State of Emergency: the Way We Were

by Dominic Sandbrook

  Entire books have been written about what went wrong with British industry. What is clear, however, is that the rot had set in during the 1950s, although it took the global shocks of the late 1960s and 1970s to expose all the weaknesses to public view. At a time when Britain still enjoyed enormous advantages, with many of its competitors busy rebuilding their war-shattered economies, managers and executives were far too complacent, allowing their access to soft colonial markets to blind them to the need for modernization. If Britain had joined the Common Market, its manufacturers might have been exposed to the bracing winds of proper competition, with beneficial consequences in the long run. But it did not. And on top of that, the attachment to full employment (perfectly understandable given the trauma of the 1930s), as well as the power of the unions, meant that politicians shrank from the job losses that would inevitably come in a radical shakeout. So British industry coasted along through the 1950s, only to find the waters getting progressively choppier as foreign rivals caught up. By the early 1960s, the problems were there for all to see: high prices and uncompetitive goods; conservative management; a financial sector obsessed with short-term profits rather than long-term growth; and, of course, short-sighted, defensive unions that did not cause the problems (contrary to what some on the right claimed) but made it almost impossible to take worthwhile measures to resolve them.

  Indeed, when the government did intervene, it generally only made matters worse. In a sense, the very idea that the government had a responsibility to manage the affairs of industry was part of the problem. Since it would inevitably be attacked for every rise in unemployment or inflation, no sensible government was ever likely to take radical measures, even though they might be the right ones. Instead, governments of both parties kept intervening to prop up struggling industries like cotton and shipbuilding, although any clear-sighted analyst could see that they were doomed. The Wilson administration was particularly culpable because it was convinced that the way out of the mess was to select ‘national champions’, often huge, unwieldy conglomerates formed after government pressure. But by and large, the ‘merger mania’ of the late 1960s was a disaster. None of the Wilson government’s beloved industrial leviathans, from the gigantic shipbuilding groups in Scotland and the North-east to the ICL computer giant, really worked, while the words ‘British Leyland’ should surely be etched on the tombstone of the man who oversaw its creation, the supreme champion of merger mania, who then called himself Anthony Wedgwood Benn. The problem was not that government intervention in industry was automatically a bad thing; when the French intervened, it often worked, although it is notable that the West Germans, who intervened least, had the best economic record. The problem was that British governments did it so badly, making the wrong choices time after time. And by the time Heath moved his piano into Downing Street, some industries – cars, textiles and shipbuilding, to name but three – were already in desperate trouble.8

  In the early days of the Heath government, some predicted that he would bring the radical approach necessary to turn Britain around. Ten days after the election, The Times told its readers that the Tory victory would ‘produce greater changes in the way Britain is run than in any administration since the Attlee government’, a ‘revolution of the generations’ in which ‘most of the pre-1970 assumptions’ would inevitably be discarded. With its promises to cut taxes and to roll back the power of the state, Heath’s manifesto certainly promised something new, and he talked a great deal about setting industry free to stand on its own two feet. And yet the truth was that Heath remained a creature of the post-war consensus. For all his talk of change, he had been a loyal, dependable insider all his political life, and, as Harold Macmillan’s Chief Whip, he had been at the right hand of perhaps the most moderate, collectivist Conservative leader of the century. He was a technocrat, not a radical, a good staff officer who was never comfortable with ideas. His rival Enoch Powell even remarked that ‘if you showed Ted an idea he immediately became angry and would go red in the face’. What people wanted to know, Heath once said, was ‘how we are going to do things rather than what needs to be done’. And like Macmillan and Wilson before him, he hoped that somehow faster economic growth would be the answer to all Britain’s problems. ‘No one will ever understand the Heath government,’ said his friend Robert Carr, ‘unless they understand the degree of our commitment to economic growth.’9

  Despite his antipathy to Wilson, Heath and his rival had much more in common than people realized. Both were former civil servants, doers rather than thinkers, who talked a lot about modernizing Britain without quite explaining how they were going to do it. Crucially, both took power with distinctly vague economic plans. For all the nonsense about Selsdon Man, Heath came into office with a yawning policy vacuum concerning the most urgent economic issue of all: the incessant pressure on prices and incomes, which was driving up inflation. Both Macmillan and Wilson had tried to hold down wage increases with statutory freezes – ‘incomes policies’, according to the jargon of the time – but these invariably only postponed and exacerbated the inflationary pressures. The problem for Heath was that the Tory high command was split over the issue. Most senior figures, led by Reginald Maudling, who had been Chancellor in the early 1960s, believed that although incomes policies were blunt and unpopular, they were among the regrettable necessities of life. On the right, however, there was a growing movement to drop them entirely, spearheaded by free-marketeers like Enoch Powell, who thought the government had no business telling people what they should earn. Faced with a crucial choice, Heath’s answer was a fudge: ‘ringing condemnations of compulsory controls qualified by meaningless reservations’, as his biographer puts it. Almost unbelievably, therefore, his five years as Leader of the Opposition had failed to produce a clear sense of how his government would tackle inflation, which was to prove the defining issue of the 1970s. But the public had no way of knowing this, because Iain Macleod had persuaded him that for the campaign it was better to look decisive than to say nothing. ‘Manifestos had to be black or white,’ one colleague remembered Macleod saying. ‘Either we said we were going to have an incomes policy and it would be superb, or that we were not going to have one at all. We should say that we were not going to have one and if in a few years we changed our minds we would have to explain there were special circumstances.’ It was pure cynicism, but Heath went along with it. ‘We utterly reject the philosophy of compulsory wage control’, declared the manifesto – words that even Heath probably did not believe at the time.10

  Of all Heath’s ministers, it was Macleod, the D-Day veteran and former bridge prodigy whose mixture of Yorkshire cynicism and Highland romanticism had made him one of the most colourful figures on the Tory front bench, who was expected to set the tone for the 1970s. A brilliant orator whose liberal views on the death penalty, abortion and homosexuality horrified the Conservative rank and file, Macleod had presided over British withdrawal from Africa between 1959 and 1961, but resigned from the government two years later in protest at Sir Alec Douglas-Home’s elevation to the leadership. Everybody agreed that he was Heath’s most brilliant asset; it was said he was the only opponent in debate whom Harold Wilson really feared. As Shadow Chancellor, he was a bit like Denis Healey, a fellow Yorkshireman with a sharp mind and biting wit, in that he prided himself on not reading about economic theory, but cared only about the practical nuts and bolts. Macleod was certainly no fan of laissez-faire, which he thought was ‘a Whig rather than Tory doctrine’, and remarked that setting the market free was ‘an excellent policy for the strong, but we are concerned also with the weak’. As Chancellor, he planned to be a radical reformer, slashing taxes and spending, but not a reckless or uncaring one; in many ways, he was the soul of One Nation Toryism. The only cloud on the horizon was his health. In 1940 he had sustained a severe thigh wound which still affected him, and he also suffered from kidney failure and chronic spondylitis, a spinal disease, which meant that he walked with a pronounced limp, his bo
dy hunched and twisted.11

  At the beginning of July, Macleod went into hospital for what seemed like appendicitis, but was in fact a benign abdominal condition. On Sunday, 19 July he was back in 11 Downing Street, watching the Commonwealth Games on television, when the heart attack struck. Within an hour, aged just 56, having been Chancellor for exactly a month, he was dead. For Heath, who immediately came over from Number 10 and sat up for the rest of the night trying to comfort Macleod’s wife Eve, it was a terrible blow. ‘I felt numb and sick,’ he later recalled. ‘I was shattered by the news.’ Quite apart from the human tragedy, it was an enormous loss to the government. None of Heath’s ministers had comparable wit, charisma or rhetorical skill, and certainly none had Macleod’s tactical instinct. ‘He was our trumpeter,’ said Robert Carr, ‘and any party, any government, needs a great trumpeter.’ What was more, he was the one colleague Heath really respected and who could stand up to him, the first mate the captain could not do without. With Macleod gone, the government lost its balance. In his place, Heath appointed his protégé Anthony Barber, who had been an RAF pilot in the war, was imprisoned by the Nazis after his plane crashed, and once escaped as far as Denmark before being recaptured. But as Heath’s new Chancellor, Barber cut a much less colourful figure than one might expect from a man who had broken out of Stalag Luft 3, looking more like a balding provincial accountant than a war hero. He had a high voice and hesitant manner, and John Kent’s Private Eye cartoons always showed him addressing Heath as ‘Sir’. To put it bluntly, he was a lightweight; from now on, it was Heath who ran economic policy.12

  During the 1970 election, Harold Wilson’s advertising men had come up with a famously negative poster campaign, showing a set of evil-looking clay figurines of Heath, Macleod, Douglas-Home, Quintin Hogg, Reginald Maudling and Enoch Powell, with the caption ‘YESTERDAY’S MEN (They failed before!)’. In fact, yesterday’s men played much less weighty parts in Heath’s government than anyone had anticipated. Macleod was dead, Powell was in exile after speaking out against immigration, and Hogg had been moved upstairs to become Lord Chancellor as Lord Hailsham. Douglas-Home, a former Prime Minister now running the Foreign Office, had too much on his plate already to worry about domestic issues (which had never interested him greatly anyway). The one man who might have been most help to Heath was Reginald Maudling, the Home Secretary, who had been a contender for the Tory leadership in 1965. Maudling was in many ways an enormously appealing politician: clever, affable and fun-loving, a man with a Rolls-Royce intellect who thought nothing of spending the morning tasting vintage port with his officials, and said that his favourite kind of whiskies were ‘large ones’. He might have been a great liberal Home Secretary, a kind of Tory Roy Jenkins. But he was not on good form in the early 1970s. Losing the leadership had brought out his worst characteristics: laziness, greed and self-indulgence. By 1966 he was beginning every day with brandy at breakfast and gin throughout the morning, and while never completely drunk, he was rarely entirely sober either. His wife Beryl, who always liked a drink or several, loved the good life too, and by 1970 they had been sucked into a nether world of flagrant corruption to pay for their extravagant lifestyles. Maudling was turning into a Westminster joke: as Robin Day told a friend in 1969, he was increasingly ‘bone-lazy and quite useless after lunch’. The large Scotches and day-long lunches were taking their toll, and ‘there was an air of shabbiness and disorder in his appearance’, as his biographer puts it. Maudling’s features had thickened; his suits were crumpled; his shoulders were dusted with dandruff; his hair was lank and oily. But these were merely the superficial manifestations of his deeper moral decline.13

  From the start, therefore, Heath relied on an inner circle of advisers and officials, the court of a President rather than a Prime Minister. Unlike Wilson’s faction-ridden ‘Kitchen Cabinet’, this was a tight, professional team, albeit a very introverted and technocratic one, including Heath’s political secretary Douglas Hurd, his press officer Donald Maitland, his Principal Private Secretary Robert Armstrong, who soon established an exceptionally close, even filial relationship with Heath, and above all, his Permanent Secretary, Sir William Armstrong, the head of the Civil Service, who became virtually deputy Prime Minister. Beyond them, Heath relied upon a small group of ministers nicknamed the ‘Heathmen’ by the press, who were supposed to be a new breed of thrusting Tory modernizers, united by their modest origins, managerial style and loyalty to their master. This was a bit of an exaggeration, since most came from distinctly wealthy backgrounds, but the press loved the idea of a new generation of ruthless go-getters. Anthony Sampson, an inveterate trend-spotter, thought that they represented the rise of a ‘New Toryism’: ‘men who actually sounded interested in industry; and who were dedicated to making the capitalist system work, with tougher competition, greater incentives and the injection of eager management methods into government’. Among them he singled out the new Education Secretary, Margaret Thatcher, a grammar-school-educated research chemist with a ‘quick mind’ and ‘a scientist’s interest in teaching machines and aids’, and the new Environment Secretary, Peter Walker, a grocer’s son from Gloucester who had become a self-made City millionaire and the ultimate ‘manager-minister’, running his department ‘as if it were a giant corporation’. Walker was not popular inside his own party: at only 38, he was too young, too arrogant, too ambitious and too liberal for many older backbenchers. It was as though an old family firm had been ‘suddenly invaded by icy time-and-motion experts’, one Conservative MP complained. But Heath liked Walker’s emphasis on efficiency, and nobody could deny that he got results.14

  In later years, Heath became famous for his hilarious, world-class grumpiness, whether manifested in glacial silences, withering put-downs or selfishness of the most outrageous kind. Stories of his rudeness are legion: the time his campaign bus crashed and threw a middle-aged lady passenger to the floor, prompting Heath to call immediately for a glass of brandy which he then drank himself; or the occasion in the 1970 campaign when a man in a pub asked him whether he would get a tax cut because he was a family man and a home-loving man, to which Heath snapped: ‘Well, you had better go home now, I think.’ Much of this can be traced back to his Kentish boyhood, when he was a spoiled prodigy, smothered with maternal affection: not only did he have his own armchair, he was spared washing-up duty (unlike his brother) because it would interfere with his music practice. Even then, visitors thought him a self-centred little boy, and there was an extraordinary solipsism in the fact that he called his dog ‘Erg’, after his own initials. He did not change as he got older; if anything, as the historian John Ramsden observes, he had a ‘decreasing fund of small talk and a reluctance to spend those diminishing reserves on political colleagues’. His ministers had to get used to long, frosty silences punctuated by flashes of brutally dry humour: after summoning one official away from his wedding anniversary, he greeted him with the words, ‘You’re well out of that.’ ‘The outrageous statement in a deadpan voice, the sardonic question, the long quizzical silence,’ wrote Douglas Hurd, ‘were hard for a newcomer to handle.’ And perhaps only Heath could have attended a dinner of Tory agents before the party conference, organized to show his human side, and sat in silence for so long that his friend Sara Morrison passed him a napkin on which she had scribbled, ‘For God’s sake, say something.’ Without saying a word, Heath slowly unfolded the napkin, read the message, wrote something, folded it, and passed it back. When Morrison opened it, she saw the words ‘I have.’15

  And yet there is no denying that Heath inspired exceptional loyalty among his closest colleagues. He was ‘very shy, very reserved’, one civil servant later said, but ‘every so often the clouds would roll back and you saw that he liked you and depended on you. And those moments were worth much more than more frequent signs of friendship from other people.’ Heath’s friend Jim Prior, who was first Agriculture Minister and then Leader of the Commons, agreed that his rudeness was born of shyness and boredom, and
that he had a softer side that the public never saw. Other close colleagues, such as Hurd, Whitelaw and Carr, similarly felt a tremendous sense of affection for their chief. Whitelaw even made the extraordinary statement that if Heath told him to become ambassador to Iceland, he would be on the first flight to Reykjavik. ‘I trust his judgement absolutely,’ he said. ‘It’s not because he has charm, because he hasn’t any charm. It’s not because he’s easy to work for, because he isn’t easy to work for. I don’t know what it is – it’s a mystery to me. I only know I trust him more than I’ve ever trusted anybody.’16