The Path to Power m-2

by Margaret Thatcher

  The Upminster speech infuriated Ted and the Party establishment because Keith lumped in together the mistakes of Conservative and Labour Governments, talking about the ‘thirty years of socialistic fashions’. The last time anyone had been bold enough to speak like this was when Hayek wrote The Road to Serfdom in 1944. Keith pre-empted the criticism which would inevitably be levelled at him by accepting now and later his full share of the blame for what had gone wrong. One after the other he led the sacred cows to the abattoir. He said of the frantic pursuit of economic growth: ‘Growth is welcome, but we just do not know how to accelerate its pace. Perhaps faster growth, like happiness, should not be a prime target but only a by-product of other policies.’

  He said bluntly that the public sector had been ‘draining away the wealth created by the private sector’, and challenged the value of public ‘investment’ in tourism and the expansion of the universities. He condemned the socialist vendetta against profits and noted the damage done by rent controls and council housing to labour mobility. Finally — and, in the eyes of the advocates of consensus, unforgivably — he talked about the ‘inherent contradictions [of the]… mixed economy’. It was a short speech but it had a mighty impact, not least because people knew that there was more to come.

  A distinctive feature of Keith’s approach was that he went out of his way to avoid suggesting that malice had prompted the excessive state spending, nationalization, regulation, taxation and trade union power which had done so much harm to Britain. On the contrary, he argued, all this had occurred with the best of intentions. Perhaps in this he was over-generous, attributing his own high-mindedness to others. But the patent sincerity and charity which accompanied his devastating criticism of the politics of the last thirty years increased the effect. He returned to the same theme at Leith in August, by which time I was myself more actively involved in the CPS, attending Keith’s meetings, commenting on his suggestions and preparing my own notes and papers on the areas of education and social services which I knew best.

  From Keith and Alfred I learned a great deal. I renewed my reading of the seminal works of liberal economics and conservative thought. I also regularly attended lunches at the Institute of Economic Affairs where Ralph Harris, Arthur Seldon, Alan Walters and others — in other words all those who had been right when we in Government had gone so badly wrong — were busy marking out a new non-socialist economic and social path for Britain. I lunched from time to time with Professor Douglas Hague, the economist, who would later act as one of my unofficial economic advisers.

  At about this time I also made the acquaintance of a polished and amusing former television producer called Gordon Reece, who was advising the Party on television appearances and who had, it seemed to me, an almost uncanny insight into that medium. In fact, by the eve of the October 1974 general election I had made a significant number of contacts with those on whom I would come to rely so heavily during my years as Party Leader.

  The third of Keith’s troika of policy speeches was delivered in Preston on Thursday 5 September (by which time he was Shadow Home Secretary). After some early inconclusive discussion in Shadow Cabinet of Keith’s various ideas, Ted had refused the general economic re-evaluation and discussion which Keith wanted. Keith decided that he was not prepared to be either stifled or ignored, and gave notice that he was intending to make a major speech on economic policy. Ted and most of our colleagues were desperate to prevent this. Geoffrey Howe and I, as the two members of Shadow Cabinet considered most likely to be able to influence Keith, were accordingly dispatched to try to persuade him not to go ahead, or at least to tone down what he intended to say. In any case, Keith showed me an early draft. It was one of the most powerful and persuasive analyses I have ever read. I made no suggestions for changes. Nor, as far as I know, did Geoffrey. The Preston speech must still be considered as one of the very few speeches which have fundamentally affected a political generation’s way of thinking.

  It set out in much greater detail than ever before the monetarist approach. It began with the sombre statement: ‘Inflation is threatening to destroy our society.’ At most times this would have seemed hyperbole, but at this time, with inflation at 17 per cent and rising, people were obsessed with its impact on their lives. That only made more explosive Keith’s admission that successive governments bore the responsibility for allowing it to get such a grip. He rejected the idea embraced by the Shadow Cabinet that inflation had been ‘imported’ and was the result of rocketing world prices. In fact, it was the result of excessive growth of the money supply. Explaining as he did that there was a time lag of ‘many months, or even as much as a year or two’ between loose monetary policy and rising inflation, he also implicitly — and of course accurately — blamed the Heath Government for the inflation which was now beginning to take off and which would rise to even more ruinous levels the following year. He also rejected the use of incomes policy as a means of containing it. The analysis was subtle, detailed and devastating.

  Incomes policy alone [the word ‘alone’ being a minor concession I suppose to the official Shadow Cabinet line] as a way to abate inflation caused by excessive money supply is like trying to stop water coming out of a leaky hose without turning off the tap; if you stop one hole it will find two others… But long before this year, we knew all the arguments. We had used them in Opposition in 1966–70. Why then did we try incomes policy again? I suppose that we desperately wanted to believe in it because we were so apprehensive about the alternative: sound money policies.

  (Of course I too in my 1968 CPC lecture had accepted the monetarist analysis: so I felt that this applied equally to me.)

  Keith then put his finger on the fundamental reason why we had embarked on our disastrous U-turns — fear of unemployment. It had been when registered unemployment rose to one million that the Heath Government’s nerve broke. But Keith explained that the unemployment statistics concealed as much as they revealed because they included ‘frictional unemployment’ — that is, people who were temporarily out of work moving between jobs — and a large number of people who were more or less unemployable for one reason or another. Similarly, there was a large amount of fraudulent unemployment, people who were drawing benefit while earning. In fact, noted Keith, the real problem had been labour shortages, not surpluses. He said that we should be prepared to admit that control of the money supply to beat inflation would temporarily risk some increase in unemployment. But if we wanted to bring down inflation (which itself destroyed jobs, though this was an argument to which Keith and I would subsequently have to return on many occasions), monetary growth had to be curbed. Keith did not argue that if we got the money supply right, everything else would be right. He specifically said that this was not his view. But if we did not achieve monetary control we would never be able to achieve any of our other economic objectives.

  The Preston speech had a huge impact. It was, of course, highly embarrassing for Ted and the Party establishment. Some still hoped that a combination of dire warnings about socialism, hints of a National Government and our new policies on mortgages and the rates would see us squeak back into office — an illusion fostered by the fact that on the very day of Keith’s speech an opinion poll showed us two points ahead of Labour. The Preston speech blew this strategy out of the water, for it was clear that the kind of reassessment Keith was advocating was highly unlikely to occur if the Conservatives returned to government with Ted Heath as Prime Minister. Keith himself discreetly decided to spend more time at the CPS in Wilfred Street than at Westminster, where some of his colleagues were furious. For my part, I did not think that there was any serious chance of our winning the election. In the short term I was determined to fight as hard as I could for the policies which it was now my responsibility to defend. In the longer term I was convinced that we must turn the Party around towards Keith’s way of thinking, preferably under Keith’s leadership.

  TED’S LAST THROW

  The Conservative Party manifest
o was published early, on Tuesday 10 September — about a week before the election was announced — because of a leak to the press. I was taken by surprise by a question on it when I was opening the Chelsea Antiques Fair. The release of the manifesto in this way was not a good start to the campaign, particularly because we had so little new to say. It was clear, however, from the course of the Shadow Cabinet two days later, that what was really worrying Ted and his circle was what Keith — and to a lesser extent I — was likely to say. Ted laid down the law: we must speak to the manifesto and nothing else, and any amplification of policies must be made only after discussions between the relevant spokesmen, the Party Chairman and himself. Shadow Cabinet members must concentrate particularly on their own subjects. No one had the slightest doubt about the target for these remarks.

  I was effectively on the campaign trail even before the formal announcement the following Wednesday of a general election to take place on Thursday 10 October. On Monday I spoke in the north-west for Fergus Montgomery, my splendid PPS (a frontbencher’s eyes and ears in the Commons). On Tuesday I was answering questions about our policies at a meeting of the House-builders’ Federation. On Wednesday itself I gave an interview to a magazine called Pre-Retirement Choice: this was, as I shall explain, to come back to haunt me. On Thursday there was a further general discussion of the campaign in Shadow Cabinet. The following day Parliament was dissolved and the campaign got properly under way with MPs leaving for their constituencies.

  I had never had so much exposure to the media as in this campaign. The Labour Party recognized that our housing and rates proposals were just about the only attractive ones in our manifesto, and consequently they set out to rubbish them as soon as possible. On Tuesday 24 September Tony Crosland described them as ‘a pack of lies’. (This was the same press conference at which Denis Healey made his notorious claim that inflation was running at 8.4 per cent, calculating the figure on a three-month basis when the annual rate was in fact 17 per cent.) I immediately issued a statement rebutting the accusation, and in order to keep the argument going, for it would highlight our policies, I said at Finchley that evening that the cut in mortgage rates would be among the first actions of a new Conservative Government. Then, in pursuit of the same goal, and having consulted Ted and Robert Carr, the Shadow Chancellor, I announced at the morning press conference at Central Office on Friday that the mortgage rate reduction would occur ‘by Christmas’ if we won. The main morning papers led with the story the following day — ‘Santa Thatcher’ — and it was generally said that we had taken the initiative for the first time during the campaign. On the following Monday I described this on a Party Election Broadcast as a ‘firm, unshakeable promise’. And the brute political fact was that, despite my reservations about the wisdom of the pledge, we would have had to honour it at almost any cost.

  It was at this point that the way in which I was presenting our housing and rates policies first began to run up against the general approach Ted wanted to take in the campaign. At his insistence I had made the policies I was offering as hard and specific as possible. But the manifesto, particularly in the opening section, deliberately conveyed the impression that the Conservatives might consider some kind of National Government and would therefore be flexible on the policies we were putting forward. The passage read:

  The Conservative Party, free from dogma and free from dependence upon any single interest, is broadly based throughout the nation. It is our objective to win a clear majority in the House of Commons in this election. But we will use that majority above all to unite the nation. We will not govern in a narrow partisan spirit. After the election we will consult and confer with the leaders of other parties and with the leaders of the great interests in the nation, in order to secure for the Government’s policies the consent and support of all men and women of goodwill. We will invite people from outside the ranks of our party to join with us in overcoming Britain’s difficulties. [Emphasis added.]

  These undefined people who would join the Conservatives in government might include, one presumed, some members of the right wing of the Labour Party and perhaps the Liberals. The latter had all along been openly campaigning for a coalition government. This kind of rhetoric made me deeply uneasy. It was not just that, like Disraeli’s England, I did not like coalitions. In practical terms, such talk reduced the credibility of the pledges I was making in my own area. For who could tell what inter-party horse-trading might do to them?

  At the Conservative press conference on Friday 2 October Ted stressed his willingness as Prime Minister to bring non-Conservatives into a government of ‘all the talents’ (party and talent being in this context considered synonyms). This tension between firm pledges and implied flexibilities was in danger of making nonsense of our campaign and dividing Shadow ministers.

  We were now entering the last week. I still did not believe we were likely to win. The opinion polls had shown us well behind since the beginning of the campaign. But I felt that in spite of criticism in the heavyweight press my housing and rates policies had proved a political success. I also thought that we might manage to get by with the present somewhat ambiguous attitude to National Governments for the few days remaining.

  On Thursday I continued when campaigning in the London areas with the vigorous defence of our housing policies and combined this with attacks on ‘creeping socialism’ through municipalization. In the evening I was asked to come and see Ted at Wilton Street. His advisers had apparently been urging him to go further and actually start talking about the possibility of a Coalition Government. Because I was known to be firmly against this for both strategic and tactical reasons, and because I was due to appear on the radio programme Any Questions in Southampton the following evening, I had been called in to have the new line spelt out to me. Ted said that he was now prepared to call for a Government of National Unity which, apparently, ‘the people’ wanted. I was extremely angry. He had himself, after all, insisted on making the housing and rates policies I had been advocating as specific as possible: now at almost the end of the campaign he was effectively discarding the pledges in the manifesto because that seemed to offer a better chance of his returning to Downing Street.

  Why, in any case, he imagined that he himself would be a Coalition Government’s likely Leader quite escaped me. Ted at this time was a divisive figure, and although he had somehow convinced himself that he represented the ‘consensus’, this accorded with neither his record, nor his temperament, nor indeed other people’s estimation. For myself, I was not going to retreat from the policies which at his insistence I had been advocating. I went away highly disgruntled.

  On Any Questions I conceded that if there were no clear majority, a coalition would probably be necessary. But I qualified this by saying that I myself could never sit in a government with left wingers like Michael Foot or Tony Benn. I might have added that the likelihood of Keith Joseph and my being included in a coalition of the great and the good was tiny — hardly greater in fact than Ted himself leading it.

  The last few days of the campaign were dominated by all the awkward questions which talk of coalitions brings. But I stuck to my own brief, repeating the manifesto pledges sitting alongside Ted Heath at the last Conservative press conference on Tuesday 7 October. The general election result two days later suggested that in spite of the natural desire of electors to give the minority Labour Government a chance to govern effectively, there was still a good deal of distrust of them. Labour finished up with an overall majority of three, which was unlikely to see them through a full term. But the Conservative result — 277 seats compared with Labour’s 319 — though it might have been worse, was hardly any kind of endorsement for our approach.

  KEITH BOWS OUT

  I myself had fared quite well, though my majority fell a little in Finchley. I was thought to have had a good campaign. Talk of my even possibly becoming Leader of the Party, a subject which had already excited some journalists a great deal more than it convinced me,
started to grow. I felt sorry for Ted Heath personally. He had his music and a small circle of friends, but politics was his life. That year, moreover, he had suffered a series of personal blows. His yacht, Morning Cloud, had sunk and his godson had been among those lost. The election defeat was a further blow.

  Nonetheless, I had no doubt that Ted now ought to go. He had lost three elections out of four. He himself could not change and he was too defensive of his own past record to see that a fundamental change of policies was needed. So my reluctance to confirm suggestions that I might myself become Leader had little to do with keeping Ted in his present position. It had everything to do with seeing Keith take over from him. Indeed, by the weekend I had virtually become Keith’s informal campaign manager. Accordingly I discouraged speculation about my own prospects. For example, I told the London Evening News on Friday 11 October: ‘You can cross my name off the list.’

  Similarly I told the Evening Standard on Tuesday 15 October: ‘I think it would be extremely difficult for a woman to make it to the top… I have always taken the view that to get to the very top one has to have experience in one of the three important posts…[32] they give you confidence in yourself and give others confidence in you.’

  Then on Saturday 19 October Keith spoke at Edgbaston in Birmingham. It was not intended as part of the series of major speeches designed to alter the thinking of the Conservative Party, and perhaps for this reason had not been widely circulated among Keith’s friends and advisers: certainly, I had no inkling of the text. The Edgbaston speech is generally reckoned to have destroyed Keith’s leadership chances. It was the section containing the assertion that ‘the balance of our population, our human stock, is threatened’, and going on to lament the high and rising proportion of children being born to mothers ‘least fitted to bring children into the world’, having been ‘pregnant in adolescence in social classes 4 and 5’, which did the damage. Ironically, the most incendiary phrases came not from Keith’s own mouth, but from passages taken from an article by two left-wing sociologists published by the Child Poverty Action Group. This distinction, however, was lost upon the bishops, novelists, academics, socialist politicians and commentators who rushed to denounce Keith as a mad eugenicist.