Margaret Thatcher: Power and Personality (78 page)

For the last twelve years of Margaret Thatcher’s life, four of them as Leader of the Opposition, Whitelaw had been her shrewdest adviser. He had decided, after the 1975 leadership election, that it was his duty to give her impeccable loyalty as her deputy. In government he was extraordinarily effective in helping her to deliver her agenda and to steer through dangerous moments of decision and division.

A wealthy landowner who lived the high Tory lifestyle of shooting weekends and clubbable dinners, Whitelaw combined the mind of a clever Wykehamist with the geniality of a jovial squire. Everyone liked him, trusted him and respected his judgement. He anticipated the political moods of Westminster as instinctively as a pointer stiffening at the scent of a grouse. One of his greatest assets was his ability to sum up a discordant cabinet discussion in a unifying manner that gave the Prime Minister the decision she wanted.

Other fine qualities were his openness of character, his self-deprecating humour, his warmth and his skill in persuading Margaret Thatcher in one-on-one conversations to come round to his way of handling a problem or a personality.

A few weeks before his stroke, she coined the memorable tribute to Whitelaw: ‘Every Prime Minister should have a Willie.’ When she realised her
double entendre
, made unconsciously in front of her speech-writing team, she tried to swear all present to secrecy.
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The story was too good to be kept quiet, not just because it was funny but also because it contained a great truth. For without Willie Whitelaw, Margaret Thatcher and her team of ministers would have fallen out, perhaps fallen apart, much sooner than they eventually did.

Her abrasive style of leadership was only workable because her number two was so likeable. Whitelaw was at his best as a confidant to bruised colleagues. He acted as a shoulder to cry on, as a friend at court and as a mender of fences – all done for the purpose of supporting the Prime Minister.

This support came at a price. Willie Whitelaw was a more sensitive soul than his bluff exterior suggested. During the Falklands crisis, officials from the U.S. State Department noticed his neurotic nail biting at meetings. When tensions mounted in cabinet, he was often observed to be tugging at his eyebrows ‘as if he was encouraging the grey cells into action’.
³⁰

After particularly difficult meetings at No. 10, he would sometimes come into the Principal Private Secretary’s room, collapse into a chair and bury his head in his hands, saying over and over again, ‘Oh dear, oh dear, oh dear, oh DEAR!’
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At times of conflict with colleagues he could explode into outbursts of anger, although he was careful not to lose his temper with Margaret Thatcher. But when he let off steam in this way, his bark, although loud, had no bite. For his wrath would return to good humour as quickly as a passing summer thunderstorm.

Occasionally he could be really stubborn. ‘It’s absolutely not on’, he would tell the Prime Minister, or ‘The party just won’t wear it’.
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Then they would argue, but on these rare altercations, as often as not she would be the one to yield, because she knew that his loyalty to her was absolute, and that his judgement was excellent.

Although he liked to say ‘I am a bear of small brain’,
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this was all part of his self-effacing style. He was never much of a figures man, but he had the gift of political intelligence in abundance. Margaret Thatcher respected Willie Whitelaw but she probably never fully understood how much she owed him. His premature departure was one of the reasons for her own premature departure three years later.

Surprisingly, the Prime Minister never consulted her former deputy on any subject after he left the government. He was hurt by his exclusion from her counsels. This was a mistake as well as a snub. For a little of the Whitelaw wisdom applied to the cabinet’s personnel problems in the 1998–1990 period could well have avoided the blow-ups that occurred, if he had occasionally been asked to help.

Outwardly, Margaret Thatcher seemed to manage quite satisfactorily without Whitelaw as she pressed ahead with her reforming agenda. In addition to education reform, she attempted to reshape housing policy, social security and the NHS. The results were mixed.

In her first two terms her attempts to introduce policy changes into this large swathe of state activity had been minimal. Norman Fowler had altered the eligibility rules for Housing Benefit, Income Support and some other benefits so that ‘deserving’ groups – the elderly, the disabled and families with young children – were helped at the expense of the ‘undeserving’ – the young unemployed. But it brought about no slowing down in the £40 million a year cost of social security, which had soared by 40 per cent since 1979.

To reduce this, the Prime Minister brought into her 1987 cabinet John Moore. He was handsome, athletic, good on television and influenced by the ideas of American neo-conservatism. These qualities made him, for a short while, another of the Prime Minister’s court favourites. She even talked of him as a potential successor. But the DHSS was to prove his political graveyard.

A month after his appointment, Margaret Thatcher had a lengthy conversation with John Moore about fundamental reforms of his department. His background in US banking and his familiarity with the writings of Milton Friedman gave him an enthusiasm for overhauling the universal benefits in Britain’s welfare state such as Child Benefit. But nothing ever came of this reformist zeal, largely because the Prime Minister was too cautious to support it.

She thought once more about reforming the NHS, but was again constrained by her overriding caution that it must remain free and open to all. Although she flirted with the idea of challenging this post-war consensus, she soon backed away from it and concentrated on improving the management and delivery of health services. To this end, she set up an internal policy review that she chaired. The ministers who made up the review group were John Moore and Tony Newton from the DHSS, and Nigel Lawson and John Major from the Treasury. Their deliberations were full of contradictory views. Margaret Thatcher wanted to enlarge private medical care by giving tax relief on private health insurance. She was also willing to allow the NHS to charge for some services. In the end, these plans were watered down to allow small charges for eye tests and dental check ups. They scraped through the House of Commons by tiny majorities after Tory defections. As for tax incentives for private health insurance, they too were diluted down to a small concession for the over 65s.

One part of the problem was that on NHS reform, the Prime Minister bore more than a passing resemblance to Dr Doolittle’s animal, the Pushmipullyu. At one stage, she would push for radical changes, then she pulled back with conservative caution. John Moore proved ineffective in handling her uncharacteristic ambivalence, not least because of a persistent chest infection that weakened his energy and his speaking voice. The Prime Minister’s new Parliamentary Private Secretary, Archie Hamilton MP, saw these contradictions in their relationship and the policy muddles that emerged from it. ‘She kept changing her mind. One minute she wanted to go further, the next she got an attack of the doubts, wanted to trim back a bit. Each time, the unfortunate John
agreed, made the adjustments, came back for approval. The result was a total hotchpotch and she ended up thinking he was a wanker, and got rid of him.’
³⁴

In July 1988, the Prime Minister made her own adjustments. She moved John Moore away from decisions on health by splitting the huge DHSS into separate Health and Social Security departments, leaving him in charge of the latter. She appointed Kenneth Clarke to be the new Health Secretary. He was positively anti-Thatcherite in his political philosophy. Nevertheless, he proved to be an effective minister in establishing an ‘internal market’ within the NHS, which separated the commissioning and providing roles between District Health Authorities, NHS Trust Hospitals and GP fundholders. It cost more money, which was not what the Prime Minister wanted, but it treated more patients. As this result was not apparent during her time at No. 10, she continued to be accused of attempting to privatise the NHS. In fact her reforms, most of them Kenneth Clarke reforms, did improve the management of the NHS without changing its ethos.

During the first two years of Margaret Thatcher’s third term, her government managed to maintain some momentum. But her radical zeal was flagging because she was no longer bothering to take her colleagues with her. Partly because of the loss of Willie Whitelaw, rifts were developing over the economy; over the flagship policy of replacing the rates with the Community Charge; and, above all, over Europe. At the heart of all these disagreements was the most dangerous of fault-lines within any British government – a growing alienation between the Prime Minister and the Chancellor of the Exchequer.

REFLECTION

The beginning of the third term marked a change for the worse in Margaret Thatcher’s personality. She was becoming more volatile, more hubristic, more autocratic and far less willing to listen to anyone else’s point of view.

These weaknesses did not prevent her, for most of the time, from being an effective national leader. If she had been US president, constitutionally set apart from the legislative branch of government, she would have had few problems. But a British prime minister has to work with the grain of the cabinet and parliamentary systems. Margaret Thatcher was increasingly ignoring these two pillars of her power. As a result, discontent was growing, but she herself remained largely oblivious to it.

The rows inside the high command of the Tory Party’s election campaign were largely of Margaret Thatcher’s making. She played a double game, setting Tim Bell against Norman Tebbit; Lord Young against Norman Tebbit; and Bell’s company, Lowe Howard-Spink and Bell, against Saatchi and Saatchi, the appointed advertising agency of the Conservative Party.

The ructions that emerged from these clashes about 1980s ad men were far more colourful than anything that could ever have been dreamed up by the twenty-first-century creators of the iconic TV series
Mad Men
. The huge surprise in the real life 1987 feuds was the discovery that the Prime Minister had been encouraging and stirring them. Her motives for doing this seem to have been a mixture of insecurity and volatility. At various times, she worked herself up into a frenzy of passion about losing the election, a deep mistrust of Norman Tebbit and an exaggerated belief in Tim Bell. The upheavals her interventions produced were as pointless as they were unpleasant. Her over-reactions caused many insiders to ask the question: What happened to the Margaret Thatcher who was so calm, so resolute and so supportive of her team in the 1979 and 1983 general elections?

Winning a third term with a 102 parliamentary majority was such a stunning result that it quelled all unhappy memories of the campaign. Yet, right from the start of the new session, there was more than a whiff of ‘trouble at t’mill’ among Conservative MPs.

The trouble was over the Community Charge. The policy direction had been set by Margaret Thatcher some two years earlier, but most colleagues assumed there would be plenty of give and take in the legislation in order to eradicate the manifest unfairnesses and anomalies of a flat-rate tax. It came as a blow when at the first meeting of the 1922 Committee in the new Parliament, the Prime Minister was at her most inflexible when demanding obedient support for what she called her ‘flagship policy’.

As the parliamentary party trickled out of Committee Room 14 after this address, Nicholas Budgen kept saying, ‘She ain’t listening. She ain’t listening.’
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It could have been the refrain of a continuous lament throughout the last three years of Thatcherism.

The other place where the key figures felt they were not being listened to was the cabinet. This was the growing problem that came to dominate the third term. It all centred on the visibly changing personality of Margaret Thatcher.

31

Trouble with Nigel Lawson

FLASHPOINTS OF PERSONALITY

Margaret Thatcher had always been a leader with a combative and argumentative personality. Her style of doing business was abrasive but effective. Once her colleagues understood how much she relished the cut and thrust of a good row, they usually accepted her flashes of anger, even when they were unfair or unjustified, as part of her character. This acceptance was made easier because for most of her first eight years in power she conducted her disputes with vigour but without rancour.

In her third term this changed. Not only did she become sharper and ruder; against her two most senior ministers, she developed a personal animus. This soured her working relationship with them and sowed seeds of such unpleasantness that it damaged and eventually destroyed her premiership.

To this day, it is difficult to decide whether Margaret Thatcher’s time as Prime Minister came to an end because of personality clashes or policy disagreements. The conventional wisdom is that she was forced out because of splits over Europe and the poll tax. Yet this is by no means the full story.

All politicians like to maintain the lofty pretence that when they fight among themselves, the battle lines are drawn over great issues of principle unrelated to individual animosities. Unfortunately, in Margaret Thatcher’s third term the two became inextricably linked. Her downfall occurred because personal bitterness merged with policy disagreements. So it is important to examine both areas of trouble in explaining the real reasons why her relationships with her Chancellor and her Foreign Secretary began to unravel and eventually to explode.

Margaret Thatcher had an up-and-down relationship with Nigel Lawson. In his early period as her Chancellor they worked together in harmony as
a golden partnership. Then there were bumps in the road. For a while, his popularity within the government and the Conservative Parliamentary Party was greater than hers. In the final phase, with flaws appearing on both sides, they became bitter adversaries. Yet one aspect of their collaboration never changed. She was always in awe of his brainpower.

Her admiration for his intellect was not, however, immediately equalled by her enthusiasm for his personality. This was apparent during her first term when he was still a junior minister. As Financial Secretary to the Treasury, he was the architect of the Medium Term Financial Strategy (MTFS), which was pivotal to Geoffrey Howe’s Chancellorship. Yet, in 1981, she promoted Leon Brittan into the cabinet to become Howe’s no. 2 as Chief Secretary to the Treasury.

As the obvious front-runner for the job, Lawson was greatly upset at being overlooked, so much so that he did not turn up at his ministerial office for several days. His absence was interpreted as sulking by some colleagues, but not by the Prime Minister who invited her devastated Financial Secretary to lunch at Chequers a week after her failure to promote him.

In a frank one-on-one conversation she listened sympathetically to his grievance and promised that she would put him in the cabinet in her next reshuffle. Lawson learned that he had been blocked by Willie Whitelaw telling the Prime Minister that he was ‘too clever by half’ and ‘not a safe pair of hands’.
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These fences took time to mend, but after a while both Willie Whitelaw and Margaret Thatcher were completely won round. Nigel Lawson joined the cabinet as Energy Secretary nine months later. His impressive performance in that job, which contributed much to the later victory in the miners’ strike, led to his surprise appointment to the Chancellorship of the Exchequer immediately after the 1983 election.

Margaret Thatcher took a big gamble in giving the second most important post in her government to such a relatively new and controversial choice. But her bet paid off – at least for most of the second term.

The Chancellor and Prime Minister began by working well together. Lawson’s strategy, evolved over four Budgets, laid the foundation for sustained growth and successful election winning. But not everything was sweetness and light between them. He was obsessively secretive, especially in his dealings with her. He wanted to be master in his own house, running the economy in a non-collegiate and idiosyncratic style of last-minute decision-making.

This was the source of the most fundamental disagreements between them. He believed that there could ‘only be one Chancellor’
²
exercising suzerainty over Treasury affairs. He even asserted that the Prime Minister’s historic role and title of First Lord of the Treasury was ‘a myth’.
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At the beginning of his tenure of No. 11 Downing Street Lawson kept this view to himself. But as his Chancellorship moved into its fourth, fifth and sixth years he became increasingly hostile to the notion that he was the Second Lord of the Treasury who had to obey Margaret Thatcher as his boss. This was a war of will-powers waiting to happen.

FIRST CLASH OVER THE ERM

In 1985, the Prime Minister and Chancellor had their first serious policy disagreement when he began favouring the idea that Britain should join the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). In an attempt to block the advance of what she called ‘a fashionable consensus’,
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the Prime Minister convened an
ad hoc
ministerial meeting of carefully chosen colleagues who she thought would support her side of the argument.

But to her dismay, at this meeting on 13 November 1985, Nigel Lawson persuaded not just the predictably pro-EMS Geoffrey Howe (Foreign Secretary) but also Norman Tebbit (Party Chairman), John Wakeham (Chief Whip), Leon Brittan (Secretary of State for Trade and Industry) and even the ultra-loyal Willie Whitelaw (Deputy Prime Minister) to speak in favour of joining the ERM/EMS arrangement.

The arguments they expressed in favour of it were entirely economic and highly technical, focused on what was right for the exchange rate, interest rates and the control of inflation. Margaret Thatcher alone seems to have recognised the constitutional implication that the EMS/ERM might bind Britain into a structure that could lead towards a single European currency and an irreversible loss of sovereignty.

Yet she did not articulate her fears in a constitutional or indeed any sort of non-economic argument. Instead, when faced with the unexpected degree of unity of her colleagues behind a policy to which she was opposed, the Prime Minister played the theatrical card of a dramatic exit. ‘I disagree. If you join the EMS, you will have to do so without me’, she declared as she gathered up her papers and swept out of the room.
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A shaken Nigel Lawson then made his exit to No. 11, accompanied by Geoffrey Howe, Norman Tebbit and Willie Whitelaw. Describing himself as ‘extremely depressed’,
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the Chancellor told his colleagues that he saw little point in carrying on and felt that he ought to resign. They urged the Chancellor to banish the thought. Whitelaw in particular assured him that by persuasion and persistence he would bring the Prime Minister round to his point of view. But this did not happen.

Margaret Thatcher’s determination to resist the almost unanimous recommendation of her Chancellor and her senior colleagues in favour of joining the ERM seems to have been more visceral than logical. She received support for her stance from her new Head of Policy at No. 10, Brian Griffiths; from the Leader of the House, John Biffen, who was a long-standing supporter of floating exchange rates; and from her former adviser, Alan Walters, who had written to her suggesting that an expected fall in oil prices would mean that Britain could enter the EMS at a lower parity in six months time. But their arguments were technical, too. By contrast, Margaret Thatcher’s hostility to the ERM was fundamental, fuelled by deep instincts from the well-springs of her belief in Britain’s freedom to make its own national decisions. Another intuitive source of her opposition may have been her dislike of Germany’s dominant vote in the ERM.

Terry Burns, who was present at the meeting on 13 November as Chief Economic Adviser to the Treasury, sensed that the real reason for the Prime Minister’s apparent intransigence was that ‘she just couldn’t bear to be beholden to other people to determine the destiny of Britain’s interest rates. She did not mind rules, but she always wanted the wriggle room that the ERM would not allow’.
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On his side of the argument, Nigel Lawson was down but by no means out. He regarded his defeat at the 13 November meeting as ‘the saddest event of my time as Chancellor’.
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Lawson overcame his sadness by considerable clandestine activity in preparation for joining the ERM.

This began less than a month after Margaret Thatcher had vetoed the move when on 7 December 1985 the Chancellor authorised a secret mission of senior Treasury officials to the Deutsche Bundesbank in Bonn to discuss contingency planning for Britain’s membership of the ERM. Despite this and other such provisional manoeuvres, the issue of joining the ERM was kept on the shelf for nearly two years. But Nigel Lawson was biding his time. When he felt strong
enough to do so he effectively joined the ERM, to use Nicholas Ridley’s words, ‘unilaterally and unofficially’,
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in March 1987. But to do this, he had to act by stealth without declaring his hand to the Prime Minister, using a new policy known as ‘shadowing the Deutschmark’.

SHADOWING THE DEUTSCHMARK

From 1987 onwards, Nigel Lawson was in a position of great strength. Never a modest Chancellor, he believed his policies had delivered a stunning victory for the Tories and an expanding economy for the nation. He was right about the first claim. On the second he did not see that his expansion was turning into overheating. But an even greater worry was that he had become so confident of his own judgement that he launched a major change in exchange-rate policy without the agreement of the Prime Minister or the consent of the cabinet.

From March 1987, in covert furtherance of his long-held view that sterling should join the ERM, Nigel Lawson began using interest rates and interventions in the currency markets to set the pound’s value at DM3. This shadowing of the Deutschmark was his way of operating sterling as if Britain had joined the ERM, even though no decision to join it had been taken by the government.

At face value, this was an act of insubordination by the Chancellor, who appeared to be deliberately deceiving the Prime Minister with this secretive course of action. Nigel Lawson claimed that he did not see it in this light. Conveniently ignoring the fact that Margaret Thatcher was First Lord of the Treasury, he insisted that he was in charge of Britain’s economic policy and was fully entitled to order the Treasury and the Bank of England the carry out his instructions.

His justification was that the official policy of the government, unchanged since the days when Ted Heath was Prime Minister, was that Britain would join the ERM when the time was right. Therefore, he was entitled to prepare the ground for entry by aligning sterling with the Deutschmark immediately, keeping the pound down by instructing the Bank of England to buy other currencies.

The problem with this explanation was that Lawson well knew that Margaret Thatcher’s opposition to joining the ERM was hardening. In her view, the time to sign up was certainly not in the 1980s, and might never be right. In
his view, the time was so right that he was already implementing the policy. This disagreement put the Chancellor and the Prime Minister on an inevitable collision course.

Margaret Thatcher claimed to be unaware of this. In her memoirs she asserted that she only discovered her Chancellor was shadowing the Deutschmark at DM3 to the pound on Friday 20 November 1987 when journalists from the
Financial Times
provided her with chapter and verse.

‘The implications of this were, of course, very serious,’ she wrote. ‘Nigel had pursued a personal economic policy without reference to the rest of the Government. How could I possibly trust him again?’
¹⁰

By contrast, Nigel Lawson has strenuously denied that the Prime Minister was blindsided by his Deutschmark shadowing policy. He wrote in his memoirs, ‘It was always an implausible insult to her formidable intelligence to suggest that she could possibly have been unaware of it, even if I had wished to keep her in the dark, which, of course, I did not … She was simply not that kind of Prime Minister.’
¹¹

Trying to extract the truth from these conflicting accounts is difficult. But Nigel Lawson has now admitted, in an interview for this book, that he never directly told the Prime Minister that he was shadowing the Deutschmark, until after she had been alerted to it by the
Financial Times
. His case is that she must have known about his policy since she was daily sent the Treasury’s market report recording the figures of intervention by the Bank of England in the foreign-exchange markets required to support sterling.

The argument is special pleading after the event. It is correct to say that if a foreign-exchange expert had studied the confidential figures sent every evening from the Treasury to No. 10 which detail the costs of UK intervention in the currency markets, then it would have been possible to detect that the Deutschmark was being shadowed as a matter of undisclosed policy. But the Prime Minister did not know this. Her two most relevant officials at No. 10, Robin Butler, her Principal Private Secretary, and Brian Griffiths, her Head of Policy concerned with Treasury and Bank of England affairs, also did not know it.
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It is hard to escape the conclusion that concealment took place.

So why was the Chancellor not transparent with No. 10? Why in nine months of bi-laterals did he hold back from telling the Prime Minister that he had instructed the Bank to shadow the Deutschmark? Nigel Lawson explained:

I am not a gushing person. She has half a point when she says she was not told. But I never withheld the information from her. It was all there in her red boxes with the figures sent by my Private Secretary to her Private Secretary every night.
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