by Andrew Marr
The answer was buried in the personality of the Prime Minister herself, a far more determined woman than most people realized. The single most important influence through her life seems not to have been an economic theorist or even her husband Denis, but her father. Alderman Alfred Roberts was a self-made, austere, hard-working owner of a grocer’s shop strategically placed on the main road north from London, the A1, at Grantham in Lincolnshire. He did not believe in fripperies or waste – there was no inside loo or hot running water in Margaret’s childhood – and was a strong Methodist. Though an independent in local politics and keen enough for municipal action when he became mayor in 1945, Roberts was of Tory instincts. He was a pillar of the local community in an age when both pillar and community meant something – not only serving as mayor but chairing local charities, the Workers’ Educational Association and acting as a director of a local bank. He was a living exemplar of the kind of independent-minded local politics that would be devastated by the governments of his daughter and her successor. Meanwhile, he taught his daughter to argue. In this he was extremely successful.
Margaret Roberts was not only self-certain but clever. She won a scholarship place at the local grammar school. She went to Oxford to study chemistry, taught by among others the Nobel Prize-winning Dorothy Hodgkin, who rated her, and whose portrait hangs in Downing Street to this day. More significantly, she joined the University Conservatives, something regarded as eccentric in Attlee-era Oxford. Her early career was as an industrial chemist and she can be blamed for the waxy, air-filled texture of cheap ice creams sold from vans in summertime. She moved on to become a tax barrister, though not the kind who used the Bar as a training for politics. Tax law and chemistry meant an attention to facts and to detail. None of this was glamorous. At Oxford and in London, she was more the anonymous hard worker, like that other provincial Methodist who recoiled from public schoolboy flash, young Harold Wilson. But she was a Tory and ambitious; unlike Wilson who kept his Yorkshire accent as a badge of belonging, she lost her Lincolnshire burr as a passport in her direction of travel. In the words of her biographer Hugo Young, she ‘was born a northerner but became a southerner, the quintessence of a Home Counties politician’.
Her two failed attempts to enter Parliament for Dartford in Kent brought her the other crucial figure in her life, her husband Denis. A divorced Kent businessman who had had a good war, his political views were to the right of hers. A keen rugby coach and good golfer, he would become much satirized later as bumbling and henpecked, always with a large G&T in one hand a nervous glance for She Who Must Be Obeyed. In fact Denis was a highly successful executive, rising through the sale of a family paint and chemicals company to the top of Burmah Oil, and retiring very rich in 1975. He provided her with the money and the political, moral support which allowed them to have twins while Mrs Thatcher, as she now was, devoted herself to politics. In the eighties, he managed to keep out of the limelight so that his hard-right views on South Africa, immigrants, the BBC and the feckless working classes created no scandal.
It was a loving marriage which sustained her superbly. In the fifties there was nothing distinctive about the politics of his young wife. It was enough that she was fighting to win a seat as one of the very few women in the Commons, something achieved when she was elected for the well-off middle-class seat of Finchley in 1959. Her politics were formed, nevertheless, by the experience of the post-war years. Seen from above, the socialist experiment in planning and fair shares might have looked noble, she concluded. But from below it was a maze of deprivation, shortage and envy. The Housewives’ League has been mentioned earlier in this book. Far later, Thatcher looked back: ‘No one who lived through austerity, who can remember snoek, Spam and utility clothing, could mistake the petty jealousies, minor tyrannies, ill-neighbourliness and sheer sourness of those years for idealism and equality.’
As we have seen, Thatcher had risen quietly through the party until as Heath’s Education Secretary she had presided over a joyous, reckless slaughter of grammar schools and played her part in the high-spending consensus policies she later repudiated. When Joseph had his great conversion to free-market economics and monetarism she was with him but still several paces behind. She had won the leadership from Heath to general stupefaction and had been patronized and sneered at as Opposition leader. Only a few commentators had spotted what was coming. In romantic vein the former Labour MP and now television interviewer Brian Walden was telling people that the country needed someone like Margaret Thatcher: ‘In years to come great novels and poems will be written about her.’ But this was not the general view. During the 1979 election, using all the skills of her new image-makers and advertising agency, and with a shrewd understanding of the importance of television, she was still trailing Callaghan in the personal popularity stakes, by six points at the beginning of the campaign and a whopping nineteen points by the end. It was Labour unpopularity that cost the party power, not Mrs Thatcher’s allure.
The quotation chosen for her to say as she stood for the first time as prime minister on the steps of Number Ten was popularly but wrongly attributed to St Francis of Assisi. It was in fact Victorian. It was also endlessly used to show what a hypocrite she was. Taking what she said as a whole, this is not fair. It read: ‘Where there is discord, may we bring harmony. Where there is error, may we bring truth. Where there is doubt, may we bring faith. Where there is despair, may we bring hope.’ The harmony, it is fair to say, she rather fell down on. As for truth, in politics it is in the eye of the observer. But for the people she had determined to govern for, the inflation-ravaged and despairing middle classes who doubted whether Britain had a future and believed the unions could never be tamed by the State, she brought both faith and hope. And more than any Prime Minister since the war, she made the difference herself. Without her the Tory government of 1979-83 would have been entirely different. Without that confrontational self-certainty and determination not to be bested, Britain would have been back with a pay policy, Keynesian public spending policies and a business-as-usual deal with the European Community within eighteen months. Only a few had the chance to see the real Thatcher before she won power. The British ambassador in Iran was one. In 1978 he had been with her on a visit to Tehran, when she suddenly said that there were still people in the Conservative Party who believed in consensus politics. The ambassador, Sir Anthony Parsons, replied that most British people did, including him. ‘I regard them as Quislings, as traitors,’ she replied. Strong language? ‘I know. I mean it.’ The ‘Assisi’ quotation was pious and a hostage to events but it was not cynical. Had people been able to hear her words to Parsons at the time, they would have had the full picture.
The crucial issue was grip, which in 1979 meant gripping inflation, which to the Thatcherites meant monetarism. As we have seen, modern monetarism originated in the fifties but had only really become fashionable by the mid-seventies after Heath and Barber let the money supply out of control and huge inflation followed. Its most prominent theorist, the American economist Milton Friedman, was awarded the Nobel Prize in 1975. Denis Healey had pursued a policy of restraining public spending through cash limits and tax rises which had the effects monetarism suggested, though never believing in the numbers and targets he was obliged to publish. The basic proposition of monetarism is almost universally accepted, which is that inflation is related to the quantity of money in the economy. Where it diverges from Keynesian economics is in arguing that the sole important job of government in economic management is therefore to control the money supply and that this can be scientifically measured and calibrated. The other issues, unemployment, productivity and so on, will eventually resolve themselves. The intellectual attraction is obvious. Conventional economic management had become a horrendously difficult and uncertain business, juggling uncertain and out-of-date information about output, the balance of payments, unemployment, inflation – a game with one too many rules ever to fully grasp. Monetarism swept away all that. Only hold
firm to the principle, get the money supply down, and you will succeed. In 1979 it had not been widely tested outside the military dictatorship of Chile.
In practice Thatcher and her tight circle of economic ministers and advisers, who kept the rest of the cabinet in the dark, did have other objectives. They could have restricted the money supply by raising income tax but she was a tax-cutter. Almost immediately Howe cut the basic rate of income tax from 33 per cent to 30 per cent and the top rate from 83 per cent to 60 per cent. Spending cuts were agreed too but to make up the difference a huge rise in value added tax, doubling to 15 per cent, came in. Money was being redistributed from the masses, paying more for meals, clothes and other items, to higher-rate taxpayers. One of the Tory moderates, Jim Prior, following the manifesto, unveiled a bill for trade union reform that banned the closed shop unless 80 per cent of workers wanted it, provided public money for strike and union ballots, and outlawed secondary picketing of the kind that had been so widely seen during the ‘winter of discontent’. It would have been radical under another government. Thatcher expressed bitter disappointment that it did not go further and outlaw all secondary action. She castigated him as a ‘false squire’, one of a class of Tories who ‘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 retreating gracefully before the Left’s inevitable advance.’ This was a mean and foolish verdict; Prior was simply a shrewd politician, taking one step at a time. In frustration Thatcher suddenly announced that strikers would now be assumed to be getting union strike pay and so would not qualify for social security. The battle lines were being clearly set.
Howe pursued his strategy through a second Budget in 1980 setting out the scientific sounding Medium-Term Financial Strategy, or MTFS, with detailed predictions about the growth of the chosen measurement of money, sterling M3. But with inflation raging, a recession biting and credit restrictions loosened, it was impossible to enforce, just as Healey had predicted. The money supply was meant to be growing for 1980-1 at around 8 per cent but actually grew at nearly 19 per cent. The monetarists risked looking like fools. Strike-ravaged and low-productivity British Leyland came begging for yet more money but instead of telling the State car-maker to close, or ordering it to be sold off, Thatcher gave way, very much as Heath had when Rolls-Royce had tested his opposition to bail-outs. Rolls-Royce eventually thrived, however, while BL died. There was a steel strike and though the government talked tough and stood firm, the eventual settlement was high and the unions were certainly not humiliated. By the second half of the year unemployment was up by more than 800,000 and hundreds of manufacturing businesses were going bust, throttled by the rising exchange rate. Industrialists, who had looked to the Tories with such delight, were beginning to despair. Prices were up by 22 per cent in a year, wages by a fifth. At the Tory conference of 1980 cabinet dissidents began to make speeches subtly criticizing the whole project. These coded bat-squeaks of alarm, demonstrating early on that the Tory left had little real fight in it, were dismissed by Thatcher in a phrase found for her by the playwright Ronald Millar: ‘You turn if you want to. The lady’s not for turning.’
The word ‘wet’ was a public schoolboy term meaning soppy or weak. It was being applied by monetarist Tories to their Heathite opponents by the mid-seventies. In the great Thatcher cabinet battles of the early eighties it was appropriated to refer particularly to the senior ministers who did not agree with her – notably Prior, Francis Pym, Sir Ian Gilmour, Mark Carlisle, Norman St John Stevas, Peter Walker, Christopher Soames and (arguably) Michael Heseltine. All had subtly different analyses but all were panicking about the deflation being visited upon an already weak economy by Howe. She would punish them for their lack of faith. They were in the majority and had they revolted the history of Britain would have been very different. But ‘wet’ was accurate in a wider sense. They rarely tried to face her down, they did not settle on joint action to make her change course and though there were many threats to resign on points of principle, the cabinet dissidents waited till she fired or demoted them.
The great confrontation would have come in 1981. Howe believed that despite unemployment at 2.7 million and heading towards 3 million, despite the economy continuing to shrivel, with new bankruptcies being reported by the day and the biggest collapse in industrial production in a single year since 1921, and despite the lack of any clear control over the money supply, he must go further still. Swingeing cuts and rises in taxes, this time by freezing tax thresholds, would take a further £4 bn out of the economy. Thatcher told her new economic adviser Alan Walters that ‘they may get rid of me for this’ but that it would be worth it for doing the right thing. Outside her circle, it seemed anything but right. Famously, 364 economists wrote to the papers denouncing the policies. The Conservatives crashed to third place in the opinion polls behind the SDP and the left-wing Labour Party of Michael Foot. On the streets rioting seemed to be confirming all the worst fears of those who had predicted that monetarism would tear the country apart.
This was the moment when Thatcher’s self-certainty would be tested most clearly. Any normal politician would have flinched. Churchill, Macmillan, Heath, Wilson and Callaghan would have ordered in the Chancellor and called quietly for a change in direction, blowing smoke in all directions to hide the retreat. Thatcher egged her Chancellor on. If anything, she thought he had not gone far enough. In ringing terms she told the Tory Party faithful to stay calm and strong: ‘This is the road I am resolved to follow. This is the path I must go. I ask all who have spirit – the bold, the steadfast and the young at heart – to stand and join with me.’ In early April 1981 riots broke out in Brixton. Shops were burned and looted, streets barricaded and more than 200 people, most of them police, were injured. Mrs Thatcher’s response was to pity the shopkeepers. Lord Scarman was asked to hold a public inquiry; but in the first week of July, trouble began again, this time in the heavily Asian west London suburb of Southall, with petrol-bombs, arson attacks and widespread pelting of the police. Then Toxteth in Liverpool erupted, the worst of all, and continued for nearly two weeks. Black youths, then whites, petrol-bombed the police, waved guns and burned both cars and buildings. The police responded with CS gas, the first time it had been used on the streets of mainland Britain, and with baton charges. As in London, hundreds were injured and here one man was killed. Toxteth was followed by outbreaks of looting and arson in Manchester’s Moss Side.
With unemployment reaching 60 per cent among young blacks, and both Liverpool and Manchester having suffered badly from recent factory closures, many saw this as clearly linked to the Thatcher-Howe economics; what Denis Healey, from opposition, was now calling ‘sadomonetarism’. (He had called it punk monetarism but his children told him this was unfair to punk rockers.) Michael Heseltine at his own insistence was despatched for a series of extraordinarily frank exchanges with young black men in Toxteth. He took up their frank allegations of racism with the local police and bullied local bankers and industrialists into coming with him to see how bad conditions were at first hand. Back in London he wrote a famous internal memorandum, ‘It Took a Riot’, calling for a change of industrial and social polices to help places like Toxteth – government money to bring in private investment, job creation schemes and a minister for Liverpool, for the next year at least; Heseltine argued that anything less was not compatible with the best traditions of the Tory Party. He stuck with Liverpool for well over a year, helping bring renovation projects, new money and a morale-boosting garden festival, attended by 3 million people.
Mrs Thatcher knew a rival when she saw one. There was only room in this party for one blonde. She described the Heseltine initiative merely as ‘skilful public relations’. She had also visited Liverpool and drew very different conclusions:
I had been told that some of the young people involved got into trouble through boredom and not having enough to do. But you only had to look at the gr
ounds around these houses with the grass untended, some of it almost waist high, and the litter, to see this was a false analysis. They had plenty of constructive things to do if they wanted. Instead, I asked myself how people could live in such circumstances without trying to clear up the mess.
The problem was lack of initiative and self-reliance created by years of dependency on the State, and compounded by the media. It was nothing whatever to do, she snorted, with sterling M3. No better expression can be found of the gap between the monetarist true believers and the old Tories.
Her views unaltered, Thatcher then went into full-scale battle with the ‘wets’. The provocation on both sides was Howe’s discovery that after the ferocious Budget of 1981, he would need to implement yet another tight squeeze in the coming year. Another £5 bn cut was needed for the 1982 Budget. There was something like a full-scale cabinet revolt. Heseltine, fresh from Liverpool, warned of despair and electoral meltdown. Other ministers called for a return to planning, warned wildly of what had happened in Hitler’s Germany and, in the case of Gilmour, lethally quoted Churchill too: ‘However beautiful the strategy, you should occasionally look at the results.’ Even monetarist true believers seemed to be deserting. Thatcher herself called it one of the bitterest arguments in a cabinet in her time. She became extremely angry. She had once said that given six strong men, she could get through what was ahead. Now she was well short. Drawing the meeting to a close, she prepared to counter-attack. St John Stevas had already been sacked. Now Soames, Mark Carlisle and Gilmour went too, while Prior was moved away from the centre, to Northern Ireland. She had realized she could afford to take her internal critics out, department by department, clever riposte by clever riposte.