The Path to Power m-2

by Margaret Thatcher

  Meanwhile, throughout that summer of 1974 I received far more publicity than I had ever previously experienced, mainly as a result of our housing policy. Some of this was inadvertent. The interim report of the housing policy group which I circulated to Shadow Cabinet appeared on the front page of The Times on Monday 24 June. On the previous Friday Shadow Cabinet had spent the morning discussing the fourth draft of the manifesto. By now the main lines of my proposed housing policy were agreed. The mortgage rate would be held down to some unspecified level by cutting the composite rate of tax paid by building societies on depositors’ accounts, in other words by subsidy disguised as tax relief. A grant would be given to first-time buyers saving for a deposit, though again no figure was specified. There would be a high-powered inquiry into building societies; this was an idea I modelled on the James Inquiry into teachers’ training. I hoped it might produce a long-term answer to the problem of high mortgage rates and yet save us from an open-ended subsidy.

  The final point related to the right of tenants to buy their council houses. Of all our proposals this was to prove the most far-reaching and the most popular. The February 1974 manifesto had offered council tenants the chance to buy their houses, but retained a right of appeal for the council against sale, and had not offered a discount. We all wanted to go further than this; the question was how far. Peter Walker constantly pressed for the ‘Right to Buy’ to be extended to council tenants at the lowest possible prices. My instinct was on the side of caution. It was not that I underrated the benefits of wider property ownership. Rather, I was wary of alienating the already hard-pressed families who had scrimped to buy a house on one of the new private estates at the market price and who had seen the mortgage rate rise and the value of their house fall. These people were the bedrock Conservative voters for whom I felt a natural sympathy. They would, I feared, strongly object to council house tenants who had made none of their sacrifices suddenly receiving what was in effect a large capital sum from the Government. We might end up losing more support than we gained. In retrospect, this argument seems both narrow and unimaginative. And it was. But there was a lot to be said politically for it in 1974 at a time when the value of people’s houses had slumped so catastrophically.

  In the event, we went a long way in Peter’s direction. The October 1974 manifesto offered council tenants who had been in their homes for three years or more the right to buy them at a price a third below market value. If the tenant sold again within five years he would surrender part of any capital gain. Also by the time the manifesto reached its final draft we had quantified the help to be given to first-time buyers of private houses and flats. We would contribute £1 for every £2 saved for the deposit up to a given ceiling. (We ducked the question of rent decontrol.)

  It was, however, the question of how low a maximum mortgage interest rate we would promise in the manifesto that caused me most trouble. Although, for the reasons I have already outlined, I had convinced myself that some kind of pledge in this area was justified, I was very aware of how the cost to the Exchequer might escalate alarmingly if inflation and interest rates kept on rising. Ted and those around him seemed to entertain no such caution. On Thursday 1 August he summoned me back from Lamberhurst for a meeting at his new house in Wilton Street with Peter Walker, Ian Gilmour and Robert Carr. I was put under great pressure to go beyond the phrase which had by now been agreed for the manifesto of pegging the mortgage rate at a ‘reasonable’ level. Ted and the others wanted a specific figure. I argued strongly against, but in the end I had to concede a pledge that we would hold the rate ‘below 10 per cent’. Beyond that, I did not agree to a specific figure. I hoped it would be the end of the matter.

  But when I was in the car on the way from London to Tonbridge on Wednesday 28 August in order to record a Party Political Broadcast the bleeper signalled that I must telephone urgently. Ted apparently wanted a word. Willie Whitelaw answered the phone and it was clear that the two of them, and doubtless others of the inner circle, were meeting. Ted came on the line. He asked me to announce on the PPB the precise figure to which we would hold down mortgages, and to take it down as low as I could. I said I could understand the psychological point about going below 10 per cent. That need could be satisfied by a figure of 9½ per cent, and in all conscience I could not take it down any further. To do so would have a touch of rashness about it. I was already worried about the cost. I did not like this tendency to pull figures out of the air for immediate political impact without proper consideration of where they would lead. So I stuck at 9½ per cent.

  It was a similar story on the rates. When we had discussed the subject at our Shadow Cabinet meeting on Friday 21 June I had tried to avoid any firm pledge. I suggested that our line should be one of reform to be established on an all-party basis through a Select Committee. I was the first to admit that this was not likely to set the world on fire. But even more than housing, this was not an area in which precipitate pledges were sensible. Ted would have none of this and said I should think again. The need for something clearer was indeed demonstrated by the Commons debate on the rates a few days later. We called for fundamental reform, some interim rate relief and a provision that water charges should qualify for rate rebate. In my speech I also argued for central government having the power to cap local government spending and then for a general inquiry into the rates. But though I emerged with my reputation as a parliamentarian intact, Tony Crosland, the Environment Secretary, arguing for an increased central government subsidy to local authorities without major reform of the system, was generally thought to have had the better of the debate. His victory was pyrrhic. For increased subsidies led not to lower rates but to higher local spending. Within a year Mr Crosland was announcing sternly: ‘The party is over.’

  In July Charles Bellairs at the Conservative Research Department and I worked on a draft rates section for the manifesto. We were still thinking in terms of an inquiry and an interim rate relief scheme. I went along to discuss our proposals at the Shadow Cabinet Steering Committee. I argued for the transfer of teachers’ salaries — the largest item of local spending — from local government onto the Exchequer. Another possibility I raised was the replacement of rates with a system of block grants, with local authorities retaining discretion over spending but within a total set by central government. Neither of these possibilities was particularly attractive. But at least discussion revealed to those present that ‘doing something’ about the rates was a very different matter from knowing what to do.

  On Saturday 10 August I used my speech to the Candidates’ Conference at the St Stephen’s Club to publicize our policies. I argued for total reform of the rating system to take into account individual ability to pay, and suggested the transfer of teachers’ salaries and better interim relief as ways to achieve this. It was a good time of the year — a slack period for news — to unveil new proposals, and we gained some favourable publicity.

  It seemed to me that this proved that we could fight a successful campaign without being more specific; indeed, looking back, I can see that we were already a good deal too specific because, as I was to discover fifteen years later, such measures as transferring the cost of services from local to central government do not in themselves lead to lower local authority rates.

  I had hoped to have a pleasant family holiday at Lamberhurst away from the sticky heat of London and the demands of politics. It would have been the first for three years. It was not to be. The telephone kept ringing, with Ted and others urging me to give more thought to new schemes. Then I was called back for another meeting at Wilton Street on Friday 16 August. Ted, Robert Carr, Jim Prior, Willie Whitelaw and Michael Wolff from Central Office were all there. It was soon clear what the purpose was — to bludgeon me into accepting a commitment in the manifesto to abolish the rates altogether within the lifetime of a Parliament. I argued against this for very much the same reason that I argued against the ‘9½ per cent’ pledge on the mortgage rate. But so shell-shocked by
their unexpected defeat in February were Ted and his inner circle that in their desire for re-election they were clutching at straws, or what in the jargon were described as manifesto ‘nuggets’.

  There were various ways to raise revenue for expenditure on local purposes. We were all uneasy about moving to a system whereby central government just provided block grants to local government. So I had told Shadow Cabinet that I thought a reformed property tax seemed to be the least painful option. But in the back of my mind I had the additional idea of supplementing the property tax with a locally collected tax on petrol. Of course, there were plenty of objections to both, but at least they were better than putting up income tax.

  In any case, what mattered to my colleagues was clearly the pledge to abolish the rates, and at Wilton Street Ted insisted on it. I felt bruised and resentful to be bounced again into policies which had not been properly thought out. But I thought that if I combined caution on the details with as much presentational bravura as I could muster I could make our rates and housing policies into vote-winners for the Party. This I now concentrated my mind on doing.

  It was at a press conference on the afternoon of Wednesday 28 August that I unveiled our final proposals. I delivered the package of measures — built around 9½ per cent mortgages and the abolition of the rates — without a scintilla of doubt, which as veteran Evening Standard reporter Robert Carvel said, ‘went down with hardened reporters almost as well as the sherry’ served by Central Office. We dominated the news. It was by general consent the best fillip the Party had had since losing the February election. There was even some talk of the Conservatives being back in the lead in the opinion polls, though this was over-optimistic. The Building Societies’ Association welcomed the proposals for 9½ per cent mortgages but questioned my figures about the cost. In fact, as I indignantly told them, it was their sums which were wrong and they subsequently retracted. Some on the economic right were understandably critical, but among the grassroots Conservatives that we had to win back the mortgage proposal was extremely popular. So too was the pledge on the rates. The Labour Party was rattled and unusually the party-giving Tony Crosland was provoked into overreaction, describing the proposals as ‘Margaret’s midsummer madness’. All this publicity was good for me personally as well. Although I was not to know it at the time, this period up to and during the October 1974 election campaign allowed me to make a favourable impact on Conservatives in the country and in Parliament without which my future career would doubtless have been very different.

  FIRST SECOND THOUGHTS

  Although it was my responsibilities as Environment spokesman which took up most of my time and energy, from late June I had become part of another enterprise which would have profound consequences for the Conservative Party, for the country and for me. The setting-up of the Centre for Policy Studies (CPS) is really part of Keith Joseph’s story rather than mine. Keith had emerged from the wreckage of the Heath Government determined on the need to rethink our policies from first principles. If this was to be done, Keith was the ideal man to do it. He had the intellect, the integrity and not least the humility required. He had a deep interest in both economic and social policy. He had long experience of government. He had an extraordinary ability to form relationships of friendship and respect with a wide range of characters with different viewpoints and backgrounds. Although he could, when he felt strongly, speak passionately and persuasively, it was as a listener that he excelled. Moreover, Keith never listened passively. He probed arguments and assertions and scribbled notes which you knew he would go home to ponder. He was so impressive because his intellectual self-confidence was the fruit of continual self-questioning. His bravery in adopting unpopular positionsbefore a hostile audience evoked the admiration of his friends, because we all knew that he was naturally shy and even timid. He was almost too good a man for politics, except that without a few good men politics would be intolerable.

  I could not have become Leader of the Opposition, or achieved what I did as Prime Minister, without Keith. But nor, it is fair to say, could Keith have achieved what he did without the Centre for Policy Studies and Alfred Sherman. Apart from the fact of their being Jewish, Alfred and Keith had little in common, and until one saw how effectively they worked together it was difficult to believe that they could cooperate at all.

  I understand that Keith and Alfred first met in 1962 when Keith was Housing Minister and Alfred covered local government matters at the Daily Telegraph. From time to time they were in touch, and then after a discussion at the Reform Club Keith asked Alfred’s thoughts about a speech draft he had with him. From then on Keith took to asking for Alfred’s suggestions. During the early years of the Heath Government they had less contact, but it was during the three-day week that Keith met Alfred to discuss the Middle East, on which Alfred was something of an expert, writing for the main Hebrew-language daily in Israel.

  Alfred had his own kind of brilliance. He brought his convert’s zeal (as an ex-communist), his breadth of reading and his skills as a ruthless polemicist to the task of plotting out a new kind of free-market Conservatism. He was more interested, it seemed to me, in the philosophy behind policies than the policies themselves. He was better at pulling apart sloppily constructed arguments than at devising original proposals. But the force and clarity of his mind, and his complete disregard for other people’s feelings or opinion of him, made him a formidable complement and contrast to Keith. Alfred helped Keith to turn the Centre for Policy Studies into the powerhouse of alternative Conservative thinking on economic and social matters.

  I was not involved at the beginning, though I gathered from Keith that he was thinking hard about how to turn his Shadow Cabinet responsibilities for research on policy into constructive channels. In March Keith had won Ted’s approval for the setting-up of a research unit to make comparative studies with other European economies, particularly the so-called ‘social market economy’ as practised in West Germany. Ted had Adam Ridley put on the board of directors of the CPS (Adam acted as his economic adviser from within the Conservative Research Department), but otherwise Keith was left very much to his own devices. Nigel Vinson, a successful entrepreneur with strong free-enterprise convictions, was made responsible for acquiring a home for the Centre, which was found in Wilfred Street, close to Victoria. Simon Webley, who ran the British/North American Research Association, ensured that the Centre’s publications never forgot the realities of industry and commerce amid the economic theories. Later in 1974 Gerry Frost, the present Director, also joined the CPS and established some administrative order out of what might have been a chaos of intellectuals. Other figures who made crucial contributions from time to time were Jock Bruce-Gardyne and Peter Utley. A further reason for the Centre’s success was the dedication of secretaries and cooks who twice a week provided some of the best low-cost meals in London. (Perhaps not always low-cost: Gerry Frost once complained in a memo: ‘We seem to be bent on disproving the dictum that there is no such thing as a free lunch.’) Increasingly, the CPS acted as a focus for a large group of free-market thinkers, by no means all of them Conservative, who sought to change the climate of opinion and achieve wider understanding of the role of the market and the shortcomings of statism.

  It was at the end of May 1974 that I first became directly involved with the CPS. Whether Keith ever considered asking any other members of the Shadow Cabinet to join him at the Centre I do not know: if he had they certainly did not accept. His was a risky, exposed position, and the fear of provoking the wrath of Ted and the derision of left-wing commentators was a powerful disincentive. But I jumped at the chance to become Keith’s Vice-Chairman.

  The CPS was the least bureaucratic of institutions. It could not properly be called a ‘think tank’ for it had none of the corporate grandeur of the prestigious American foundations which that term evokes. Alfred Sherman has caught the feel of it by saying that it was an ‘animator, agent of change, and political enzyme’. The original proposed so
cial market approach did not prove particularly fruitful and was eventually quietly forgotten, though a pamphlet called Why Britain Needs a Social Market Economy was published. The concept of the social market was — like other terms of foreign provenance too literally translated — bedevilled with problems. How much was it simply a matter of restating the truth that only a successful market economy can sustain social improvement? How much did it signify a market economy with a high degree of ‘social protection’, i.e. regulation? Even its most prominent exponent, West German Chancellor Ludwig Erhard, apparently had his doubts about the way it was being implemented in later years.

  What the Centre then developed was the drive to expose the follies and self-defeating consequences of government intervention. It continued to engage the political argument in open debate at the highest intellectual level. The objective was to effect change — change in the climate of opinion and so in the limits of the ‘possible’. In order to do this it had, to employ another of Alfred’s phrases, to ‘think the unthinkable’. It was not long before more than a few feathers began to be ruffled by that approach.

  Keith had decided that he would make a series of speeches over the summer and autumn of 1974 in which he would set out the alternative analysis of what had gone wrong and what should be done. The first of these, which was also intended to attract interest among potential fund-raisers, was delivered at Upminster on Saturday 22 June. Alfred was the main draftsman. But as with all Keith’s speeches — except the fateful Edgbaston speech which I shall describe shortly — he circulated endless drafts for comment. All the observations received were carefully considered and the language pared down to remove every surplus word. Keith’s speeches always put rigour of analysis and exactitude of language above style, but taken as a whole they managed to be powerful rhetorical instruments as well.