Margaret Thatcher: Power and Personality (45 page)

Jim Prior’s doubts went far further than employment legislation issues. On that front, he suffered more defeats. He thought his 1980 Employment Bill was to be the government’s last word on law reforms affecting the trade unions. Margaret Thatcher decreed it was to be the first step. Before the bill was on the statute book, the government published a green paper indicating that further curbs on the closed shop and other measures were in the pipeline. But as Prior was still refusing to end the legal immunities of trade unions, a priority reform for her, it became clear that he was a cabinet minister who would have to be reshuffled to some other job as soon as practicable.

Prior’s lame-duck status was none too subtly announced to the world by a process that could well have been called ‘death by a thousand leaks’. It was a form of slow torture applied to several other ministers over the next few years, but the Secretary of State for Employment was the prototype victim. What happened was that a trickle and then a steady flow of press stories started to appear, reporting in various formats that Prior was not up to the job, losing the confidence of the Prime Minister, failing to reform the unions and likely to be banished to Northern Ireland. There was an element of tit for tat in this war of attrition, since Prior himself was a fountain of indiscretion when it came to letting journalists know about his misgivings over the government’s economic strategy.

However, he was not the only such fountain. Others spouted higher and more artistically. One of the most voluble wets, Norman St John-Stevas, was sacked from the cabinet in January 1981 for being leaker-in-chief, although the charge was later somewhat unconvincingly withdrawn by the Prime Minister.

The Downing Street official often blamed for black propaganda activities against ministers was her new Press Secretary, Bernard Ingham. He was far too
professional a civil servant to do any negative briefing without higher authority. Most of the leaking was done by other hands and voices with access to Margaret Thatcher’s frequent fulminations against her colleagues.

The firing of Norman St John-Stevas, like the eighteenth-century execution of Admiral Byng, was widely seen as a move by the Prime Minister ‘
pour encourager les autres
’.
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Soon after it, Jim Prior had a meeting with her that he regarded as his effort to get back into a reasonable working relationship with his boss. He decided to tackle the problem of leaks and counter-leaks.

‘I know you think I leak things to the press, and yes, I sometimes do, deliberately at times and by mistake on others’, he began. ‘But, of course, so do you.’

‘Oh no, Jim, I never leak’, she replied.

‘Well, if you tell me that I must accept it, but in that case your officials and press people certainly leak for you.’

‘Oh, that is quite wrong: they never know anything, so how could they leak?’
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The straight-faced effrontery of this answer amazed Prior. He eventually came round to the view that the Prime Minister was in denial, because she simply never thought that any disclosure by herself could be a leak. ‘If she said it,’ he concluded, ‘how could there be any question of a leak?’
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This view might explain her handling of the Westland crisis and other unsavoury leak episodes at later stages of her time at No. 10.

With leaks, as with so many manoeuvres of power, the cards were always stacked in favour of the Prime Minister. She ran rings around Jim Prior, calling his bluff when he rumbled about resigning over economic policy, and when he made initial noises about refusing to serve as Secretary of State for Northern Ireland. She sent Whitelaw to rebuke him for disloyalty and for ‘holding a pistol to the PM’s head’.
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This caused Prior to back down and left him looking foolish.

In general, Jim Prior was always more of a bluffer than a plotter. He saw life differently from Margaret Thatcher. He thought her leadership had created ‘the most divided Conservative cabinet ever’.
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But, apart from doing a great deal of private grumbling, he kept his head down in his department and did not foment these divisions, except when she attacked him for being too soft or too wet with the unions. For her part, she saw him as a lightweight figure. This was unfair in most people’s eyes, but not in hers. She liked to remind her inner circle that he had only received nineteen votes in the 1975 Tory leadership election. She never believed he had the fire-power to cause the slightest threat to her position. So
in slow time she undermined him, marginalised him and moved him to a peripheral role in the cabinet. His last attempt to cause serious trouble was over the 1981 Budget.

THE COURAGE OF THE 1981 BUDGET

The 1981 Budget was a major turning point in the reputation of the government and of Margaret Thatcher. It did not look that way at the time, for it received one of the worst receptions of any Budget in modern times. Yet, seen with the wisdom of hindsight, this was the political event that confirmed beyond doubt that ‘The lady’s not for turning’ on economic strategy. It crushed the wets in the cabinet, and marked the end of Britain’s long and dismal record of economic decline since the early 1960s. Also it demonstrated that the Prime Minister and her Chancellor of the Exchequer deserved recognition for political courage. For it was a time when they stood alone against the prevailing opinion of the pundits, the political elite and the general populace, but they were proved right.

Just before the Christmas parliamentary recess in December 1980, Ian Gow organised a small private dinner in the House of Commons for the Prime Minister to get to know more of her new MPs. One of them asked her about the atmosphere at cabinet meetings. ‘Well, really it’s very lonely’, she replied. ‘It’s really Geoffrey and me against the rest of them.’
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This feeling of isolation grew worse. In the same pre-Christmas period she asked Brian Griffiths,
^†
Professor of Banking at City University, to come to see her. He was one of her academic ‘voices’ on economic policy, but was unprepared for the depths of her worries. ‘Twice she came close to tears’, he recalled. ‘She felt that Geoffrey was getting it wrong, always trying to find a middle way under the influence of Treasury Keynesians like Sir Douglas Watt. She was in a despondent mood.’
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Loss of confidence in her Chancellor was increased by the gloomy news he kept reporting to her at their weekly bilaterals. In the early weeks of the New Year it emerged that all the national economic indicators were far worse than
anyone had expected. The main problem was public borrowing. The high costs of subsidising the nationalised industries and of rising unemployment benefit meant that the Public Sector Borrowing Requirement (PSBR) was forecast to reach £11.5 billion. By March this forecast had increased to £14.5 billion. Margaret Thatcher had frequently proclaimed the need to cut the PSBR, but now it was soaring out of control. Would she grasp the nettle of bringing it down by higher taxation?

A new recruit to her team of advisers in January 1981 was a little-known economist, Professor Alan Walters. On his first morning at No. 10 he was given a clear signal by the Prime Minister that she thought her Chancellor’s backbone needed stiffening. ‘What should she do about Geoffrey?’ Walters recorded in his diary. ‘Who could she promote. No one. Said come and see me whenever you like.’
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Professor Walters’ proximity to the seat of power initially troubled the Chancellor, or at least his wife. ‘Elspeth clearly peeved at me being in No. 10’,
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he wrote, after a tense encounter with Lady Howe. He was an unsettling Cassandra, making good use of his access to argue that to restore prudence to the national finances, a PSBR of £10 billion was imperative, which he thought required new taxes of £4 billion. When he pressed for this at a meeting between the Chancellor and the Prime Minister on 13 February, Margaret Thatcher reacted angrily, exclaiming that she had not been elected to put up taxes. ‘Nor had I’,
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responded Sir Geoffrey Howe, but he went on in his dogged way to agree with Walters and to outline the options for raising the necessary extra taxation.

Gradually, the Prime Minister came round to the Howe–Walters view. On this occasion the Professor and the Chancellor were singing from the same hymn sheet. Another key voice was that of John Hoskyns, the head of the Prime Minister’s Policy Unit, who favoured a draconian Budget. So did the inner Treasury team of officials. But none of these advisers were elected politicians. As Margaret Thatcher tartly told Hoskyns at one point in the heated discussions: ‘It’s all very well for you. You don’t have to stand up and sell this in the House.’
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Her caution was understandable. The strategy she was about to endorse was likely to be rejected by the majority of her cabinet and by most Members of Parliament. It flew in the face of Keynesian economics and the received wisdom of pundits and commentators. Their prevailing view was that at a time of rising
unemployment and deepening recession it would be politically impossible to apply the thumbscrews of higher taxation and deflation to an already depressed economy.

Margaret Thatcher saw the risks. But she continued to be swayed by Alan Walters, who convinced her that to get the economy moving out of recession the highest priority was lower interest rates, which would be impossible without lower borrowing, which could only be achieved by higher taxation. In the end this argument, backed to the hilt by Hoskyns, Howe and the Treasury, won her support. ‘Its consequences for my administration were unpredictable’, she recalled. ‘Yet I knew in my heart of hearts that there was only one right decision, and that it now had to be made.’
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Once the strategy was agreed, Geoffrey Howe implemented it with skill and courage. Instead of raising the standard rate of income tax, as the Prime Minister had accepted might be necessary, he decided to freeze all personal allowances and tax thresholds. She described this as ‘an extraordinarily bold move when inflation remained at 13 per cent’.
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Other painful measure included double-indexing the tax rates on alcohol, tobacco, cars and vehicle excise duties. Extra taxes on banks and North Sea oil companies completed a tough package, which reduced the PSBR forecast by £4 billion from £14.5 billion (6 per cent of GDP) to £10.5 billion (4.5 per cent of GDP). As a plan it was admirable for its prudence, but no one knew how it would be received politically. Shortly before the 1981 Budget was unveiled to the world, the Prime Minister confided to Alan Walters: ‘You know, Alan, they may get rid of me for this.’ But, she added, it would be a worthwhile cause. ‘At least I shall have gone knowing I did the right thing.’
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The first test of whether these apocalyptic misgivings might prove justified came on the morning of the Budget, when its details were revealed to the full cabinet. It is one of the traditions of British politics that the First and Second Lords of the Treasury (the Prime Minister and the Chancellor) keep their ministerial colleagues completely in the dark about the Budget until some three hours before it is presented to the House of Commons and the world. This secrecy is said to be essential to prevent profiteering by speculators. In 1981, secrecy was imperative to avoid a rebellion by cabinet ministers.

The chief potential rebel, although he turned out to be ineffective in this role, was Jim Prior. As a courtesy to his position, Geoffrey Howe decided to
brief him on the eve of Budget day. The Secretary of State for Employment was appalled. ‘I told him [Howe] that I thought it was awful and absolutely misjudged’, recalled Prior. ‘It was far too restrictive, the PSBR was being cut by far too much, and it would add to unemployment. I couldn’t say anything bad enough about it.’
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The following morning, Prior shared his negative views with two other leading wets in the Cabinet – Ian Gilmour and Peter Walker. They talked about resigning over the Budget, but it was just talk. This was the nearest they came to a rebellion. At the cabinet meeting Prior was ‘interestingly incoherent’, according to Howe.
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But as the three musketeers neither fired a shot nor produced a strategic alternative, their revolt fizzled out with barely a whimper. Led by the loyal Whitelaw, all other Ministers closed ranks behind the Chancellor and the Prime Minister. Gilmour and Prior said afterwards that they regretted not having handed in their resignations, but these were afterthoughts. At the time it was game, set and match to the Budget makers, although Alan Walters presciently noted in his diary that evening: ‘All hell breaks loose. The Wets are up in arms. We’ll have a hot summer.’
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The views of the commenting classes on the Budget were indeed hot and hostile. Geoffrey Howe was given a rough ride by Tory back-benchers at the meeting of the Finance Committee immediately after his speech. One of them, Peter Tapsell, demanded his resignation, calling the Budget ‘economically illiterate’.
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The press, from the
Financial Times
to the
Sun
, were almost as negative. The unkindest cut of all came in a letter to
The Times,
signed by no less than 364 economists. They forecast that the government’s policies would ‘deepen the depression, erode the industrial base of our economy and threaten its social and political stability’.
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Margaret Thatcher took not the slightest notice of these prophets of doom. She slammed the 364 economists:

Their confidence in the accuracy of their own predictions leaves me breathless. But having myself been brought up over the shop, I sometimes wonder whether they back their forecasts with their money. For I can’t help noticing that those who have to do just that – the investing institutions which have to show performance from their judgement – are giving us a very different message.
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It was a dubious argument to contrast academic economists with professional investors, but the Prime Minister, buoyed up by a rise in the stock market, and scornful toward her academic attackers, was in a mood for taking no prisoners. Mocking her critics, she trumpeted her convictions as if she was Joan of Arc issuing a call to the faithful: ‘I do not greatly care what people say about me … This is the road I am resolved to follow. This is the path I must go. I ask all who have the spirit – the bold, the steadfast, and the young in heart – to stand and join with me as we go forward.’
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