Margaret Thatcher: The Authorized Biography (43 page)

In the general election campaign of May/June 1970, the Conservative manifesto had declared: ‘We utterly reject the philosophy of compulsory wage control.’ Although the manifesto had concentrated more on Heath’s desire for a ‘new style of government’ than on an ideologically coherent programme, it was informed by a preference for free-market liberal economics, one which Heath himself, at that time at least, shared.
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He believed, and the manifesto argued, that free collective bargaining in industry – as unregulated pay negotiation between management and trade unions was known – could exist happily, provided that there was ‘a new context of labour law’.
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This meant a curbing of the legal privileges of the trade unions, and the introduction of a new Industrial Relations Act. The manifesto was equally firm in its condemnation of inflation, which it attributed to ‘Labour’s damaging policies of high taxation and devaluation’. Government spending had risen from a 44 per cent share of Gross Domestic Product in 1964 to 50 per cent in 1969. That drift, the Tories had argued, had to stop and be replaced by a downward pressure and by a political direction which would be maintained. ‘Nothing has done Britain more harm’, said the manifesto, ‘… than the endless backing and filling we have seen in recent years.’ The Conservatives who won in 1970 were committed to a smaller state, and a freer economy, and to the urgency of these matters. They failed, and their failure created the conditions for Margaret Thatcher to become their leader.

It is beyond the scope of this book to give a full account of the Heath government and its economic U-turn which culminated in the introduction of
an incomes policy in 1972. Numerous factors contributed. The early death of Iain Macleod meant that Heath had, in Anthony Barber, a politically weak Chancellor of the Exchequer, who did not bring important thinking of his own to economic policy and was therefore a prisoner of the Keynesian dominance of the age. Much more than later prime ministers, Heath was his own chancellor, and the men with whom he worked most closely – Robert Armstrong,
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his principal private secretary, Sir Burke Trend, the Cabinet Secretary, and, above all, the head of the home Civil Service, Sir William Armstrong – were all opposed to liberal, free-market economics. Government-engineered increases in growth were seen as answering the problems of economic sluggishness. The fact that the most articulate Tory advocate of liberal economics was also Heath’s most hated rival, Enoch Powell, meant that criticism of policy too quickly became connected with personal disloyalty. World conditions, including President Richard Nixon’s adoption of emergency economic measures in August 1971, and the oil-price shocks which followed the Yom Kippur War of 1973, did not help. Nor did the Conservative fear of unemployment as electorally lethal to the party associated with privilege and with the sufferings of the 1930s: there was alarm when the figure passed 1 million in January 1972. But by far the biggest difficulty the government faced was that of industrial relations; pay and trade unions, particularly in the nationalized industries, dominated the scene from the beginning. Union leaders who had seen off Harold Wilson in his attempt to reform industrial relations in 1969 were not going to make it easier for a new prime minister who led the party to which they were opposed. From the start, they flexed their muscles.

Douglas Hurd,
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who ran Heath’s political office in Downing Street from the election until the winter of 1973, recorded that ‘there is no doubt what swallowed up most of my working time. The government’s handling of public sector disputes was the dominant theme.’
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This was true from the first, not only in the later, darker days. As soon as the government came into office, there was a dock strike, requiring the declaration of a state of emergency. It was settled at a very high price. In November 1970,
arbitrators awarded what was seen as a shockingly large 14 per cent increase to local authority workers. In the following month, regular power cuts began, as power-station employees worked to rule.
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In January 1971 there was a postal strike. In March there was a serious dispute at the Ford Motor Company.

A similar, related pattern emerged in government dealings with ailing industry, whether nationalized, private or – as was often, and complicatedly, the case – somewhere between the two. In February 1971 the aero-engine company Rolls-Royce informed the government that it could not afford to complete the RB211 engine and was insolvent. Heath rescued the company in the interest of national defence. On 14 June that year he announced to the Cabinet that Upper Clyde Shipbuilders, a partly government-backed conglomerate on which depended 15,000 jobs, mainly in Scotland, was going to apply for liquidation that day. There was no question of a bail-out, he said. But over the summer, as union militants began a ‘work-in’ at the Clydeside yard, refusing to leave the premises, and the police authorities warned that they might not be able to preserve order, Heath weakened. On 19 October the Cabinet agreed to rescue the consortium. And the following February the Secretary of State for Trade and Industry, John Davies,
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used a parliamentary debate on unemployment to proclaim the final rescue package for the company, thus explicitly linking government rescues with jobless totals, an act which even Heath came to regard as a mistake.
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By this time, the government was already immersed in its most significant industrial dispute, and with its most symbolically important foe. In July 1971 the National Union of Mineworkers had made a demand for a wage increase of 45 per cent, which was rejected. In December the union revised its rules, reducing the percentage required to vote for a strike to 55 per cent. Fifty-nine per cent voted that way, and on 9 January 1972 the first national miners’ strike for nearly fifty years began. The government considered that it had enough stocks of coal to weather the dispute. The problem lay in their distribution. Union picketing could prevent the movement of stocks from their depots and also the movement of oil to power stations. On 10 February a session of the Cabinet was interrupted by a message for Reginald Maudling, the Home Secretary, from the Chief Constable
of Birmingham. The message stated that he had asked for the closure of the Saltley coke depot because lorry drivers there were being prevented from entering the depot by the huge pickets. The 500 police deployed were not in a position to restrain the violent threats of the 10,000 or so pickets, who were led by the rising star of the hard left in the NUM, Arthur Scargill.
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Saltley was, remembered Heath, ‘the most vivid, direct and terrifying challenge to the rule of law that I could ever recall emerging from within our own country’,
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and it came at a time when the shortage of power, which had already put much of industry on a three-day week,
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threatened a total blackout. Mrs Thatcher later identified Saltley as the turning point for Heath: ‘Until Saltley, Ted gave a strong lead and made up his mind. Then he made up his mind the other way.’
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Heath’s response to Saltley – and probably by then he had little choice – was to find a way of giving in. He invited the judge Lord Wilberforce to conduct a hurried inquiry into the dispute. Wilberforce recommended a punishingly generous settlement of more than 20 per cent, but even this the miners rejected. Heath intervened in person, inviting the miners’ leaders to 10 Downing Street and negotiating with them into the small hours. In the end, they accepted the Wilberforce pay offer, but pocketed from Heath an additional improvement in their substantial fringe benefits, such as longer holidays, so extravagant as to be the equivalent of the extra wages they had sought.

Faced with this defeat, Heath concluded that there had, after all, to be an ‘industrial strategy’. On 21 March 1972 Barber presented a reflationary Budget to Parliament. The following day, John Davies unveiled his White Paper, called
Industry and Regional Development
, which contained mechanisms by which ministers could, in the phrase of the time, use public money to ‘back winners’ in industry, with a bias in favour of depressed regions. The new policy, not previously disclosed to the Cabinet, had been prepared mainly by Heath and William Armstrong, with Davies as little more than its spokesman, and the Treasury in the dark. When it became the Industry Bill in May, Tony Benn greeted it warmly from the Labour benches as ‘spadework for socialism’. In June, the pound was floated. Over the summer, Heath organized a series of tripartite meetings between government, the Confederation of British Industry (CBI) and the TUC to discuss the objectives of economic management. These discussions tried to
produce the basis for an agreed policy to control prices and wages. However, the TUC ultimately baulked at the wages part of the agreement, and after a weekend discussion at Chequers on 28–29 October Heath decided that the government would press ahead unilaterally with wage and price control. On 6 November he announced to the House of Commons that he would impose a ninety-day freeze on wages, prices, rents and dividends. This was framed as an emergency measure – and probably the government genuinely intended it as such – but the fact was that the government had broken decisively with the principles of a free economy with which it had entered office. There was no general revolt in the party, but, in a sign of their growing dissatisfaction with their leader, Tory backbenchers elected Edward Du Cann,
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a long-standing opponent of Heath, as chairman of the 1922 Committee
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that autumn. The holder of that position, which at that time commanded great prestige, was a counterbalance to the power of the Prime Minister. On the whole, the crisis measures were well received in the country, at first. But for the rest of Heath’s time in office the emergency deepened, and the distance from the intentions of 1970 grew.

In after years, critics of Mrs Thatcher attacked her for her acquiescence in changes which she later so decisively repudiated. She herself had a somewhat uneasy conscience in the matter. In her memoirs, she makes much of the fact that she was not present at the Cabinet meeting of 20 March 1972 which considered the Budget and Davies’s White Paper. However, at the meetings which she did attend, she launched no frontal assault on the new policy. ‘Should I have resigned?’ she wrote. ‘Perhaps so. But those of us who disliked what was happening had not yet either fully analysed the situation or worked out an alternative approach. Nor, realistically speaking, would my resignation have made a great deal of difference. I was not senior enough for it to be anything other than the littlest “local difficulty”.’
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In fact, there is no evidence that she even considered resigning. If she did, she kept it to herself.
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And, as she rather self-contradictingly points out in
the same paragraph, some of those who disliked what was happening
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analysed it. Notable among them were Enoch Powell, Nicholas Ridley,
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John Biffen
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and Jock Bruce-Gardyne.
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Partly because she was a woman in a man’s world, and partly because she was a busy minister, Mrs Thatcher was not a member of any gang of like-minded people who debated these matters. The discontented, including the four named above and John Nott
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and Cecil Parkinson,
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were part of the influential, free-market-oriented Economic Dining Club, which met once a month in one another’s houses when Parliament was sitting: Mrs Thatcher was not a member, and was not invited to join until after the general election of February 1974. Indeed, earlier suggestions that she should join were blocked by those who thought her presence would reduce the jollity of the all-male proceedings and force them to start serious discussions even before dinner had begun.
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Mrs Thatcher later alleged that she objected, in Cabinet, that the tripartite system of economic discussions was ‘anti-parliamentary’,
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but Cabinet records contain no evidence of this. Heath himself took some pleasure, in later years, in pointing out that Mrs Thatcher ‘didn’t argue a great deal in Cabinet’, and that, if she showed signs of ‘being difficult’, ‘once she’d heard three taps on the Cabinet table, then she knew [that the debate was over].’
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Other pro-Heath witnesses have also maintained that she voiced no dissent in his Cabinets.
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Some light on Mrs Thatcher’s attitude to her own political career at this time, and to the government of which she was a part, is shed by an airgram
from the US Embassy in London to the State Department. It was sent by the Ambassador, Walter Annenberg
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(much later one of her close American friends), on 25 June 1973, accompanying the memorandum of a conversation at lunch at the Connaught Hotel by Dirk Gleysteen of the Embassy staff.
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Mrs Thatcher, Annenberg wrote, has put in a performance which is ‘solid, respectable and unspectacular. She has not sought to introduce radical remedies to deal with Britain’s problems in education and science.’ ‘She is a strong supporter of Heath,’ he went on, and he poured cold water on the idea that she might become prime minister: ‘it is most doubtful that she could, or does, realistically expect to lead her party … A well-educated, intelligent and even sophisticated woman herself, Mrs Thatcher shares with others in her party a certain anti-intellectual bias.’

Gleysteen’s memo was more gossipy. His lunch the previous month had taken place the day after Anthony Barber had announced spending cuts from which education had been exempted. Mrs Thatcher told Gleysteen that she had persuaded colleagues not to cut education as planned: ‘When the chips were down, education policy would not win an election and it was therefore important not to let this area be vulnerable to negative attacks.’ Asked by Gleysteen what the next election would be about, she ‘unhesitatingly said: “Food prices and housing” ’, and viewed these in what Gleysteen described as an ‘ideological’ light: ‘She said she considered it a Tory duty to try to frame all government policy in such a fashion as to lessen the growing dependence of the citizen on the government.’