The whole visit left me in no doubt as I drove back that evening that we faced immense problems in areas like Toxteth and Brixton. People had to find once again a sense of respect for the law, for the neighbourhood, and indeed for themselves. Despite our implementation of most of Scarman’s recommendations and the inner city initiatives we were to take, none of the conventional remedies relying on state action and public spending was likely to prove effective. The causes went much deeper; so must the cures.
The rioters were invariably young men, whose high animal spirits, usually kept in check by a whole range of social constraints, had on these occasions been unleashed to wreak havoc. What had become of the constraints? A sense of community — including the watchful disapproval of neighbours — is the strongest such barrier. But this sense had been lost in the inner cities for a variety of reasons. Often those neighbourhoods were the artificial creation of local authorities which had uprooted people from genuine communities and decanted them into badly designed and ill-maintained estates where they did not know their new neighbours. Some of these new ‘neighbourhoods’, because of large-scale immigration, were ethnically mixed; on top of the tensions which might initially arise in any event, even immigrant families with a very strong sense of traditional values found those values undermined in their own children by messages from the surrounding culture. In particular, welfare arrangements encouraged dependency and discouraged a sense of responsibility, and television undermined common moral values that would once have united working-class communities. The results were a steadily increasing rise in crime (among young men) and illegitimacy (among young women).
All that was needed for these to flower into full-scale rioting was the decline of authority and the consequent feeling among potential rioters that they could probably get away with mayhem. Authority of all kinds — in the home, the school, the churches and the state — had been in decline for most of the post-war years. Hence the rise in football hooliganism, race riots and delinquency over that period. There had even been one or two cases when the nervous indecision of the police — for instance in withdrawing officers from riots until reinforcements arrived — had both encouraged the rioters and undermined the confidence of law-abiding members of the community. What perhaps aggravated the 1981 riots into a virtual saturnalia, however, was the impression given by television that, for all these reasons, rioters could enjoy a fiesta of crime, looting and rioting in the guise of social protest. They had been absolved in advance. These are precisely the circumstances in which young men riot, and riot again — and they have nothing whatever to do with £M3.
Once we had solved the problem of the British economy, however, we would need to turn to those deeper and more intractable problems. I did so in my second and third terms with the set of policies for housing, education, local authorities and social security that my advisers, over my objections, wanted to call ‘Social Thatcherism’. But we had only begun to make an impact on these by the time I left office.
MORE CABINET DISSENT AND THE
SEPTEMBER 1981 RESHUFFLE
It was the 1981 budget, however, which throughout the summer continued to agitate the Cabinet. Some ministers were long-standing in their dissent. Others on whose support I had counted in the past began to fall away. The irony was that at the very time the opposition to the strategy was greatest, the trough of the recession had already been reached. Whereas in 1980 the dissenters in the Cabinet had refused to face up to the true seriousness of the economic situation and so had insisted on higher government spending than we could afford, in 1981 they made the opposite mistake by exaggerating the bleakness of the economic outlook and calling for even higher spending in a bid to reflate the economy out of recession. Surely there is something logically suspect about a solution which is always correct whatever the problem.
One of the myths perpetuated by the media at this time was that Treasury ministers and I were obsessively secretive about economic policy, seeking always to avoid debate in Cabinet. In view of past leaks that might indeed have been an understandable approach, but it was never one we adopted. Geoffrey Howe was anxious to have three or four full economic discussions in Cabinet every year, in the belief that it would help us to win greater support for the policy; I doubted whether discussions of this sort would achieve a meeting of minds, but I went along with Geoffrey’s suggestion as long as it generated practical results, and in particular greater realism about public expenditure.
At the Cabinet in mid-June there was a general discussion of the economy lasting two hours, based on several Treasury papers dealing with various elements in the debate. The main paper was a full survey of recent economic developments and the economic prospect. It showed that the public finances had been placed on a sounder basis: we had cut borrowing and repaid some international debt. Interest rates at 12 per cent in the UK were now substantially below those in the US and France, and lower than those of the major industrialized countries generally. Industrial production had ceased to fall, though unemployment — a lagging indicator, as always — was still rising. The tax burden was up; but we were at least financing that spending in a sound way — and honest money was essential to sustainable recovery.
Other ministers, however, saw little that was positive in this picture. They believed that unemployment over three million — the figure now predicted — was politically unacceptable and that higher government spending should be used to accelerate and strengthen economic recovery. My own analysis was entirely different: the way to achieve recovery was to ensure that a smaller proportion of the nation’s income went to government, freeing resources for the private sector where the majority of people worked.
All these arguments came to a head at the Cabinet discussion on Thursday 23 July. I had more than an inkling of what was coming. Indeed before I went down to the Cabinet Room that morning, I had said to Denis that we had not come this far to go back now. I would not stay as Prime Minister unless we saw the strategy through. Spending ministers had submitted bids for extra expenditure of more than £6.5 billion, of which some £2.5 billion was demanded for the nationalized industries. But in view of past overspending and of the tax increases which had taken place already, the Treasury urged reduced public spending for 1982–3, below the totals derived from the March white paper. The result was one of the bitterest arguments on the economy, or any subject, that I can ever recall taking place at Cabinet during my premiership. The ‘wets’, of course, argued their case with redoubled vigour, strengthened by the lack of any evidence that our policies had turned things round. Some argued for extra public spending and borrowing as a better route to recovery than tax cuts. There was talk of a pay freeze. Even those, like John Nott, who had been known for their views on sound finance, attacked Geoffrey Howe’s proposals as unnecessarily harsh. All at once the whole strategy was at issue. It was as if tempers suddenly broke. I too became extremely angry. I had thought that we could rely on these people when the crunch came. I just was not interested in this kind of creative accounting that enabled fair-weather monetarists to justify an about-turn. Others, though, were as loyal as ever, notably Willie, Keith and, of course, Geoffrey himself who was a tower of strength at this time. And indeed it was their loyalty that saw us through.
I had said at the beginning of the government ‘give me six strong men and true, and I will get through.’ Very rarely did I have as many as six. So I responded vigorously in defence of the Chancellor. I was prepared to have a further paper on the issue of tax cuts versus public spending. But I warned of the effects on international confidence of public expenditure increases or any departure from the MTFS. I was determined that the strategy should continue. But when I closed the meeting I knew that there were too many in Cabinet who did not share that view. Moreover, after what had been said it would be difficult for this group of ministers to act as a team again.
Much of this bitter disagreement found its way into the press — and not simply in reports of what had been said in Cabinet de
rived from nonattributable ministerial comments, but also in the form of scarcely coded public speeches and statements. There were particularly embarrassing comments from Francis Pym and Peter Thorneycroft, who between them were meant to be responsible for the public presentation of our policies. At Francis’s suggestion I had authorized the recreation of the ‘Liaison Committee’, at which ministers and Central Office were supposed to work together to achieve a coherent message. In August it became clear that these arrangements were actually being used to undermine the strategy.
Geoffrey Howe had said in the House of Commons that the CBI’s latest Industrial Trends Survey provided evidence that we were now at the end of the recession — a remark which may have been slightly imprudent, but which was strictly true. The following weekend Francis Pym in the course of a lengthy speech observed: ‘there are few signs yet of when an upturn will occur. And that recovery when it comes in due course may be slower and less pronounced than in the past.’ This forecast would have been bold even from an economist; coming from Francis it verged on the visionary. For good measure he added that ‘in our industrial policy we must work as partners with industry and with the trade unions to identify the key sectors of the economy and the most promising export markets’ — the kind of neo-corporatist incantation which signified total rejection of the economic strategy. Even Peter Thorneycroft, who had been a superb chairman of the Party in Opposition, joined the ‘wet’ chorus, describing himself as suffering from ‘rising damp’ and saying that ‘there [was] no great sign of [the economy] picking up.’ Given that these comments came from the two men in charge of presenting government policy, they were extremely damaging and easily seen (in that inevitable metaphor) as ‘the tip of the iceberg’.
Trade union reform was another subject of Cabinet disagreement. We had issued a green paper on trade union immunities on which comments were to be received by the end of June 1981. When they came in, these showed a desire among businessmen for further radical action to bring trade unions fully under the rule of law. But Jim Prior and I disagreed about what should be done. I wanted further action to restrict trade union immunities, which would make union funds liable to court action. Jim’s proposals would not have achieved this. His analysis was, indeed, fundamentally different from mine. In his reading, history showed that the unions could defeat any legislation if they wanted to. I believed that history showed nothing of the sort, but rather that governments in the past had failed the nation through lack of nerve — drawing back when the battle was nearly won. I was also convinced that on the issue of union reform there was a great reserve of public support on which we could draw. Indeed, as I told Jim, I thought that there was a real risk that people would consider that we had done very little to tackle trade union power.
The differences between Cabinet ministers over the economic strategy — and between myself and Jim Prior over trade union reform — were not just ones of emphasis but of fundamentals. If the goals I had set out in Opposition were to be achieved they must be reaffirmed and fought for by a new Cabinet. So it was quite clear to me that a major reshuffle was needed if our economic policy were to continue, and perhaps if I were to remain Prime Minister.
I preferred to have a Cabinet reshuffle during the recess if possible, so that ministers could get used to their departments before being questioned in the House. I also believed that as matters usually got fairly difficult at the end of July, it was better for all of us to have a holiday before decisions were taken. It was not, therefore, until September that I discussed the details with my closest advisers. Willie Whitelaw, Michael Jopling (the Chief Whip) and Ian Gow came over to Chequers on the weekend of 12–13 September. For part of the time Peter Carrington and Cecil Parkinson joined us. The reshuffle itself took place on the Monday.
I always saw first those who were being asked to leave the Cabinet. I began with Ian Gilmour and told him of my decision. He was — I can find no other word for it — huffy. He left Downing Street and denounced government policy to the television cameras as ‘steering full speed ahead for the rocks’ — altogether a flawless imitation of a man who has resigned on principle. Christopher Soames was equally angry — but in a grander way. I got the distinct impression that he felt the natural order of things was being violated and that he was, in effect, being dismissed by his housemaid. Mark Carlisle, who had not been a very effective Education Secretary and leaned to the left, also left the Cabinet — but he did so with courtesy and good humour. Jim Prior was obviously shocked to be moved from Employment where he had come to consider himself all but indispensable. The press had been full of his threats to resign from the Government altogether if he were asked to leave his present position. I wanted this post for the formidable Norman Tebbit, and Jim could not intimidate me by threatening himself. So I called his bluff, and offered him the post of Northern Ireland Secretary. He asked for time to consider, and after some agonizing and some telephoning he accepted my offer and became Secretary of State for Northern Ireland in place of the debonair Humphrey Atkins, who succeeded Ian Gilmour as the main Foreign Office minister in the Commons.
I moved David Howell from Energy to Transport. It gave me great pleasure to promote the immensely talented Nigel Lawson, the intellectual author of the MTFS, into the Cabinet to take his place. Nigel turned out to be a highly successful Secretary of State for Energy, vigorously promoting competition, taking a real grip on his department and building up coal stocks for the inevitable struggle with the miners.
Keith Joseph had told me that he wished to move from Industry. With his belief that there was an anti-enterprise culture which had harmed Britain’s economic performance over the years, it was natural that Keith should now wish to go to Education where that culture had taken deep roots. Accordingly, I sent Keith to my old department to replace Mark Carlisle. Norman Fowler returned to take up Health and Social Security, the portfolio he had held in Opposition, replacing Patrick Jenkin who took over at Industry from Keith. Janet Young, a friend for many years who had first become involved in politics as leader of Oxford City Council, became Leader of the House of Lords, the first woman to hold the post, taking over Christopher Soames’s responsibility for the civil service.
Perhaps the most important change was the promotion of Norman Tebbit to replace Jim Prior at Employment. Norman had had experience of dealing with industrial relations as a trade unionist himself. He had been an official of the British Airline Pilots’ Association and had no illusions about the vicious world of hard-left trade unionism, nor, by contrast, any doubt about the fundamental decency of most trade union members. As a true believer in the kind of approach Keith Joseph and I stood for, Norman understood how trade union reform fitted into our overall strategy. Norman was also one of the Party’s most effective performers in Parliament and on a public platform. The fact that the Left howled disapproval confirmed that he was just the right man for the job. He was someone they feared.
I had already agreed with Peter Thorneycroft that he should cease to be Party Chairman. I had been unhappy about some of Peter’s actions in recent months. But I would never forget how much he did to help win the 1979 election. He was one of an older school of political leaders — a man of force and character — and remained a friend. I appointed Cecil Parkinson to succeed him — dynamic, full of common sense, a good accountant, an excellent presenter and, no less important, on my wing of the Party.
The whole nature of the Cabinet changed as a result of these changes. After the new Cabinet’s first meeting I remarked to David Wolfson and John Hoskyns what a difference it made to have most of the people in it on my side. This did not mean that we would always agree, or that there would not be the regular arguments about public spending. There would always be some dissent and Jim Prior at his own request remained a member of ‘E’ committee, the economic committee of the Cabinet. But it would be a number of years before there arose an issue which fundamentally divided me from the majority of my Cabinet, and by then Britain’s economic recover
y, so much a matter of controversy in 1981, had been accepted — perhaps all too easily accepted — as a fact of life.
The day after the reshuffle, The Times leader entitled Prima Inter Pares, summed up reaction to the changes I had made:
the final impression … left by this reshuffle is the indelible stamp and style of the Prime Minister herself. She has reasserted her political dominance and restated her faith in her own policies. She has rewarded those who do, and punished some of those who do not share that faith. If she succeeds — and by success we mean regenerating the British economy and winning the next election for the Conservative Party — it will be a remarkable personal triumph. If she fails, the fault will be laid at her door, though the damage and the casualties will spread wide through the political and economic landscape.
I could accept that.
THE 1981 CONSERVATIVE PARTY
CONFERENCE
The ‘wets’ had been defeated, but they did not yet fully realize it, and decided to make a last assault at the 1981 Party Conference in Blackpool that October.
The circumstances on the eve of the conference were grim. Inflation, which had fallen sharply since 1980, remained stubbornly at between 11 and 12 per cent. Largely as a result of the US budget deficit, interest rates had been increased by 2 per cent in mid-September, temporarily wiping out the reduction made possible at such cost by the budget in March. Then, shortly after I arrived at Melbourne for the Commonwealth Conference on 30 September, I received a telephone call to say that we would have to make a second increase of 2 per cent. So interest rates now stood at an alarming 16 per cent.
The Downing Street Years Page 20