Margaret Thatcher: The Autobiography

by Margaret Thatcher

  Because our analysis of what was wrong with Britain’s industrial performance centred on low productivity and its causes – rather than on levels of pay – incomes policy had no place in our economic strategy. I was determined that the Government should not become enmeshed, as previous Labour and Conservative administrations had been, in the obscure intricacies of ‘norms’, ‘going rates’ and ‘special cases’. Of course, pay rises at this time were far too high in large parts of British industry where profits were small or nonexistent, investment was inadequate, or market prospects looked poor. Judged by relative labour costs, our level of competitiveness in 1980 was some 40 to 50 per cent worse than in 1978: and around three-fifths of this was due to UK unit labour costs increasing at a faster rate than those abroad, with only two-fifths the result of exchange rate appreciation. There was little, if anything, we could do to influence the exchange rate, without allowing inflation to rise still further and faster. But there was a great deal which trade union negotiators had it in their power to do if they wished to prevent their own members and others being priced out of jobs; and as the scale of union irresponsibility grew apparent, talk of the need for a pay policy began to be heard.

  So it was important that from the very beginning I stood firm against suggestions of pay policies. I had come to feel that all such talk was at best irrelevant and at worst misguided.

  Some people offered what they thought of as the ‘German model’. We were all conscious of Germany’s economic success. Indeed, we had helped create the conditions for it after the war by introducing competition and restructuring their trade unions. There were those in Britain who said that we should copy the German corporatist tendency of making national economic decisions in consultation with business organizations and trade union leaders. However, what might work for Germany would not necessarily work for us. The German experience of hyperinflation between the wars meant that nearly everyone there was deeply conscious of the need to keep inflation down, even at the expense of a short-term rise in unemployment. German trade unions were also far more responsible than ours, and of course the German character is less individualistic and more regimented. So the ‘German model’ was inappropriate for Britain.

  In any case, we already had the National Economic Development Council (NEDC) in which ministers, employers and trade unionists met from time to time. And so I was quite sure that we should not proceed further with the idea of a new ‘forum’. In fact, I felt that the whole approach based on prices and incomes controls should be swept away. The Government would set the framework, but it was for businesses and workforces to make their own choices, and to face the consequences of their actions, good and bad. In the private sector rates of pay must be determined by what businesses could afford, depending on their profitability and productivity. In the public sector also affordability was the key – in this case meaning the scale of the burden it was right to ask the taxpayer and ratepayer to bear. Given that government was the ultimate owner and banker, however, the mechanism by which these disciplines could be made effective was bound to be less clear and direct than in the private sector.

  The income tax cuts in our 1979 budget were intended to give more incentives to work. However, the most important aspect of the 1980 budget related to monetary policy rather than taxation. We announced in the budget our Medium Term Financial Strategy (quickly known as the MTFS), which was to remain at the heart of our economic policies throughout the period of their success and which was only relegated in importance in those final years, when Nigel Lawson’s imprudence had already begun to steer us to disaster. A little historical irony is provided by the fact that Nigel himself, as Financial Secretary, signed the Financial Statement and Budget Report (FSBR), or ‘Red Book’, in which the MTFS first burst on an astonished world, and that he was its most brilliant and committed exponent.

  The MTFS was intended to set the monetary framework for the economy over a period of years. The aim was to bring down inflation by decreasing monetary growth, while curbing borrowing to ensure that the pressure of disinflation did not fall solely on the private sector in the form of higher interest rates. The monetary figures for later years that we announced in 1980 were illustrative rather than firm targets – though this did not prevent commentators poking tiresome fun when the targets were altered or not met. The 1980 MTFS figures for the money supply were expressed in sterling M3 (£M3), though the Red Book noted that ‘the way in which the money supply is defined for target purposes may need to be adjusted from time to time as circumstances change’, an important qualification.*

  A firm financial strategy was necessary to improve our economic performance: but we never believed that it would be sufficient. We also had to deal with the problem of trade union power, made worse by successive Labour Governments and exploited by the communists and militants who had risen to key positions within the trade union movement – positions which they ruthlessly exploited in the callous strikes of the winter of 1978–79.

  The engineering industry dispute in 1979 provided a good demonstration of how much poison excessive trade union power and privilege had injected into British industry – and not just the public but the private sector too. The engineering industry had every commercial reason to reduce costs so as to compete. Yet after a ten-week strike, the Engineering Employers’ Federation (EEF) conceded a 39-hour week, increases of £13 a week for skilled men and an extra week’s holiday phased over four years, all of this greatly increasing their costs. Because of the centralized system of pay bargaining, employers throughout the industry had also given in. The EEF had long accepted the closed shop as an unavoidable fact of life. So the unions’ power over their members was more or less absolute.

  On 14 May 1979, less than a fortnight after I formed the Government, Jim Prior wrote to me setting out his plans for trade union reform. There was a certain amount that we could do at once. We could set up our promised inquiry into the coercive recruitment practices of the printing union SLADE – which would deal also with the activities of the NGA in the advertising industry. We could also make certain changes to employment legislation by Order in Council, with the aim of reducing the heavy burden placed – on small firms in particular – by the provisions on unfair dismissal and redundancy. But we would have to consult with employers and unions extensively about our main proposals.

  Two weeks later Jim set out his proposals in a Cabinet paper. They covered three main areas: picketing, the closed shop and ballots. We planned to limit the specific immunities for picketing strictly to those who were themselves party to the dispute and who were picketing at the premises of their own employer. Where there was a closed shop, we proposed to give employees who might be dismissed for refusing to join a union the right to apply to an industrial tribunal for compensation. There would be a legal right of complaint for those arbitrarily expelled or excluded from union membership. We would extend the present protection for employees who objected to joining a union because of deeply held personal conviction. A new closed shop could in future only be established if an overwhelming majority of workers voted for it by secret ballot. A statutory code relating to the closed shop would be drawn up. Finally, the Secretary of State for Employment would be given power to reimburse trade unions for the postal and administrative costs of secret ballots.

  These early proposals were as notable for what they did not contain as for what they did. At this stage they did not extend to the question of secondary action other than secondary picketing, nor did they deal with the wider question of trade union immunities. In particular, they left alone the crucial immunity which prevented action being taken by the courts against union funds. On secondary action we were awaiting the conclusions of the House of Lords in the important case of Express Newspapers v. MacShane. It is worth noting that the changes we made in all these areas were changes in the civil, not the criminal, law. In public discussion of subsequent strikes this distinction was often lost. The civil law could only change the way in which unions b
ehaved if employers or, in some cases, workers were prepared to use it. They had to bring the case. By contrast, the criminal law on picketing had to be enforced by the police and the courts. Although the Government would make it clear that the police enjoyed its moral support, the constitutional limits on us in this area were real and sometimes frustrating.

  As the summer wore on, it became obvious that although the TUC was prepared to talk to the Government about our proposals, it had no intention of actually co-operating with them. There was no willingness on their side to face economic facts or to try to understand the economic strategy we were pursuing.

  In the last part of 1979 and the early months of 1980 we continued refining the Employment Bill and spent a good deal of time on the question of secondary action and immunities. We also discussed item by item measures to deal with the burdens which past Labour legislation had placed on industry.

  But by far the most contested issue was that of trade union immunities. Our proposals on secondary picketing had already begun to address it. But we now took a further step. We had received the report of the inquiry set up earlier into the recruitment activities of the printing union SLADE, undertaken by Mr Andrew Leggatt QC.* In response, we decided to remove the immunity where industrial disruption was called or threatened by people other than those directly working for a particular firm with the intention of coercing its employees into joining a trade union.

  We decided to go further, following the House of Lords decision in the MacShane case on 13 December. The MacShane case was important because it confirmed the wide scope of existing immunities in the case of secondary action. Most of the immunities then enjoyed by trade unions had their origin in the Trade Disputes Act (1906), which Labour extended significantly in October 1974. The MacShane case arose from a dispute that began in 1978 between the National Union of Journalists (NUJ) and a number of provincial newspapers. The provincial papers managed to keep going during the dispute by publishing stories supplied to them by the Press Association. The NUJ unsuccessfully attempted to prevent this, first, by direct appeal to NUJ members working for the Press Association and when that failed, by instructing its people on national newspapers to black Press Association material altogether. In response the Daily Express applied for an injunction against the NUJ. The Court of Appeal in December 1978 ruled in favour of the Express that the NUJ secondary action had exceeded that which could be regarded as furthering the objectives of the dispute and therefore did not enjoy immunity. As a result of this decision, injunctions could be and were granted. However, when the case went to the House of Lords, the Appeal Court’s ruling was overturned. Essentially, the Lords decided that for purposes of law an industrial action was ‘in furtherance of a trade dispute’, and therefore immune, if trade union officials genuinely believed it to be so. It meant that henceforth there would be virtually unlimited immunity for secondary industrial action.

  The position was complicated by the outcome of two other court cases. One of these – N.W.L. Limited v. Nelson Wood, or the ‘Nawala Case’ – resulted from the attempts of the International Transport Workers’ Federation to prevent the employment by a British shipping company of overseas seamen in British registered ships. The Federation’s action threatened the future of the British shipping industry. Still more important, however, was the second case, which widened the scope for secondary action in the steel strike. The Iron and Steel Trades Confederation (ISTC) had called out its members in the private steel sector as part of its dispute with the British Steel Corporation, which had begun on 2 January 1980. Duport Steels, a private steel company, was granted an injunction by the Court of Appeal against Bill Sirs, General Secretary of the ISTC. The Court of Appeal ruled that immunity did not apply in this case because the ISTC’s argument was essentially with the Government rather than BSC itself. But again, the House of Lords reversed this ruling, relying on broadly the same grounds as in the MacShane case. The practical result was that the strike spread once more to the private steel companies.

  We were all agreed that the law as now interpreted by the courts must be changed. But we disagreed both about what immunity, if any, there should be for secondary action and about the timing of the introduction of the necessary change into the Employment Bill. Again and again, Jim Prior said that he did not want decisions about changes in the law to be linked with a particular dispute. But as the steel strike worsened, with none of our proposed legislation yet in force, the public criticism grew. I had the greatest sympathy with the critics, though I wished that some employers had earlier been rather more robust. Whenever those of us who felt that we ought to go faster put our case – and our number included Geoffrey Howe, John Nott, Keith Joseph, Angus Maude, Peter Thorneycroft and John Hoskyns – Jim Prior was always able to argue against ‘hasty action’ by reference to the cautious attitude of the CBI.

  By this stage I did not share Jim’s analysis of the situation at all. He really believed that we had already tried to do too much and that we should go no further, whether in the area of trade union law or general economic strategy. I, for my part, had begun bitterly to regret that we had not made faster progress both in cutting public expenditure and with trade union reform.

  For all his virtues, Jim Prior was an example of a political type that had dominated and, in my view, damaged the post-war Tory Party. I call such figures ‘the false squire’. They have all the outward show of a John Bull – ruddy face, white hair, bluff manner – but inwardly they are political calculators who see the task of Conservatives as one of retreating gracefully before the Left’s inevitable advance. Retreat as a tactic is sometimes necessary; retreat as a settled policy eats at the soul. In order to justify the series of defeats that his philosophy entails, the false squire has to persuade rank and file Conservatives that advance is impossible. His whole political life would, after all, be a gigantic mistake if a policy of positive Tory reform turned out to be both practical and popular. Hence the passionate and obstinate resistance mounted by the ‘wets’ to the fiscal, economic and trade union reforms of the early 1980s. These reforms had either to fail or be stopped. For if they succeeded, a whole generation of Tory leaders had despaired unnecessarily. It made Jim Prior timid and overcautious in his trade union policy. I had to stake out a more determined approach.

  Brian Walden interviewed me for Weekend World on Sunday 6 January. I used the occasion to say that we would be introducing a new clause in the Employment Bill to rectify the problem left by the MacShane judgment. I made it clear that we did not intend to remove the immunity enjoyed by trade unions as regards action intended to cause people to break their employment contracts, but would concentrate on the immunity relating to action designed to cause employers to break their commercial contracts. I also drew attention to the way in which trade union immunities had combined with nationalized monopolies to give huge power to the trade unions in these industries. We needed to restrict the immunities and to break the monopolies by introducing competition.

  All my instincts told me that we would have strong public support for further action to restrict union power, and the evidence supported me. An opinion survey in The Times on 21 January 1980 asked people the question: ‘Do you think sympathy strikes and blacking are legitimate weapons to use in an industrial dispute, or should the new law restrict their use?’ Seventy-one per cent of those who replied – and 62 per cent of trade unionists who did so – said that a new law should indeed restrict their use.

  On the morning of Tuesday 5 February I had two meetings with industrialists. The first was with the CBI. Some of them said that the present Bill, as drafted, went as far as possible.

  The second meeting that day was with the private sector steel producers. They complained that the private steel companies had been dragged into a dispute not of their making and in which they would be the only real victims. As a result of the strike they were losing about £10 million a week. It was clear that there was no real grievance on the part of private sector steel workers but
the threat of losing union cards was the decisive factor in persuading private sector workers to join the strike. In these circumstances it is not surprising that the private sector steel companies wanted immediate legislation to outlaw secondary picketing.

  Ministers now agreed to restore the law to what it had been understood to be before the MacShane judgment, adding further tests relating to the dispute to be applied by the courts. There would not, however, be a total ban on secondary action. There followed a short period for consultation and the new clause was introduced into the Employment Bill at the Report Stage in the House of Commons on 17 April 1980, limiting immunity for secondary action which broke or interfered with commercial contracts. Immunity would only exist when the action was taken – by employees of suppliers or customers of the employer in dispute – with the ‘sole or principal purpose’ of furthering the primary dispute and when the action was reasonably likely to succeed. Of great significance for the future was the fact that we announced the publication of a Green Paper on trade union immunities, which would appear later in the year and would look at the whole issue from a wider perspective.