The Downing Street Years (6 page)

As regards pay bargaining in the nationalized industries, we decided that the responsible ministers should stand back from the process as
far as possible. Our strategy would be to apply the necessary financial discipline and then let the management and unions directly involved make their own decisions. But that would require progress in complementary areas — competition, privatization and trade union reform — before it was to show results.

There would also have to be a fundamental overhaul of the way in which prices were controlled by such interventionist measures as the Price Commission, government pressure, and subsidy. We were under no illusion: price rises were a symptom of underlying inflation, not a cause of it. Inflation was a monetary phenomenon which it would require monetary discipline to curb. Artificially holding down increases merely reduced investment and undermined profits — both already far too low for the country’s economic health — while spreading a ‘cost plus’ mentality through British industry.

At both Cabinets, I concluded by emphasizing the need for collective responsibility and confidentiality between ministers. I said I had no intention of keeping a diary of Cabinet discussions and I hoped that others would follow my example. Inconvenient as that may be for the authors of memoirs, it is the only satisfactory rule for government. But I had to repeat this warning against leaks many times.

We were still in the first week of government, but we had to decide the content of the first Queen’s Speech. This was largely the task of ‘QL’,
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the Cabinet committee chaired by Willie Whitelaw, which was responsible for making recommendations to the Cabinet on legislation for inclusion in the Queen’s Speech. We were fortunate that our manifesto commitments had been so clear; the Queen’s Speech almost wrote itself.

In all this activity of government-making and policy-setting, however, I knew I could not afford to neglect the back-benchers. After twenty years in the House of Commons, through six Parliaments, I had seen how suddenly trouble could arise and the business of the House be put in jeopardy. So on Tuesday evening, before Parliament assembled the following day, I had invited the Chairman and Officers of the 1922 Committee for a talk, to celebrate our victory and discuss the work of the coming parliamentary session.
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The name — which is usually abbreviated to ‘the ‘22’ — commemorates the events of that
year, when Conservative back-benchers forced the resignation of Lloyd George’s coalition Government, bringing about a general election and the return of a Conservative administration under Bonar Law. It should remind anyone who is inclined to doubt it of the ‘22’s importance to government. Even in less stormy times, a heavy legislative programme is only possible when there is a good working understanding between No. 10, the ‘22, the Whips’ Office and the Leader of the House.

Wednesday 9 May saw the new parliament assemble for the election of the Speaker. The Speaker of the previous parliament had been George Thomas, a former Labour Cabinet minister, and he was the unanimous choice to continue in that office. My respect for George Thomas, already great, was to grow over the years. He was a deeply committed Christian with a shining integrity that gave him as Speaker a special kind of authority — but in my speech of congratulation, something else was on my mind: I had to keep remembering not to refer to Jim Callaghan as Prime Minister.

On the following day Members of Parliament assembled-to take the oath. But Thursday was a day of more than ceremonial importance (indeed there was one ceremony which somehow got lost in the rush — Denis’s birthday). It was on that day that Helmut Schmidt, the West German Federal Chancellor, arrived in London on an official visit originally arranged with the Labour Government — the first head of a foreign government to visit me as Prime Minister.

There had been some discussion about whether this visit should go ahead. But I was particularly keen that it should. I had met Herr Schmidt in Opposition and had soon developed the highest regard for him. He had a profound understanding of the international economy on which — although he considered himself a socialist — we were to find ourselves in close agreement. In fact, he understood a good deal better than some British Conservatives the importance of financial orthodoxy — the need to control the money supply and to restrain public spending and borrowing so as to allow room for the private sector to grow. But he had to be told straight away that although Britain wanted to play a vigorous and influential role in the European Community, we could not do so until the problem of our grossly unfair
budgetary contribution had been resolved.
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I saw no reason to conceal our views behind a diplomatic smokescreen; indeed I wanted to convince Helmut Schmidt of both the reasonableness of our position and the strength of our determination precisely because he and West Germany exercised great influence in the Community. So I used every occasion to get the message across.

The speech which I delivered that Thursday evening at our dinner in honour of the Federal Chancellor was my first opportunity to set out my new approach towards the European Community. I rejected right from the start the idea that there was something ‘un-European’ in demanding that inequities be sorted out. In a passage which caught the media’s attention, I said:

At our joint press conference the following day we were asked about our personal relations, since Helmut Schmidt was a socialist who had always referred to Mr Callaghan as ‘Jim’. When I stressed the similarity of our policies, he intervened: ‘Don’t go too far, Prime Minister, and do not spoil my relations with my own Party, please!’

On Saturday I flew to Scotland to address the Scottish Conservative Conference, something I always enjoyed. Life is not easy for Scottish Tories; nor was it to become easier. Unlike English Conservatives, they are used to being a minority party, with the Scottish media heavily slanted against them. But these circumstances gave Scottish
Conservatives a degree of enthusiasm and a fighting spirit which I admired, and which also guaranteed a warm-hearted and receptive audience. Some leading Scottish Tories, though a small minority, still hankered after a kind of devolved government, but the rest of us were deeply suspicious of what that might mean to the future of the Union. While reaffirming our decision to repeal Labour’s Scotland Act, I indicated that we would initiate all-party talks ‘aimed at bringing government closer to the people’. In the event we did so by rolling back the state rather than by creating new institutions of government.

My main message to the conference, however, was a deliberately sombre one, intended for Britain as a whole. That same day an inflation figure of 10.1 per cent had been published. It would rise further. I noted:

As our economic and political difficulties accumulated in the months ahead, no one could claim that they had not been warned.

We arrived back at RAF Northolt and drove to Chequers where I spent my first weekend as Prime Minister. I do not think anyone has stayed long at Chequers without falling in love with it. From the time of its first prime ministerial occupant, David Lloyd George, it has been assumed that the holders of that office would not necessarily have their own country estates. For that reason, Lord Lee’s gift to the nation of his country house for the use and relaxation of prime ministers marks as much a new era as did the Reform Bills.

When I arrived as Prime Minister, the curator was Vera Thomas, who knew and loved each perfectly polished piece of furniture, each historic portrait, each glittering item of silver. Chequers itself is an Elizabethan house, but has been substantially rebuilt over the years. The centre of the house is the great hall, once a courtyard, enclosed at the end of the last century, where in winter a log fire burns, giving a slight tang of woodsmoke through every room.

Thanks to the generosity of Walter Annenberg, US Ambassador to Britain from 1969–74, Chequers has a covered swimming pool. But in the years I was there it was only used in the summer. Early on I
learned that it cost £5,000 a year to heat. By saving this money we had more which could be spent on the perpetual round of necessary repairs to the house. Perhaps the most important work I had done was the cleaning of the Elizabethan panelling in the dining-room and the Great Parlour. Once the layers of varnish and dirt had gone, we discovered some beautiful marquetry beneath that had not been seen for many years.

The group which gathered for Sunday lunch just ten days after our election victory was fairly typical of a Chequers weekend. My family were there, Denis, Carol, Mark. Keith Joseph, Geoffrey and Elspeth Howe, the Pyms and Quintin Hailsham represented, as it were, the Government team. Peter Thorneycroft and Alistair McAlpine were present from Central Office — the latter having been, as Conservative Party Treasurer, one of the most effective fund raisers of all time and one of my closest and most loyal friends. David Wolfson, Bryan Cartledge (my private secretary) with their wives, and our friends Sir John and Lady Tilney completed the party.

We were still in a mood to celebrate our election victory. We were away from the formality of No. 10. We had completed the initial task of getting the Government on the road. We still had that spirit of camaraderie which the inevitable disputes and disagreements of government were bound to sap. The meal was a light-hearted and convivial one. It was perhaps an instance of what a critic was later to call ‘bourgeois triumphalism’.

But we were aware that there was a long road ahead. As my father used to say:

At 7 p.m. that evening Denis and I returned to London to begin my second full week as Prime Minister. Work was already piling up, with boxes coming to and from Chequers. I recall once hearing Harold Macmillan tell an eager group of young MPs, none more eager than Margaret Thatcher, that prime ministers (not having a department of their own) have plenty of spare time for reading. He recommended Disraeli and Trollope. I have sometimes wondered if he was joking.

CHAPTER II

To turn from the euphoria of election victory to the problems of the British economy was to confront the morning after the night before. Inflation was speeding up; public sector pay was out of control; public spending projections were rising as revenue projections fell; and our domestic problems were aggravated by a rise in oil prices that was driving the world into recession.