The Downing Street Years (73 page)

I felt that the reshuffle had given the Party and the Government a lift. I believed that we had created a stronger administration, good at both policy and presentation, that could weather any storm and see us through to the next election. But it was not to be. ‘The best laid schemes o’ mice an’ men [and women], Gang aft a-gley.’

There are differing views even now of what the Westland affair was really about. At various times Michael Heseltine claimed that it was about Britain’s future as a technologically advanced country, the role of government in industry, Britain’s relationship with Europe and the United States and the proprieties of constitutional government. Of course, these are all interesting points for discussion. But Westland was really about none of these things. Michael Heseltine’s own personality — not mine or any other member of the Government’s — alone provides a kind of explanation for what arose. Michael is one of the most talented people in politics. His talents are selective and cultivated to what always seemed to me the point of exaggeration. But anyone who has seen him on television or on a public platform will quickly accept that they are real enough.

Michael and I are similar in some ways, very different in others. We are ambitious, single-minded and believe in efficiency and results. But whereas with me it is certain political principles that provide a reference point and inner strength, for Michael such things are unnecessary. His own overwhelming belief in himself is sufficient. Shortly before Christmas 1985 when the Westland affair was rapidly getting out of hand he sent me a handwritten letter in which he wrote that he knew I would ‘understand the depth of [his] convictions in this matter’. He was all too correct.

My relations with Michael Heseltine had never been easy. When I became Leader of the Party in 1975 I wanted to move him out of his post as Shadow Industry spokesman where his interventionist instincts were out of place. He agreed to take the Environment portfolio on condition that he did not have to do so in Government. Working with Hugh Rossi — a great expert on housing — Michael presented our policy on the sale of council houses very effectively. After our election victory I offered him the Department of Energy — an important
job at the time, since the fall of the Shah was sending oil prices sharply upwards. Hearing this, he said that if that was all, he would prefer to become Secretary of State for the Environment. I bowed to this. There Michael — assisted by Tom King — did not prove particularly successful in curbing local authority spending. He came up with no feasible alternative to the rating system, which was at the root of much of the problem since many voters did not pay local authority rates. But Michael was far less interested in local authority finance than in being ‘Minister for Merseyside’. In that capacity he made a great impression, which was undoubtedly politically helpful to us. Though for the most part his efforts had only ephemeral results, I would not blame him for that: Liverpool has defeated better men than Michael Heseltine. Apart from the sale of council houses and Merseyside, what came to obsess Michael was introducing new management systems into government. This seemed to me a most commendable interest and I encouraged him, arranging at one point a seminar with other ministers to discuss it.

But Michael was clearly restless and when John Nott told me that he did not intend to stand again for the next Parliament, I decided to give Michael his big chance and put him into Defence. There Michael’s strengths and weaknesses were both apparent. He defended our approach to nuclear arms with great panache and inflicted a series of defeats on CND and the Labour Left. He reorganized the MoD, rationalizing its traditional federal structure. Supported by me in the face of departmental obstruction, he brought in Peter Levene to run defence procurement on sound business lines.

These were real achievements. But Michael’s sense of priorities was gravely distorted by his personal ambitions and political obsessions. For while Michael Heseltine was becoming increasingly obsessed with a small West Country helicopter company with a turnover of something over £300 million, far more important issues escaped his interest. In particular, the Nimrod Airborne Early Warning System project which would have to be cancelled by George Younger in December 1986 after £660 million had been spent was running into grave difficulties while Michael Heseltine was at Defence. It would have been inconceivable for Leon Brittan, who was to fare so badly at Michael’s hands, to have let such a situation continue. The Nimrod affair constituted a unique — and uniquely costly — lesson in how not to monitor and manage defence procurement. A minister has to be prepared to work through the details if he is going to come to the right decisions and this Michael was always unwilling to do.

However complex the psychological drives of Michael Heseltine,
the basic issue at stake in Westland was clear enough. It was whether the directors and shareholders of a private sector firm, heavily but not exclusively dependent on government orders, should be free to decide its future, or whether government should do so. In this sense an important issue was indeed at stake in Westland. If government manipulates its purchasing power, if it arbitrarily changes the rules under which a particular company’s financial decisions have to be made, and if it then goes on to lobby directly for a particular commercial option — these things are abuses of power. All my reading, thinking and experience has taught me that once the state plays fast and loose with economic freedom, political freedom risks being the next casualty.

The Westland helicopter company was small by international aerospace standards but it was Britain’s only helicopter manufacturer. Unlike the bulk of the aerospace industry it was never nationalized by the Labour Government and was reasonably profitable into the early 1980s. It then began to run into financial trouble. Mr Alan Bristow bid for the company in April 1985 and it was in the light of this that on 30 April Michael Heseltine informed me and other members of the Cabinet’s Overseas and Defence Committee of the Ministry of Defence’s view of Westland. Westland hoped to obtain an order from the Indian Government for helicopters partly financed from our Overseas Aid budget. But they were also looking to the MoD for crucial new orders: from Michael’s minute it was clear that they would look in vain. He made no suggestion at this stage that Westland was of strategic significance to Britain. Indeed, he emphasized that he would not wish to give the company extra orders for which there was no defence need. He added that even with the best will in the world it was difficult to see a single British specialist helicopter company competing in worldwide markets in the longer term.

In mid-June we learned that Mr Bristow was threatening to withdraw his bid unless the Government provided assurances of future MoD orders and agreed to waive its right to repayment of over £40 million of launch aid provided by the DTI for Westland’s latest helicopter. I held a series of meetings with Michael Heseltine, Norman Tebbit, Nigel Lawson and others. At the meeting on Wednesday 19 June Michael suggested a scheme by which we could provide £30 million in aid to the company, but explained that what was important to the defence programme was not the existing Westland company but rather Britain’s capability to service existing helicopters and to develop the EH101 project (see below). In spite of that, we all agreed that it was desirable to avoid Westland going into receivership, which appeared likely if the Bristow bid was withdrawn. In the end we
decided that rather than provide aid to the company in the midst of a takeover bid (which in any case might have breached company law), Norman Tebbit should encourage the Bank of England to bring together the main creditors with the object of putting in new management and developing a recovery strategy as an alternative to receivership.

As a result Mr Bristow withdrew his bid and in due course Sir John Cuckney took over as Chairman, bringing his extraordinary talents to the task of securing Westland’s future. Shortly afterwards it emerged that a large privately owned American company was considering making a bid for Westland. The new Westland management opposed this particular bid. Norman Tebbit and Michael Heseltine were also against it. But while noting the general arguments against an American takeover I made it clear even at this stage that a different American offer would have to be judged on its merits.

The situation of Westland was one of the first difficult issues which Leon Brittan had to face when he took over at the DTI in September. On Friday 4 October Leon sent me a thorough assessment of the position. The matter was urgent. It seemed likely that the company would have to go into receivership if a solution could not be found before the end of November. Leon urged me to take up the issue of India’s proposed helicopter order with Rajiv Gandhi when he visited Britain in October. As part of the proposed financial reconstruction of the company the Government was asked to underwrite some helicopter sales. We would also have to decide what to do about the launch aid, which seemed unlikely to be recovered. What would be the most controversial aspect of the package put forward by Sir John Cuckney, however, was the introduction of a new large minority shareholder to raise new capital. No British company was prepared to take such a shareholding. The most likely candidate was the large American company, Sikorsky. Westland were in contact with their European counterparts, but the prospects of a European solution within the timetable did not look good.

It was from a note of a meeting on Wednesday 16 October between Leon Brittan and Michael Heseltine that I first read about Michael Heseltine’s concern that Sikorsky would turn Westland into ‘merely a metal bashing operation’. Michael did not wish to go so far as to oppose Sikorsky’s taking the 29.9 per cent in any circumstances, but he did think it important to make every effort to find an acceptable European shareholder instead. More ominously, he apparently did not think that Sir John Cuckney was the right person to deal with negotiations with the European companies, since the latter looked to
their governments for guidance in such matters. Michael argued that the approaches needed to be made at a political level by the Ministry of Defence.

It was now becoming clear that the preference of the Westland board was likely to be for Sikorsky, while Michael Heseltine’s preference was very different. Other things being equal, we would all have preferred a European solution. Since 1978, European governments had agreed to make every effort to meet their needs with helicopters made in Europe. This did not, of course, mean that we were bound to rule out purchases of non-European helicopters, but it did obviously incline us in the European direction.

I still do not understand why anyone later imagined that the Westland board, Leon Brittan and I were all biased against a European option. In fact, the Government bent over backwards to give that option and Michael Heseltine every opportunity to advance their arguments and interests. Yet in the frenzy which followed there was almost no limit to the deviousness and manipulation we were accused of employing to secure Sikorsky its minority holding.

At the end of November the opposition between the Westland board’s views and Michael Heseltine came out into the open. Sikorsky made an offer for a substantial stake in Westland which the Westland board was inclined to accept. But entirely off his own bat Michael now called together a meeting of the National Armaments Directors (NADs) of France, Italy and Germany as well as the United Kingdom to agree a document under which the respective governments would refrain from buying helicopters other than those designed and built in Europe. This was more than a blatant departure from the Government’s policy of maximizing competition to get the best value for money: it also placed Westland in an almost impossible position. There was now an obvious risk that if Westland concluded its deal with Sikorsky it would not be deemed to meet the NADs criterion and would be excluded from all further orders from the four governments, including the UK. It was my view — and Leon Brittan’s — that the Government must not seek to prevent any particular solution to Westland’s problems: it must be for the company to decide what to do. Yet by a stroke of a pen Michael Heseltine was effectively ruling out the company’s preferred option for its future. If Westland were to be able to make a free decision it would be necessary for the Government to overrule the NADs decision. This, of course, meant overruling Michael.

I realized that we might have to do this. Although these were essentially matters for the company, the closer that we looked at the
European option the less substantial did it seem. The three European companies concerned — Aérospatiale (France), MBB (West Germany) and Agusta (Italy) — were, as Michael certainly knew, subject to pressure from their own governments. Aérospatiale and Agusta were state-owned and MBB was substantially financed by the West German Government. All the European companies were short of work and promises of more work for Westland from Europe seemed likely to remain just promises. By contrast, Westland had been collaborating with Sikorsky for several decades and had produced a number of models under licence from them. Indeed, most of not just Westland’s but Agusta’s existing helicopter designs were of American origin. Michael Heseltine argued that if Sikorsky took even a minority stake in Westland they would use their position to put pressure on the Ministry of Defence to order American-designed Blackhawk helicopters. In fact, it was widely rumoured that the armed services would have liked the MoD to do just that rather than wait for the European equivalent which was now still only at the stage of feasibility study. My own personal view of all this was of little importance, but I could well understand, as would anyone else conversant with the facts, why Westland had their preference for the American option and how angry they and Sikorsky were with Michael Heseltine’s manoeuvrings.

Nor, by now, was the ‘American’ option American only. Sikorsky had been joined by Fiat in their bid. Not to be outdone, however, Michael Heseltine suddenly revealed that British Aerospace would be ready to join the European consortium, thus making it less ‘foreign’. There were several accounts of how precisely this had occurred: I had my own opinions.