The Downing Street Years

by Margaret Thatcher

  I began that meeting with a prepared statement setting out the British position. I said that Hong Kong was a unique example of successful Sino-British co-operation. I noted that the two main elements of the Chinese view concerned sovereignty and the continued prosperity of Hong Kong. Prosperity depended on confidence. If drastic changes in the administrative control of Hong Kong were to be introduced or even announced now there would certainly be a wholesale flight of capital. This was not something which Britain would prompt — far from it. But nor was it something we could prevent. A collapse of Hong Kong would be to the discredit of both our countries. Confidence and prosperity depended on British administration. If our two Governments could agree on arrangements for the future administration of Hong Kong; if those arrangements would work and command confidence among the people of the Colony; and if they satisfied the British Parliament — we would then consider the question of sovereignty.

  I had hoped that this practical and realistic line of argument would prove persuasive. After all, China gained large amounts of foreign currency and investment by having a capitalist Hong Kong on her doorstep. Even at the height of the Cultural Revolution, though riots had been fomented in the Colony by the communists, the Red Guards had never been permitted to launch a full-scale attack on Hong Kong. I tried to persuade Mr Zhao that we should agree a fairly noncommittal joint public statement saying that our common objective was to maintain the prosperity of Hong Kong and that there would be early official talks between us about this.

  However, it was quite clear from the Chinese Prime Minister’s opening remarks that they would not compromise on sovereignty and that they intended to recover their sovereignty over the whole of Hong Kong — the island as well as the New Territories — in 1997 and no later. The fundamental position underlying the Chinese position was that the people of Hong Kong were Chinese and not British. That said, Hong Kong could become a special administrative zone administered by local people with its existing economic and social system unchanged. The capitalist system in Hong Kong would remain, as would its free port and its function as an international financial centre. The Hong Kong dollar would continue to be used and to be convertible. In answer to my vigorous intervention about the loss of confidence which such a position, if announced, would bring, he said that if it came to a choice between sovereignty on the one hand and prosperity and stability on the other China would put sovereignty first. The meeting was courteous enough. But the Chinese refused to budge an inch.

  I knew that the substance of what had been said would be conveyed to Deng Xiaoping whom I met the next day. Mr Deng was known as a realist. Indeed, it was he who effectively unlocked the way to a solution in Hong Kong. He had accepted that two different economic systems could exist in one country, a fact demonstrated by the setting up of special economic zones behind Hong Kong, within China itself. On this occasion, however, he was obdurate. He reiterated that the Chinese were not prepared to discuss sovereignty. He said that the decision that Hong Kong would return to Chinese sovereignty need not be announced now, but that in one or two years’ time the Chinese Government would formally announce their decision to recover it. I repeated that what I wanted was agreement in further talks that after 1997 British administration would continue with the same system of law, the same political system, and the same independent currency. If we could at a later stage reach such an agreement there would be a tremendous upsurge in confidence. I could then go to the British Parliament and have the whole question of sovereignty dealt with to China’s satisfaction.

  But he was not to be persuaded. At one point he said that the Chinese could walk in and take Hong Kong later today if they wanted to. I retorted that they could indeed do so, I could not stop them. But this would bring about Hong Kong’s collapse. The world would then see what followed a change from British to Chinese rule.

  For the first time he seemed taken aback: his mood became more accommodating. But he had still not grasped the essential point, going on to insist that the British should stop money leaving Hong Kong. I tried to explain that as soon as you stop money going out you effectively end the prospect of new money coming in. Investors lose all confidence and that would be the end of Hong Kong. It was becoming very clear to me that the Chinese had little understanding of the legal and political conditions for capitalism. They would need to be educated slowly and thoroughly in how it worked if they were to keep Hong Kong prosperous and stable. I also felt throughout these discussions that the Chinese, believing their own slogans about the evils of colonialism, just did not realize that we in Britain considered we had a moral duty to do our best to protect the free way of life of the people of Hong Kong.

  For all the difficulties, however, the talks were not the damaging failure which they might have been. Although I failed to achieve my initial objective, I managed to get Deng Xiaoping to agree to a short statement which, while not pretending that we had reached agreement, announced the beginning of talks with the common aim of maintaining the stability and prosperity of Hong Kong. It was essential that something of the sort be said to bolster the fragile confidence back in Hong Kong. Neither the people of the colony nor I had secured all that we wanted, but I felt that we had at least laid the basis for reasonable negotiations. We each knew where the other stood.

  The visit had been a full and tiring one. It was not all business, however, and there was time for a little sightseeing. While I was in China I had been able to visit the extraordinarily beautiful Summer Palace on the north-western outskirts of Peking, known in Chinese as the Garden of Peaceful Easy Life. I felt that this was a less than accurate description of my own visit to the Far East.

  THE BERLIN WALL

  The following month I visited another monument which, unlike the Summer Palace, has now crumbled into rubble and dust. After talks with Chancellor Helmut Kohl in Bonn, I flew to Berlin and gained my first sight of the Berlin Wall and of the grey, bleak and devastated land beyond it in which dogs prowled under the gaze of armed Russian guards. Chancellor Kohl accompanied me on this visit and, whatever difficulties would arise in the future, on matters like the evils of communism and commitment to our American allies we were as one. I suspect that the German press understood, as their comments later suggested, how powerfully moved I was by Berlin. The city was vibrant and exciting, larger than I had thought, surrounded by beautiful woods — yet uniquely scarred by the two totalitarian creeds of the twentieth century.

  In my speech that afternoon — Friday 29 October — I said:

  There are forces more powerful and pervasive than the apparatus of war. You may chain a man — but you cannot chain his mind. You may enslave him — but you will not conquer his spirit. In every decade since the war the Soviet leaders have been reminded that their pitiless ideology only survives because it is maintained by force. But the day comes when the anger and frustration of the people is so great that force cannot contain it. Then the edifice cracks: the mortar crumbles … one day, liberty will dawn on the other side of the wall.

  My prophesy has been vindicated earlier than I could ever have expected.

  * By the end of the decade 25–30 per cent of GNP was commonly estimated.

  * Germany had forsworn nuclear, chemical and biological weapons when it joined NATO in 1955.

  CHAPTER X

  Disarming the Left

  Winning the arguments and formulating the policies for a second term — 1982–1983

  THE POLITICAL SCENE, 1982–1983

  It is no exaggeration to say that the outcome of the Falklands War transformed the British political scene. In fact, the Conservative Party had begun to recover its position in the opinion polls before the conflict, as people began to realize that economic recovery was underway. But the so-called ‘Falklands factor’, beloved of political commentators and psephologists, was real enough. I could feel the impact of the victory wherever I went. It is often said that elections are won and lost on the issue of the economy, and though there is some truth in this, it
is plainly an oversimplification. In this case, without any prompting from us, people saw the connection between the resolution we had shown in economic policy and that demonstrated in the handling of the Falklands crisis. Reversing our economic decline was one part of the task of restoring Britain’s reputation; demonstrating that we were not the sort of people to bow before dictators was another. As I emerged from the strain of the period in which the Falklands dominated almost every moment, I found that people were starting to appreciate what had been achieved during the last three years. I drew attention in my speeches to the record and to the fact that none of it would have happened if we had followed the policies pressed upon us by the Opposition.

  The Opposition itself was divided between Labour and the new ‘Alliance’ of the Liberal and Social Democratic parties. Though we were not to know it at the time, Alliance support had peaked and it would never be able to recapture the heady atmosphere of late 1981 when it had led in the opinion polls and its supporters had claimed they had truly ‘broken the mould’ of British two-party politics. In fact, of course, the one thing you never get from parties which deliberately seek the middle way between left and right is new ideas and radical initiatives. We were the mould-breakers, they the mould. The SDP and Liberals hankered after all the failed policies of the past — incomes policies, reflation by fiscal boosts to demand, shifting more power to a European bureaucracy and away from genuinely democratic national governments. The SDP’s instincts on defence were sound — as opposed to the Liberals, perpetually tempted by unilateralism — and they were contemptuous of Marxist dogma. But I always felt — and still do — that the leaders of the SDP would have done better to stay in the Labour Party and drive out the far Left. The risk was that by abandoning the Labour Party to its militant wing, while attracting support away from us, they might actually let into power the very people they were seeking to keep out.

  As for Labour, the Party continued an apparently inexorable leftward shift. Michael Foot is a highly principled and cultivated man, invariably courteous in our dealings. If I did not think it would offend him, I would say he was a gentleman. In debate and on the platform he has a kind of genius. But the policies he espoused, including unilateral disarmament, withdrawal from the European Community, sweeping nationalization of industry and much greater powers for trade unions, were not only catastrophically unsuitable for Britain: they also constituted an umbrella beneath which sinister revolutionaries, intent on destroying the institutions of the state and the values of society, were able to shelter. The more the general public learned of Labour’s policies and personnel the less they liked them. I was not among those many Conservatives at the time who thought that Labour would be displaced by the Alliance. Socialism represents an enduring temptation: no one should underestimate Labour’s potential appeal. But there was no doubt that in the extreme form adopted under Michael Foot’s leadership it was easier to beat.

  The opinion polls and by-election results confirmed what my own instincts told me — that the Falklands had strengthened our standing in the country. On the eve of the war we had already moved just ahead of the Alliance parties in the polls. Between April and May our support rose ten percentage points to 41.5 per cent, well ahead of all the other parties. It rose again in the wake of the recapture of the islands and then fell back a little during the second half of the year. However, on only one occasion between then and the election did it dip below 40 per cent. I never took much notice of what the polls said about me personally. Too much concentration on this sort of thing can be a distraction. But it was also true that my own standing in the polls had gone up substantially.

  The ‘Falklands factor’ certainly punctured the Alliance: together with mounting optimism about the economic prospect, it helped us win back those Conservative supporters who had defected to what seemed a more comfortable, moderate option. Nor was there any joy in the polls for poor Michael Foot, whether one looked at Labour support as a whole, or his personal standing as leader.

  However, by-election results in the last part of the Parliament confirmed that in some constituencies there was a real danger of the Alliance splitting the centre-right vote and letting Labour in. A good Alliance result always risked setting off the bandwaggon which its friends in the media longed to see rolling. In March 1982 Roy Jenkins had won a stunning victory over us in Glasgow Hillhead. Only two months later we held our vote — and the seat — in Beaconsfield and in June we actually gained Mitcham and Morden from a defector to the SDP. Yet on 28 October there were by-elections in Peckham and Birmingham (Northfield) in both of which the Conservative vote was badly squeezed by the Alliance. As a result, we lost the Birmingham seat to Labour. The risks were evident, though looking at the figures in detail, the news was not all good for Labour: we knew that they would have to do a great deal better to stand any chance of winning a general election.

  The last two by-elections of the Parliament were at Bermondsey in February 1983, where a far-left Labour candidate was routed by the Liberals, and Darlington in March which was held by Labour. We did not do well, but neither of these by-elections really harmed us. Labour was the main competitor in London, so Bermondsey was not likely to do us much damage. And although Labour won at Darlington, they did not do well enough to threaten our position nationally. The commentators loved to speculate, but no one knew how much tactical voting there would be against us in a general election — that is, how many people would vote for the candidates who seemed best placed to beat those standing for the Government, rather than for their preferred party. In fact, this sort of behaviour occurs much more rarely than predicted.

  I always took a close interest in by-elections. I was regularly briefed by the Party Chairman about the issues and tactics, and I also received a detailed statistical breakdown from Keith Britto, our resident psephological genius at Central Office, on swings and their implications. I myself never took part in by-election campaigns in case I caused the Government to run unacceptable political risks in the event of a bad result: and results usually are bad when you are in power, especially in mid-term when many people wish to register a protest, safe in the knowledge that the result will not bring about a change of government. But I always sent public messages of support to our candidates and spoke privately to them afterwards to congratulate or — more usually — to console.

  DEFENCE AND UNILATERALISM

  Inevitably, defence was the political issue on which the Falklands War had the greatest bearing. During the Falklands campaign itself the nuclear issue was almost entirely edged out of public debate, though my speech at the UN Special Session on disarmament in June 1982 was an attempt to show how the same fundamental principles underlay the whole of defence policy.* However, in the autumn of that year, I began to be more concerned about the presentation of our nuclear strategy. I was anxious that the unilateral disarmers were still making the running on nuclear issues. Although public opinion was with us on the principle of the nuclear deterrent and opposed to unilateralism, there was a good deal of opposition to Trident II, mainly on grounds of cost, and to the stationing of Cruise missiles. Underlying both was a disagreeable streak of anti-Americanism. Accordingly, on 20 October and 24 November I chaired meetings of the Liaison Committee of Ministers and Central Office officials to explore the facts and refine the arguments.

  Unilateralism became the official policy of the Labour Party at the 1982 Party Conference, when the necessary two-thirds majority was secured. Michael Foot personally had long been committed to the unilateralist position. It had an appeal in the universities and among some intellectuals and received a good deal of covert support from those in the media, especially the BBC. Labour councils had adopted the gimmick of declaring their areas ‘nuclear free zones’. Although the Campaign for Nuclear Disarmament (CND) had begun to lose support from the high point it had reached in 1981, it remained dangerously strong.

  Of the two specific aspects of nuclear policy at the centre of debate — the independent deterrent a
nd the stationing of medium-range nuclear missiles — it was the second which was the more controversial. Cruise missiles would have to be deployed sometime in 1983 and we could expect a major campaign to prevent this.

  Ultimate control of Cruise missiles was the most tricky issue. The decision to modernize medium-range nuclear missiles in Europe, it will be recalled, had been made under pressure from the Europeans, particularly the Germans, anxious to prevent any ‘decoupling’ of the American and European wings of NATO. The Americans had developed and paid for the missiles, and therefore owned them, massively reducing the cost to European governments. There was a strong feeling in the US Congress that any US-owned missiles should be subject to US control. However, American ownership obviously carried implications if it ever came to decisions about use.

  In Britain, distrust of the United States surfaced on the question of whether there should be a ‘dual key’ — that is whether there should be a technical arrangement to ensure that the US could not fire these weapons without the consent of the British Government. That would go beyond the existing agreement that the US would not use nuclear weapons based in Britain without an Anglo-American ‘joint decision’.

  The United States had offered us the possibility of dual key right at the start, but to exercise that option we would have had to buy the weapons ourselves, which would have been hugely expensive. John Nott, before he left his post as Defence Secretary, had been attracted by the dual key option. But neither Michael Heseltine, his successor, nor I shared his view. The UK had never exercised physical control over systems owned and manned by the US. It was in my view neither fair nor necessary to ask the US to break with that precedent now. Also the more the Soviets were told about how and in what conditions Cruise missiles would be fired, the less credible they would be as a deterrent. The Soviets might be persuaded — and for the purposes of deterrence it did not matter whether they were right or wrong — that at the last moment a British Government might not agree to their use. Finally, the use of a dual key in the United Kingdom would have raised the whole question of arrangements elsewhere in Europe. In West Germany both government and public opinion would, as I have noted, only agree to deploying Cruise and Pershing II missiles if there was no German finger on the trigger.