been broken. Now the most visible greed in the land was that of the newly enriched middle classes, particularly the young middle class, who were ostentatiously enjoying the low taxes and rich rewards to be found in the free market. One young woman, interviewed by Tatler about her home life, said:
One passion we don’t share is my passion for cars. I love speed. I drive a BMW 318i. Ian’s got a BMW 323i with every extra you can think of, but he just wants a car to get from A to B. I have an absolute craving for a Porsche 911. I spend a lot of time shopping for clothes. I adore clothes.15
Not only were salaries rising for those who were not among the 3m unemployed, but handling and borrowing money had become startlingly easy. When the decade opened, almost all transactions took place face to face. Credit cards were relatively rare, and the technology to buy and sell remotely by entering data into a computer did not exist. A huge proportion of the British economy was cash only. It was a common sight, usually on a Thursday, for someone from the finance department in an office or factory to circulate with a tray of small brown envelopes, each marked with an employee’s name, containing that employee’s weekly wages. A quarter of the working population had no bank accounts and those who had were cosseted in a world as specialized, and protected by Chinese walls, as the Stock Exchange. To obtain a cheque book, you needed an account in one of the clearing banks, of which there were just five – Barclays, Lloyds, Midland, National Westminster and the Royal Bank of Scotland. Until 1984, all cheques, and other money orders and instructions, were taken each working day to a central hall in London where they were redistributed to the desks of the clearing banks and the Bank of England. If you wanted to save, you moved your money out of your cheque-bearing account and transferred it to a building society, which offered a better rate of interest and the prospect of becoming a home-owner. Banks did not offer mortgages, any more than building societies offered cheque books; and neither banks nor building societies dealt speculatively in the money markets. Banks loaned their clients’ money to businesses, again almost always after a face-to-face meeting between the businessman and the bank’s representative. Customers normally stayed with the same bank throughout their adult lives, and certainly there was no point in anyone with a mortgage moving from one building society to another, because the societies were a cartel; they all charged identical rates of interest and penalized disloyalty.