The Iron Lady

by John Campbell

  In her absence the Financial Times stirred the pot by printing extracts from an article by Walters congratulating himself that ‘so far Mrs Thatcher has concurred’ with his advice to keep out of the ‘half-baked’ ERM.12 It had actually been written for an American magazine the previous year, some months before Walters returned to England. Mrs Thatcher maintained that this made it unobjectionable. Since it was still due to be published in America, and since Walters himself had given it to the Financial Times, Lawson was entitled to feel differently. It was not so much the fact of his difference with the Prime Minister which mattered. ‘It was her persistent public exposure of that difference, of which Walters was the most obvious outward and visible symbol.’13 He felt that his position was becoming untenable.

  The two protagonists later published their own accounts of the series of meetings – four in all – that took place before his decision was announced. Thursday 26 October was an exceptionally fraught day for Mrs Thatcher. She had only got back from Malaysia at four o’clock on Wednesday morning, after an eighteen-hour flight, and was obviously ‘absolutely exhausted’. In the circumstances Lawson felt it would be unfair to tackle her at their regular bilateral meeting that afternoon, but warned her that they needed to talk about the Walters problem. ‘She replied that she saw no problem’ – but she agreed to see him first thing on Thursday morning, with no secretaries present.

  She listened quietly while Lawson told her that either Walters or he would have to go: he did not want to resign but unless she agreed that Walters should leave by the end of the year, he would have no choice. She begged him to reconsider and arranged to see him again at two o’clock. Later that morning he attended Cabinet as normal, betraying no hint of what was in his mind. But at two o’clock he was back, bringing with him his letter of resignation.

  After Prime Minister’s Questions Mrs Thatcher called John Major to her room at the Commons and told him, ‘I have a problem.’ When Lawson met her for the last time at around five o’clock, he says that she asked his advice about his successor; she says that she told him she had already chosen Major. Either way, they parted in what Lawson called ‘an atmosphere of suppressed emotion’.14 When she called Major in again he found her close to tears and felt the need to hold her hand for a moment.15

  Mrs Thatcher wasted no time in carrying out a swift, limited and unusually well-received reshuffle, announced that same evening, which rectified some of the mistakes of July. Major was clearly much better suited to the Treasury than to the Foreign Office, and it was the job he had always wanted.16 Yet he was initially reluctant to move again when he was just getting used to the Foreign Office. ‘I told him that we all had to accept second best occasionally. That applied to me just as much as to him.’17 Equally Douglas Hurd was still the obvious choice for the Foreign Office, as he had been in July. When she rang at about six to make the offer she was clearly ‘still in shock’ at Lawson’s resignation – Hurd himself was ‘flabbergasted’ – and did not disguise her doubts. ‘You won’t let those Europeans get on top of you, will you, Douglas?’18 The one move she was really happy with was the choice of David Waddington to go to the Home Office. This was the first time in four attempts, that she had managed to send a right-winger there.19

  She was able to put a positive gloss on the whole reshuffle by emphasising that all three principal appointments – Major, Hurd and Waddington – had achieved their lifetime’s dream. ‘We are very sad to be without Nigel, but we have an excellent Chancellor of the Exchequer, an excellent Foreign Secretary, an excellent Home Secretary for each of whom it was their ambition.’20 The press for the most part agreed. The ironic fallout of Lawson’s resignation, however, was that Walters resigned too. He was in America when the news broke but immediately realised that his position would be impossible and, despite Mrs Thatcher’s efforts to dissuade him, insisted on stepping down as well. Thus by sacrificing Lawson to try to keep Walters, Mrs Thatcher ended by losing both of them. Lawson reflected wryly that, ‘however painful it was to me personally, I had performed a signal service to my successor and to the Government in general’.21

  Despite the swift reshuffle, which arguably improved the Government, Lawson’s resignation, following so soon after Howe’s demotion, damaged Mrs Thatcher by throwing a fresh spotlight on her inability to retain her closest colleagues. The damage was compounded when Mrs Thatcher appeared on Brian Walden’s Sunday morning interview programme on 29 October. Instead of telling the truth – that there had developed between herself and her Chancellor a difference of view which regrettably made it impossible for him to carry on – she gushingly repeated her claim that she had ‘fully backed and supported’ him. ‘To me the Chancellor’s position was unassailable,’ she insisted; but she floundered when Walden asked the killer question:

  Do you deny that Nigel would have stayed if you had sacked Professor Alan Walters?

  I don’t know. I don’t know.

  You never even thought to ask him that?

  I… that is not… I don’t know.22

  The second instalment of this two-part trial by television the following Sunday gave Lawson the opportunity flatly to contradict her. He told Walden that he had made perfectly clear to the Prime Minister in their three conversations on the Thursday why he was resigning – ‘quite clearly and categorically’ because she refused to part with Walters.23

  No one who watched these two programmes could have had any doubt which witness was telling the truth. Not for the first time, but more publicly than over Westland three years earlier, Mrs Thatcher’s reputation for straight speaking had taken a severe knock. It was no longer a question about which of them was right about the economics of the ERM and the exchange rate. Most economists would now say Lawson was wrong. But if she really did not understand why Lawson had resigned she was too insensitive to continue long in office. If she did understand, but chose to keep Walters anyway, that only confirmed that she valued her advisers more than her elected colleagues. Either way she was increasingly living in a world of her own.

  The start of a new parliamentary session gave the Prime Minister’s critics in her own party a chance to test their level of support. The rules under which Mrs Thatcher had successfully challenged Ted Heath in 1975 allowed for a leadership contest to be held every year. Alec Douglas-Home had never imagined that this provision would be used against an incumbent Prime Minister; but in November 1989, for the first time, an unlikely champion came forward in the person of Sir Anthony Meyer, a sixty-nine-year-old baronet whose political passion was a united Europe. Meyer was not a serious challenger; yet he attracted a significant degree of support. Only thirty-three Tory MPs voted for him, but another twenty-seven abstained. A margin of 314–33 was a convincing endorsement, but it was also a warning shot. The real significance lay not in the figures but in the fact that the contest had taken place at all. If Mrs Thatcher did not make a visible effort to address her backbenchers’ mounting worries, she was likely to face a more serious challenge next year.

  The Major – Hurd axis

  Lawson’s departure opened a new phase in the Thatcher Government. Though routinely portrayed by the media as a dictator, the Prime Minister was in fact profoundly weakened from November 1989. In place of Howe and Lawson, the twin pillars of her middle period, Mrs Thatcher now had a new pair of senior colleagues who, if they combined as their predecessors had done before Madrid, had her in an armlock. Neither John Major nor Douglas Hurd was ‘one of us’; but she absolutely could not afford to lose another Chancellor or sack another Foreign Secretary. Though less senior and less assertive personalities than Lawson and Howe, Major and Hurd were thus, if they chose, in a position to dictate to the Prime Minister. And in the gentlest possible way they did.

  Unlike their predecessors, Major and Hurd met regularly for breakfast to coordinate their approach.24 ‘We both believed the Prime Minister needed to be coaxed, and not browbeaten,’ Major recalled;25 and his Permanent Secretary observed how skilfully he did it. ‘
Major went out of his way to be sensitive to what the PM wanted to do, and the fact that he was sensitive meant they got on pretty well. It also meant he got his way on most issues.’26 For his part Hurd followed Howe’s tactic of not attempting to argue with Mrs Thatcher but simply waiting till she had finished before going on patiently with what he had been saying.27

  She still had doubts about Hurd’s capacity to stand up to the wily Europeans. ‘The trouble is Douglas is a gentleman and they’re not,’ she once expostulated.28 But Major, she believed, was ‘perfect’.29 Several times over the next few months she told Wyatt that Major was her chosen successor. ‘Yes, he is the one I have in mind.’30 ‘That has always been my intention, as you know.’31 As a result she indulged him like a favourite son, averting her mind from the fact that he too lost no time in signalling his wish to join the ERM – the subject was never even mentioned when she appointed him – while he in turn suppressed his doubts about the poll tax.

  Meanwhile, he had a difficult economic inheritance.The economy was slowing down. Unemployment, which had been falling steadily since 1986, turned up again over the winter; while inflation carried on rising, from 7.7 per cent in November to 9.4 per cent in April and 10.9 per cent in October 1990 – ‘a figure’, Lady Thatcher wrote, ‘I had never believed would be reached again while I was Prime Minister.’32 With interest rates at 15 per cent and the revolt against the poll tax in full swing, the Government’s poll rating fell to just 28 per cent and Mrs Thatcher’s personal approval rating to 23 per cent, two points lower than her previous nadir in 1981.

  On these figures the Government faced complete wipe-out in the English local election results in May. In fact the Tories did less badly than expected; but with Labour winning 40 per cent to the Tories’ 32 per cent, the Liberal Democrats’ 18 per cent and the Greens’ 8 per cent, the Tories’ performance was still among their worst ever and they lost control of another twelve councils.

  In the middle of July Mrs Thatcher suffered another blow when Nicholas Ridley was forced to resign following some unguarded comments about the Germans which were widely assumed to echo her views. Ridley was almost her last unqualified supporter in the Cabinet; losing him made her more than ever the prisoner of Major, Hurd and Howe.

  Then, on 30 July, Ian Gow was murdered by the IRA. Though he had not been part of her private office since 1983, he and his wife Jane were still among her closest friends, one of the few couples with whom she and Denis would sometimes dine informally. ‘Margaret is quite shattered,’ Wyatt wrote. ‘She spoke with more emotion than I have heard for a long time and for considerable length… She missed him and misses him.’33 She immediately went down to Sussex to comfort his widow and read the lesson at his funeral on 10 August, still very upset.34 But she forced herself to keep on with her normal programme, telling her staff to cancel no engagements but to give her plenty of work to keep her busy.35 Work was always her best therapy, and on this occasion she had no time to grieve. On 1 August she flew off to Colorado, and a few hours later Saddam Hussein invaded Kuwait.

  All the time Major, with Hurd in the background, was working at trying to bring the Prime Minister round to joining the ERM. Since Madrid, she had been publicly committed to joining as soon as the conditions she had laid down there were fulfilled: free movement of capital between all the major countries in the system; completion (or near-completion) of the internal market; and British inflation coming down to somewhere near the European average. Since France and Italy were due to free capital movements on 1 July and the single market was already virtually complete, the critical condition was inflation – which was still rising.

  Major started trying to talk her round at the end of March. ‘I felt from the outset that she could be persuaded to enter if the decision to do so did not humiliate her’, he wrote. The next stage of EMU was due to be discussed at the intergovernmental conference in Rome in December 1990. ‘Our exclusion from the EMU was making us bystanders in this debate. The Prime Minister did not like this argument, not least because it was true. Yet it did register with her’ – though Major still felt she shied away from the topic.36

  But in the end she did give way. On 14 June she conceded the principle but still insisted on delaying till the autumn. On 4 July she started to consider possible dates. By 4 September she was ready to agree on one condition: she wanted a simultaneous cut in interest rates. ‘No cut, no entry,’ she told Major. ‘We had no choice but to defer to her.’ At the last moment she had a fresh attack of doubt and had to be reconvinced.37 But finally she gave the go-ahead on 4 October. ‘Do it,’ she now agreed. ‘Do it tomorrow.’38

  She made the announcement herself on the pavement outside Number Ten, with Major beside her but saying nothing: it was important that it should be seen as her decision. Accordingly she emphasised the interest-rate cut – back to 14 per cent – as much as ERM entry, asserting that ‘the fact that our policies are working and are seen to be working have [sic] made both these decisions possible’. She admitted that inflation was not yet coming down, but argued that since other countries’ inflation was rising faster, ‘we are coming nearer to the European average’, so the Madrid conditions ‘have now been fulfilled’. She affirmed that ERM entry ‘will underpin our anti-inflationary stance…We have done it because the policy is right.’39

  The immediate reaction was euphoric, and share prices soared. In his memoirs Major took understandable pleasure in recalling the enthusiasm of some of the papers which were most critical, with the benefit of hindsight, when Britain was forced out of the mechanism less than two years later. ‘Both politically and economically,’ the Financial Times wrote, ‘entry is shrewdly timed.’40 But other commentators, even at the time, were not so sure.

  The real argument that has raged ever since is whether sterling joined at the wrong rate: DM2.95, with a 6 per cent margin. But Major insists, ‘Any suggestion that we could have entered at a significantly lower rate is utterly unrealistic.’41 In fact, Mrs Thatcher decided that there should be no negotiation with Britain’s partners at all. Having bitten the bullet, she insisted on joining at the existing parity, partly because she always liked a strong pound and partly because she did not want entry to be accompanied by devaluation. Major was obliged to present his fellow Finance Ministers with a fait accompli. This failure of consultation was not responsible for fixing the parity too high, but it threw away much of the goodwill that sterling’s entry should otherwise have generated.42

  Afterwards Lady Thatcher made a virtue of the fact that she had never wanted to join at all. She had been pushed into it by the cumulative pressure of Lawson and Howe before Madrid, then of Major and Hurd, to the point where she could no longer resist. When sterling was forced out of the mechanism again in September 1992 she felt that she had been vindicated. Major denies that he pushed her into it unwillingly. She agreed ‘because she was a political realist and knew that… there was no alternative’.43 But essentially it was true. The fact was that by October 1990 she was no longer in control of economic or European policy.

  The irony of the ERM saga is that, after years of opposition, Mrs Thatcher finally agreed to join at an unsustainable rate at the worst possible moment. If she was thus proved right from one point of view, she was equally wrong from another. She was not only formally responsible, as Prime Minister, for the ultimate decision to go in; she was also, by imposing her personal veto from as far back as 1985, directly responsible for the fact that Britain did not join five years earlier, in more settled conditions, at a rate which sterling would have been able to sustain and at a time when membership would have helped contain inflation. Lawson’s attempt to shadow the Deutschmark as a substitute for membership certainly contributed to – though it did not wholly cause – the resurgence of inflation after 1987. But it might have been a different story if she had listened to Lawson in 1985.

  The decision finally to join the ERM led on to a euphoric party conference in Bournemouth. ‘It’s full steam ahead for the fourth term�
�, she announced confidently, and her troops responded ecstatically – as Ronnie Millar ironically recalled:

  On the platform, surrounded by her applauding and apparently adoring Cabinet, the star ackowledges the rapturous acclaim of her public, both arms held aloft as they have been every year since 1975… ‘TEN MORE YEARS!’ roar the faithful five thousand, stamping their feet in time with the words… ‘TEN MORE YEARS!! TEN MORE YEARS!!’ they cry fortissimo. The floor trembles. The rafters shake. It is as though by the sheer force of their utterance and its constant repetition they feel they can compel the future. Even by the Leader’s standards it is a salute to end all salutes. As it turns out to be…44

  Just over a month later she resigned.

  26

  The Defenestration of Downing Street

  The sheep that turned

  MRS Thatcher’s downfall was a drama which unfolded with shocking suddenness. For political journalists those three weeks in November 1990 were a once-in-a-lifetime story of rumour and intrigue, calculation and backstabbing, all conducted in the bars and tearooms, clubs and private houses of the Westminster village. For the general public – angry, exultant or simply bewildered by the speed of events – it was a Shakespearean soap opera played out nightly in their living rooms. Though all the elements of a climactic bust-up had been coming together over a long period, with persistent talk of another leadership challenge, speculation about Michael Heseltine’s intentions and questions about how long she could go on, few at Westminster or in the media really believed that she could be toppled as swiftly or abruptly as she was. The conventional wisdom of political scientists held that a Prime Minister in good health and in possession of a secure majority was invulnerable between elections. She might be given a warning shot but she could not be defeated. When suddenly she was gone, Tory MPs were amazed at what they had done. One recent textbook calls it ‘the most ruthless act of political ingratitude in the history of modern Britain’.1 Nicholas Ridley wrote of ‘mediaeval savagery’,2 others of treachery, betrayal, assassination, defenestration, even ritual sacrifice. Matthew Parris wrote in anthropological terms of the Tory ‘tribe’ having to kill and eat its mother figure.3 For the next decade the party was riven by the consequences of its act of regicide, and well into the new century the trauma shows little sign of healing. Yet like most great events, the drama of November 1990 was a sequence of accidents with only in retrospect an underlying inevitability. John Biffen came up with the best metaphor for what happened. ‘You know those maps on the Paris Metro that light up when you press a button to go from A to B?’ he told Alan Watkins. ‘Well, it was like that. Someone pressed a button and all the connections lit up.’4