The Downing Street Years (46 page)

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.

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.
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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 and 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.

So for all these reasons I satisfied myself through discussions with Washington that the position in reality was satisfactory from the point of view of British security and defence, and on 1 May 1983 I cleared personally with President Reagan the precise formula we should use to describe it. But I knew that it would be difficult to defend our line: not only anti-nuclear protesters but a sizeable number of our own
supporters in and out of Parliament had their doubts. Moreover, most of the newspapers were opposed to us on the question of dual key.

The timing of deployment was bound to be a sensitive matter, especially with an election campaign ahead. We were anxious to avoid very visible signs of deployment in the run-up to or during the 1983 general election campaign, with demonstrations stretching police resources. Until almost the last moment we had been planning an autumn election. But as events happened we had an election in June, so this was not the problem which it might have been. (The launchers and warheads duly arrived in November.)

Elsewhere in Europe the situation was still more difficult. There was already a good deal of public criticism in Germany and Italy of NATO’s offer of the zero-option, which was widely felt to be unrealistic. And the Soviets were mounting a major public relations campaign.

It was crucial that NATO’s policy on arms control be well presented and that the alliance should stick together. On Wednesday 9 February I had a meeting at Downing Street with George Bush to discuss these matters. The Vice-President had a special remit from President Reagan to keep in touch with European governments and he did this with great skill. He was always very well briefed and had a friendly, straightforward manner, the proof that this reflected personality rather than artifice being that his staff were well known to be devoted to him. I now urged the Vice-President that the American Administration should take a new initiative in the INF negotiations. The aim should be to seek an interim agreement whereby limited reductions on the Soviet side would be balanced by reduced deployments on the part of the United States, without abandoning the zero-option as our ultimate goal — that is the complete elimination of intermediate-range nuclear weapons.

Mr Bush reported my views back to President Reagan who replied in a message to me on Wednesday 16 February. The President was at this stage somewhat noncommittal about a new initiative but said that he would be willing to consider seriously any reasonable alternative idea for producing the same result as the zero-option. This did not seem to me to be sufficient. I replied two days later on the hot-line. I stressed the success of Vice-President Bush’s visit to Europe, but pointed out that one of its effects had been to raise expectations. I hoped that the speech which President Reagan was due to make shortly on these matters would go beyond a restatement of the US position and begin to indicate how it might be developed. As things turned out, the President’s statement contained nothing new. So I
continued the private pressure for further movement, while remaining in public totally supportive of the American position.

Then on Monday 14 March President Reagan sent me another message. He said that he had directed that a prompt review of the US position on INF negotiations should be made as a basis for new instructions to the US arms negotiating team. In the meantime, he asked that there should be no European calls for US flexibility and specifically asked me to express confidence in the very close coordination of our policies. I replied warmly welcoming his decision. On Wednesday 23 March the President told me the results of his review. While sticking to the ultimate objective of the zero-option, the chief US negotiator, Paul Nitze, would tell the Soviets at Geneva before the end of the current round of negotiations that the US was indeed prepared to negotiate an interim agreement. The Americans would stop deployment of a (still to be specified) number of warheads, on condition that the USSR reduced the number of warheads on its mobile long-range INF missiles to one equal with the US on a global basis. The President said that it was his tentative judgement that they should not offer specific numbers at this time. Again, I welcomed his decision, but argued that he should consider giving specific figures. In fact the President’s proposal announced on 30 March did not do so. But his modest flexibility did have a beneficial effect on public opinion and incidentally helped us in Britain fighting the general election campaign soon be upon us.

In that election campaign, defence would be of great political importance. Yet I had no doubt that the result would ultimately depend on the economy. Our economic course had already been set in the 1981 budget. We now had to see the strategy through. It was a remarkable testament to the soundness of public finances by this stage that we managed to pay for the Falklands War out of the Contingency Reserve without a penny of extra taxation and with barely a tremor in the financial markets. The economy was already beginning to recover and would have done so more rapidly but for sluggish world conditions. Geoffrey Howe’s 1982 budget was designed to encourage that recovery by helping business, while keeping inflation and interest rates coming down by reducing government borrowing. The principal measure of direct assistance to industry in the 1982 budget was a reduction in
the National Insurance Surcharge. We were able to make further reductions at the time of the 1982 Autumn Statement and again in the 1983 budget. These made a direct contribution to cutting industry’s wage-related costs and helped to increase employment.

Another means of strengthening industry without becoming involved in the futile task of ‘picking winners’ was to promote the application of the new ‘information technology’ (IT). This was something in which I took a particularly close interest. As a scientist, I was fascinated by the technology itself; as a passionate advocate of free enterprise capitalism I was convinced that, given the right framework of laws and an appropriately educated workforce, it could widen choice, generate wealth and jobs and improve the quality of people’s lives. Both Keith Joseph at Education and Ken Baker at Industry felt as I did. We designated 1982 Information Technology Year and we all made special efforts to widen understanding of what IT could do for business. Of course, it was the young people who found it easiest to learn the new skills and one of our most valuable and appreciated initiatives was to put a desk-top computer in every secondary school.

By now the question we were being asked was not whether economic recovery would come but rather how fast and how sustainable it would be, and also when unemployment would begin to fall. Since the whole basis of our approach to economic policy was that politicians and civil servants do not know all the answers, I never felt tempted to pick figures out of the air. But I did my best to encourage confidence because as long as the fundamentals — the public finances, monetary policy, tax levels and so on — are sound, confidence itself leads to higher investment and higher consumer spending and so helps recovery. For example, on Tuesday 19 April 1983 I addressed the CBI annual dinner at the London Hilton. We were only weeks away from the election, though neither the audience — nor even the guest speaker — knew it. I reminded them that when I had last been their guest two years earlier there was plenty to worry about in the state of the economy:

Since then, however, cuts in the NIS had put £2 billion a year back into the hands of private companies. Personal tax had also been cut by raising thresholds faster than inflation. Interest rates were seven
percentage points below their peak, saving industry about another £2 billion. The exchange rate had fallen from a high point of $2.45 in October 1980 to $1.54 now. This was providing a boost for exporters. Industrial output, housing starts, and car sales were all up. There was plenty of evidence of recovery — above all, one that was soundly based.

The money supply and government borrowing had been brought under control. Public spending was at last expected to begin falling as a share of GDP, if only slightly, now that the economy was growing again. Our overseas debts had been virtually halved. Productivity in industry was greatly improved. Most dramatically, inflation had fallen from 20 to 4 per cent — its lowest level for 13 years. Success against inflation was the single achievement to which we drew most attention as we approached the election, not least because Labour looked set to promise huge increases in spending and borrowing which could never be honestly financed and which would have sent prices soaring again. The black spot in the record was, of course, unemployment, which was still well over three million. It would be vital in the campaign to explain why this was so and what we were doing about it. Our ability to deal with this issue successfully would be a test not only of our eloquence and credibility but also of the maturity and understanding of the British electorate.

Unlike some of my colleagues, I never ceased to believe that, other things being equal, the level of unemployment was related to the extent of trade union power. The unions had priced many of their members out of jobs by demanding excessive wages for insufficient output, so making British goods uncompetitive. So both Norman Tebbit, my new Secretary of State for Employment, and I were impatient to press ahead with further reforms in trade union law, which we knew to be necessary and popular, not least among trade unionists.