Margaret Thatcher: The Authorized Biography, Volume 2

by Charles Moore

  The Scottish Bill effectively decided matters. Once the House of Commons had introduced the poll tax in Scotland, failure to proceed as promised with the same thing in England and Wales would have been a humiliating and unnecessary defeat. The mood was almost all the other way, the opposition weak. The government felt pleased that the ground for the general election was now prepared. It saw the new tax as a vote-winner. At the Scottish Conservative conference in Perth shortly afterwards Mrs Thatcher said that Scotland had suffered ‘more than most’ under the old system of rates. ‘Indeed it was in response to your needs in Scotland that we finally decided on the introduction of the community charge.’144

  The outcome of the poll tax is a matter for the final volume of this book. What can be said here is that the tax was not created on a whim of Margaret Thatcher, although it would certainly never have happened without the force of her will. It was a serious, long-considered attempt to get to grips with several genuine problems – distorted property taxes and central grants, lack of local accountability, left-wing profligacy and extremism. Although it drew heavily on ideas from ‘irregulars’ rather than emerging solely from the Whitehall machine of career civil servants, there was nothing unusual or necessarily wrong about that. It was very carefully considered by the machine: ‘We did it so carefully, with so many papers,’ recalled Terry Heiser.145 At least three problems, however, were observable in the early stages, and were not resolved.

  The first was extreme complication. No one, however brilliant, fully understood what was being done. The second was a defect in the principle itself. What, exactly, was the justification for the idea that everyone should pay the same? The argument at the time was that ‘It is the same as a loaf of bread – you pay the same regardless of whether you are rich or poor.’146 This was related to the idea that councils should be accountable to all voters. But in fact the loaf of bread analogy did not work. Customers can pay different prices for bread, and buy more or fewer loaves, and there is no law that puts them on a bread register and forces them to buy the stuff whether or not they have done so in the past. Besides, the poll tax cost a lot more than a loaf of bread each week and, in matters of tax, the amount demanded is almost always crucial. Somehow, the great minds who thought up the poll tax never quite confronted the flaws in their analogy. In the view of Stephen Sherbourne, the Prime Minister’s Policy Unit and other advisers were too like ‘clever schoolboys in science laboratories’147 and therefore were not alert to political reality.

  The third problem lay with Mrs Thatcher herself. Her instinct that getting rid of the rates could be like council house sales in securing her support was not foolish, but it led her to dismiss any virtue in property taxes and not to pay enough attention to the difficulties with the alternative she preferred. As Sherbourne put it, ‘It was the beginning of her losing touch with people, with a real electoral base.’148

  Perhaps she was too driven by anger that her ‘promise’ to get rid of the rates had been so long unfulfilled. David Norgrove remembered, one night in 1986, raising with her, while eating scrambled egg (cooked by her) in her flat, the problem of the number of losers from the poll tax. She acknowledged the danger and ‘seemed to be rather regretting’ what she was doing, but insisted, ‘I have made a commitment to abolish rates. I have to do it.’149 Bernard Ingham reported a sense from the lobby that the poll tax would be very difficult to collect and was fundamentally unfair. Quoting from the hymn ‘All Things Bright and Beautiful’, he emphasized the difference between ‘the rich man in his castle’ and the ‘poor man at his gate’. Mrs Thatcher ‘exploded’. ‘The rich man in his castle is already paying through the nose in tax!’ she exclaimed. She conceded that the tax might be difficult to collect in ‘bedsitter-land’, but not generally. Above all, ‘she thought there had to be democratic control of local spending.’150 So strongly did she believe this that she did not think through the consequences.

  12

  A single European

  ‘How dare they! We saved all their necks in the war’

  From the day she first came into office in May 1979, Mrs Thatcher had been arguing that Britain should get ‘our money’ back from the European Community (see Volume I, Chapter 18). The level of British contributions, negotiated at the time of entry by the Heath government, was, she believed, grossly excessive. What had begun as a net contribution of £102 million in 1973 had grown to £947 million by 19791 and, but for the series of temporary solutions negotiated during Mrs Thatcher’s first term in office, would have increased further. She refused to allow the Community to embark on new endeavours until the imbalance had been rectified. More than five years later, on 26 June 1984, she finally succeeded. At the European Council in Fontainebleau, she secured a budgetary rebate of 66 per cent of the net British contribution. In addition, the terms satisfied her demand that ‘the solution should be as long as the problem’: the rebate would continue for as long as member states continued to fund the Community through the newly increased 1.4 per cent of their VAT receipts (own resources). There would be no more ad hoc deals, no more haggling. It was settled.

  Almost until the last minute, success had not been assured. There had been talk, serious though not fulfilled, of withholding Britain’s EEC budgetary contribution. At the previous Council in Brussels in March 1984, agreement had been widely expected, but had been prevented. According to Pierre Morel,* one of President Mitterrand’s senior advisers, who was present, ‘All the leaders were exasperated with Mrs Thatcher with an intensity that was striking. [Helmut] Kohl told her that she and he should follow the example of Churchill and Adenauer [the great post-war German Chancellor] and “think of the future”. He was excited, out of himself. She just said, “No. Sorry. I want my money back.” It was becoming dangerous: it was clear that she had gone too far.’2 ‘Everyone was furious with Margaret Thatcher,’ Kohl later wrote. ‘François Mitterrand … whispered to me at a meal, “I have had just about enough of these endless discussions … I think we should agree between ourselves that we will offer her nothing, nothing, nothing.” ’3 Mitterrand and Kohl became determined that this row would go on no longer. So they worked for a final result at Fontainebleau, plotting with allies to isolate her if she would not agree. British diplomats got wind of some of this, and indicated to the French that Britain, too, was looking to settle the matter.4 In a bilateral meeting with Kohl, at Chequers on 2 May, Mrs Thatcher confirmed, by hints, that Britain was prepared to give a bit in negotiations in order to get a deal. She repudiated the idea that Britain lacked loyalty to Europe. The note of their conversation reports her as saying: ‘We were passionate Europeans. We joined the Community so that the conflicts that had occurred in the past could not recur in the future.’5 All the ‘big three’ – Kohl, Mitterrand and Thatcher – were currently in strong electoral positions, she pointed out. Let them unite to get a budget settlement and go forward to a new phase in the development of the Community.

  British officials such as Robin Renwick decided to try to deal with the French, who wished to bring things to a climax during their six-month presidency of the EEC. When Roland Dumas,* who later in the year succeeded his then boss, the much more anti-British Claude Cheysson,† as foreign minister, met Geoffrey Howe in Paris, he told British officials that they needed to find a new approach. Without the involvement or indeed knowledge of Mrs Thatcher, they and their French counterparts secretly cooked up the beginnings of a deal.6 The rebate would be a straight percentage with the whole thing ‘abated as we paid’ (rather than refunded later) and enshrined in Community law.7 Although British officials were by no means certain of success at Fontainebleau, almost their biggest worry was ‘Thatcher handling’8 rather than beating down the French. Would she go for the deal which they had prepared?

  The Fontainebleau European Council meeting was one of the very few events in Mrs Thatcher’s career as prime minister of which she wrote a personal account afterwards.* Her exact reasons for doing so are not known, but once out of office she
declared that she had put pen to paper ‘shortly after the event with the aim of refuting misinterpretations’.9 Her desire to record her recollections probably reflected both her pleasure at ending the long quarrel and anxiety that Eurosceptic critics might think she had given too much away. Her short, handwritten memoir recounted that she arrived at the summit unsure of what was likely to happen. She thought that Mitterrand (whom she always spelt, wrongly, with one ‘r’) had not decided which course of action to pursue. His choice lay between ‘1 – a solution & ∴ a triumph for France in the chair’ and ‘2 – a failure – all due to Britain!’10 The mood at the meeting was ‘superficially cordial’. Mrs Thatcher put forward her budget proposal and its details were, at her suggestion, remitted to the foreign ministers, who were invited to report to the heads of government at the end of dinner. The dinner was held at the Hôtellerie du Bas-Bréau, the former hunting lodge in the village of Barbizon where Robert Louis Stevenson wrote most of Treasure Island. Mrs Thatcher was annoyed to notice all the foreign ministers, led by their French host Cheysson, drinking their coffee outdoors and swapping funny stories instead of settling the details of the budget problem and reporting, as arranged, to the heads of government inside. ‘How dare they!’ she exclaimed. ‘We saved all their necks in the war.’11 Renwick and David Williamson† chose this perilous moment to reveal their until then concealed plan of negotiation with the French. They left the actual percentage on which Britain would settle blank so that she could feel she had decided it: ‘She glared, but gave us silent permission.’

  According to Mrs Thatcher, whose account does not mention her diplomats’ preparations, ‘The President’s displeasure [with the foreign ministers] was made plain,’12 and at 11.30 in the evening Cheysson joined the heads of government with a proposed refund so low that Mrs Thatcher found it insulting: ‘I was in despair and said we had never been treated fairly and if that was the best they had to offer Fontainebleau would be a disaster.’

  Renwick had told his French opposite number that the British would not settle for less than 66 per cent – over 70 per cent being the figure which Mrs Thatcher had come to Fontainebleau demanding. The French were nominally demanding 50 per cent, hoping to stick at 60 per cent, but actually ready to go further. (They did not tell the Germans, who were sticking solidly at 60 per cent, about their game with the British.) So the next day had an element of play-acting, possibly even on the part of Mrs Thatcher, though play-acting was something she never, ever admitted to, even in private. As no agreement was reached round the table, Mitterrand suggested breaking into bilaterals, and Mrs Thatcher saw him and Kohl separately. ‘I told Kohl we would accept 2/3 refunds … and we accordingly told Dumas. Kohl offered 65%.’13 As Kohl recalled it, Mrs Thatcher ‘became very vehement towards me. In essence, she said that the Federal Republic had to support Great Britain on the grounds that there were British soldiers stationed in our country.’14 She then called a ‘time out’ to consult her officials. David Williamson said to Michael Butler,* who was tasked with ‘Thatcher handling’, ‘Tell her she’s got to settle now,’ but Butler thought it better for her to have the thought unprompted, so he remained silent. ‘I think we’ve almost got as much as we can,’ she said, to his great relief,15 adding, ‘If I’ve got it to 65 per cent, I can add one more per cent.’ Returning to the full session, she asked for this, and Mitterrand duly conceded it, with gallantry: ‘Of course, Madame Prime Minister, you must have it.’16 Butler recalled the ‘huge, furious figure of Helmut Kohl’ buzzing for his officials to prevent what would be financially disadvantageous to Germany. But the Germans, who also needed a favourable Common Agricultural Policy settlement for their farmers, did not dare gainsay the French presidency, and so the thing was done.

  ‘After a very late lunch – by this time very good humoured,’ wrote Mrs Thatcher, there was a press conference with ‘the customary carping questions(!) and then home.’17† She had gained what she called the ‘essential points’ – the percentage rebate, acceptance that the deal would ‘last as long as the problem’, and that the rebate payments would be handed over automatically each year rather than being subject to a vote in the European Parliament.

  Fontainebleau was the sort of deal that delights diplomats. Many years later, its progenitors would dwell on the famous victory. The official Treasury figure for the amount of money cumulatively saved for Britain by 2015 is £78 billion. Robin Renwick claimed it as ‘the most valuable financial agreement this country ever negotiated’.18 There were, however, other ways of looking at it. Mitterrand’s officials claimed it as their country’s triumph. Hubert Védrine,* Mitterrand’s right-hand man, regarded it as the moment when the Kohl–Mitterrand axis forced Mrs Thatcher to accept compromise. He noted that she was ‘terrifying to look at’ as she capitulated: ‘She did not see it at all as a victory.’19 What would become an unbreakable relationship between Mitterrand and Kohl had been forged, Védrine believed, when the French President addressed the Bundestag in January 1983. Fontainebleau was ‘le point de départ’ for their active alliance to shape the future of Europe which lasted until the Maastricht Treaty in 1992: they had finally settled the British problem and got Britain, as part of the deal, to agree to a higher Community budget (the increase from 1 per cent VAT receipts to fund the Community’s ‘own resources’ to 1.4 per cent). At last the stalemate was ended, and they could get on with European integration, whether Mrs Thatcher liked it or not. According to Jacques Attali,† who was not present, Mitterrand told him that he had been surprised to see that Mrs Thatcher ‘was almost in tears’ when she made the deal.20‡

  Allowing for national exaggeration on both sides, it is fair to say that Fontainebleau was, indeed, a good financial deal for Britain. As the Europhile British diplomat David Hannay,§ who took part in the negotiations, conceded, ‘no British Prime Minister for whom I worked would have got a better deal than Margaret Thatcher and several would probably have settled for something inferior.’21 Her ability to master the detail and sustain the fight for so long in a ten-sided battle in which she had no reliable friends was astonishing. She carried with her into negotiation not only the conventional official speaking note, but also what were called ‘handbag points’ about particular issues which she would suddenly produce to confound her opponents, and ‘stilettoes’ which proved their hypocrisies, backslidings and evasions. She was the superior of all her counterparts in knowledge, argumentative skill, force of personality and perhaps even in raw intelligence, though not in diplomatic finesse. The budget saga proved how formidable she was in fighting for British national interests. But the French officials were not wrong to detect in Mrs Thatcher herself some anxieties about whether she had really got what she wanted. At the simplest political level, she had wanted a higher percentage than she achieved.* She was also conscious of strong Eurosceptic feeling at home. The hard core of twenty-five or so Eurosceptic Tory MPs, and the larger number of Labour counterparts, picked up on the fact that Fontainebleau won a financial benefit at the cost of acquiescence in higher European expenditure, no reform of the CAP and further European integration. In the Commons, the future Cabinet minister Peter Lilley† compared the deal to trying to ‘dissuade an alcoholic from drinking by offering him unlimited whisky if he signed the pledge’,22 the alcoholic in this image being the EEC. As the Spectator put it in the week after the deal was made, Mrs Thatcher had ‘passed up the only chance of real change by agreeing, before she had to, to more than she had to. We shall now return to the era of complacent Euro-pieties … and the relentless rise of costs.’23 Detecting her anxiety, Bernard Ingham advised her before her post-Council press conference, ‘You must present a successful outcome as a success and not grudgingly.’24 Mrs Thatcher obeyed him, but she had her doubts. In her own written account, she celebrated the fact that the matter was well settled but added that, with regard to control of expenditure, ‘the battle continues’:25 ‘at least now we can reassess our European strategy. So much will depend upon its cohesion in the c
oming years.’

  Sceptical though she was about closer European political links, Mrs Thatcher was interested in physical ones. Since the early 1800s, the idea of an underwater tunnel linking Britain with France had been promoted by enthusiasts on both sides of the English Channel.* After the Second World War, the British and French governments began to take the idea more seriously.26 In 1964 a joint tunnel project was agreed in principle, but proceeded very slowly because of concerns over financing.† When she came to power, Mrs Thatcher had neither the resources nor the inclination to commit taxpayers’ money. She found the idea appealing, however, provided that a suitable private enterprise scheme came along. In 1981, through the ever persuasive recommendation of Ian Gow, she was introduced to a scheme dreamed up by her hero of the moment, Ian MacGregor, whom she had made chairman of the British Steel the previous year.

  MacGregor, leading a group called EuroRoute, came to Mrs Thatcher with a new idea. Rather than a traditional bored tunnel, he envisaged a ‘combined viaduct bridge and immersed tube for road and rail’ with artificial islands for frontier controls.27 It was based on the Chesapeake Bay crossing in the United States which, said Mrs Thatcher’s briefing, ‘is not thought to operate profitably’.28 ‘Can we check,’ she wrote beside this (as usual she omitted question marks). She and MacGregor met and she ‘acknowledged the attractions’29 of the scheme.‡