‘She certainly was aggressive,’ one member of that Cabinet confirms, but ‘I never felt that she was dominant… On all sorts of issues there was a pretty good ding-dong discussion…’ Yet more often than not she did dominate, not only because she was always thoroughly prepared, but because she had no hesitation in berating ministers in front of their colleagues if she thought they did not know their stuff. Moreover, as Jim Prior wrote, colleagues were given no time to develop an argument at length. ‘If a minister tended to be in the slightest bit longwinded, or if she did not agree with his views, Margaret would interrupt.’17 She was the same in smaller meetings, with both ministers and officials.was in fact a very good listener when she respected the expertise of the person she was talking to, and really wanted to hear what he had to tell her. To hold her attention, however, it was essential to make your point quickly and then stick to it. ‘Waffle was death,’ a senior mandarin recalled.18 Much of her irritation with Geoffrey Howe stemmed from the fact that he never learned to make his point quickly. She relished argument for its own sake, and would often take a contrary line just to provoke one. It was through argument that she clarified her own mind. ‘She would argue vigorously,’ the head of her policy unit, John Hoskyns, recalled, ‘to satisfy herself that the thinking she was being given was good.’19 Though she read all the papers, her staff quickly learned that she was never persuaded of anything on paper alone: she had to test the case in argument before she would accept it.20the same time she was extraordinarily difficult to argue with, because she would never admit to losing an argument, but would become ‘unbelievably discursive’ and illogical if the point was going against her, abruptly changing the subject in order to retain the upper hand.21 Alan Clark, recording a bout with the Prime Minister some years later, characteristically saw her illogicality as quintessentially feminine: ‘no rational sequence, associative lateral thinking, jumping rails the whole time’.Yet he concluded: ‘Her sheer energy and the speed with which she moves around the ring makes her a very difficult opponent.’22 She argued not merely to clear her mind, but to win.was possible to change her mind, but she would never admit to having been wrong. She would furiously resist an argument by every device at her disposal one day, only to produce it unblushingly the next day as her own, with no acknowledgement that she had shifted her ground or that her interlocutor might have had a point.23colleagues reckoned that this aggressive manner was both necessary, at least in the beginning, and effective. Lord Carrington suggests that it was the only way that Mrs Thatcher, as a woman, could have asserted her authority in the circumstances of 1979 – 81.24 John Hoskyns likewise believes that she had to be ‘impossible, difficult, emotional, in order to try to bulldoze… radical thinking through’ against those he termed ‘the defeatists’ in the Cabinet.25 Even Geoffrey Howe, the butt of so much of her worst bullying, told Patricia Murray in 1980 of the exhilaration of working with Mrs Thatcher in these early days:, yes she is dramatically exciting! She has an openness, a frankness, an enthusiasm and an unwillingness to be cowed… which makes her enormous fun to work with.You can never be quite sure on issues you have never discussed with her what her instinctive reaction will be, but it’s bound to be interesting… Even on the days when it isn’t fun, she thinks it is well worth having a try.26, however – particularly those colleagues less resilient than Howe and less robust than Prior – thought her method of government by combat counterproductive and inimical to sensible decision making. David Howell, a thoughtful politician who had naively imagined that the Cabinet would function as the forum for an exchange of ideas, was disillusioned to discover that, on the contrary, ‘certain slogans were… written in tablets of stone and used as the put-down at the end of every argument’. ‘In my experience,’ Howell concluded, ‘there is too much argument and not enough discussion.’27 Another member of the 1979 Cabinet thought it ‘an absurd way to run a Government’.28 To these critics, Mrs Thatcher’s inability to delegate and her insistence on interrogating her ministers about the smallest detail of their own departments reflected a deep-seated insecurity, not so much political as psychological: she had to be on top all the time, and keep demonstrating that she was on top. The schoolgirl had not only done her homework, but had to prove that she had done it. On this analysis her aggression was essentially defensive.negative results of this method were that she exhausted herself and did not get the best out of others. Though she liked to boast that she was never tired so long as there was work to be done – ‘it’s when you stop that you realise you might be rather tired’29 – and wrote in her memoirs that there was ‘an intensity about the job of Prime Minister which made sleep a luxury’, many of those who worked most closely with her insist that this was not true. Undoubtedly her stamina was remarkable. She could go for several days with four hours’ sleep a night, and rarely allowed herself more than five or six. But her staff could see that she was exhausted more often than she ever admitted: one sign was that she would talk more unstoppably than ever.30 Her refusal to acknowledge physical weakness was another way of asserting her dominance. Any minister unwise enough to admit that he needed sleep would find himself derided as a feeble male. Alternatively, she would express motherly concern; but this, George Walden noted, was another stratagem:she was saying when she commented on how terrible you looked was that you were a man and she was a woman, you were a junior and she was Prime Minister, and yet unlike you she was never tired.31the same way she would insist that other people must have their holidays while refusing to admit that she might need one herself. ‘I must govern,’ she told a member of her staff in the summer of 1979.32 Holidays, she frequently implied, were for wimps.33 But her inability to relax also conveyed the message that she did not trust anyone to deputise for her. She believed that if she stopped for a moment, or let slip her vigilance, the Civil Service would quickly resume its paralysing inertia, her feeble colleagues would backslide and her enemies would combine against her. By not trusting her ministers to run their own departments, however, Mrs Thatcher ultimately diminished them.from the very beginning Mrs Thatcher’s restless interference centralised the business of government, while by concentrating everything on herself she underused the talents of others. As she grew more dominant, colleagues and officials became increasingly reluctant to tell her things she did not want to hear. The free circulation of information and advice within Whitehall was constrained by the requirement to refer everything upwards to Number Ten; while by battering and badgering, second-guessing and overruling her colleagues she strained their loyalty – ultimately to breaking point.34 As early as March 1980 her devoted PPS, Ian Gow, was worried that ‘Margaret did treat colleagues badly and it would boomerang’.35Ted Heath’s exceptionally harmonious Cabinet half a dozen years before, which had kept its own counsel even when pursuing sensitive and controversial policies, Mrs Thatcher’s Cabinet was prone to leaks from the very beginning. The fact that more than half the Cabinet had serious doubts about the economic strategy to which they were committed was well known and widely reported. Mrs Thatcher blamed the so-called ‘wets’ for trying to subvert by hints and whispers policies they were unable to defeat in Cabinet. The truth was that both sides leaked; this was an inevitable consequence of a fundamentally divided Cabinet. The ‘wets’ confided their misgivings to journalists because they were denied any opportunity to influence policy from within; while for her part Mrs Thatcher, having been obliged to appoint a Cabinet most of whom she knew were out of sympathy with her objectives, felt justified in bypassing them and appealing, via the press, directly to the public, which she believed understood what she was trying to do. She was never a good team player, still less a good captain, because she never trusted her team. Even when she had replaced most of her original opponents with younger colleagues more loyal to her – whether from conviction or ambition – the habit of undermining them was too established to be abandoned. She was not loyal to them, she drove an unprecedented number of them to resign, and ultimately in November 1990 the collective loyalty of the survivors cracked.Number Tenwider field over which the new Prime Minister had quickly to assert her authority was Whitehall. From the moment she took office she became responsible for the entire government machine. Yet the British Prime Minister has no department of his or her own through which to coordinate this extensive bureaucracy, merely a small private office, based in Number Ten, Downing Street, composed of an anomalous mixture of career officials inherited from the outgoing government, whose job is to provide continuity; a handful of personal staff carried over from the very different world of opposition, more often than not with no experience of government; and a scrum of more or less informal political advisers. Nowhere else in the democratic world does the changeover of power from one government to the next take place so quickly. Some discreet preparations are made at official level for a possible transition; but Mrs Thatcher was always wary of taking anything for granted, so this critical central structure had to be put together over a single weekend, ready to start running the country on Monday morning.two key permanent officials who met her when she walked through the door were her principal private secretary, Kenneth Stowe, and the Cabinet Secretary, Sir John Hunt. Both were due to be replaced before the end of the year, but both played important roles in introducing Mrs Thatcher to her new responsibilities. Emollient and self-effacing, Stowe managed the transition from Callaghan to Mrs Thatcher with exemplary smoothness, but stayed in Number Ten for only six weeks – ‘six very intensive weeks’ as he recalled.36 His replacement, Clive Whitmore, came from the Ministry of Defence. Though ‘very much the machine man’, in the view of one internal critic,37 Whitmore was instinctively in sympathy with her political objectives and they quickly formed a close working relationship, which lasted for the next three years, after which she sent him back to the MoD as Permanent Secretary at the unusually young age of forty-seven.John Hunt had been Cabinet Secretary – in effect the Prime Minister’s Permanent Secretary – since 1973: Mrs Thatcher was thus his fourth Prime Minister in seven years. He remembered her as Education Secretary under Heath, when it had never occurred to him that she might one day be Prime Minister.38 Hunt’s style was brisk and businesslike: as a newcomer feeling her way, Mrs Thatcher found him a bit managing. When he retired at the end of 1979 she was happy to choose as his successor the more obliging, indeed positively Jeeves-like, Robert Armstrong, a classic Eton and Christ Church-educated mandarin who had long been tipped for the top job. His only handicap was that he had been Heath’s principal private secretary and was still close to his old chief. But he was the model of Civil Service impartiality and selfless professionalism; and the conservative side of Mrs Thatcher’s character respected those traditional qualities so long as they were employed to serve and not obstruct her. Though far from Thatcherite by inclination, Armstrong served her, rather like Willie Whitelaw, with absolute loyalty and discretion for the next seven years.private office was headed by her political secretary, Richard Ryder, and the somewhat shadowy figure of David Wolfson. But Mrs Thatcher’s personal support team also had a strong female component, particularly in the early years, largely because she made so little distinction between work and home. When she titled the first chapter of her memoirs ‘Over the Shop’ and wrote that living in Number Ten was like going back to her girlhood in Grantham, it was not just a literary flourish, but described exactly how she lived. During her working day she was always popping upstairs to the flat at the top of the building to eat or change or work on a speech before coming down again for a Cabinet committee or to meet a foreign leader: smaller meetings with colleagues and advisers were often held in the flat. Denis, if he was around, sometimes sat in on these informal meetings: late at night it was frequently he who ended them by telling Margaret firmly that it was time for bed. Because she was ‘always on the job’ – as she once told a delighted television audience39 – she made no effort to protect her private space from the intrusion of work. Far more than with a male Prime Minister – who might wear the same suit all day and have his hair cut once a month – her clothes, her hair, her make-up were all essential props of her public performance, needing frequent, but very rapid, attention throughout the day.Thus her personal staff was much more mingled with her professional staff than was the case with Jim Callaghan or Ted Heath; secretaries might be pressed into cooking scratch meals at any hour of the day or night.[b] Though Mrs Thatcher made no secret that she enjoyed being surrounded by subservient men, and in eleven years appointed only one other woman – briefly – to her Cabinet, there was always a distinctly feminine flavour in her immediate entourage.Thatcher was justifiably proud of having created a happy family atmosphere inside Number Ten. However roughly she may have treated her colleagues and advisers, she was always immensely considerate towards her personal staff and towards all those – drivers, telephonists and the like – who kept the wheels of government turning. When her driver died suddenly in March 1980, she insisted, at the end of a very busy week, on attending the funeral in south London and comforting his widow.41 Likewise, when Bernard Ingham’s wife was involved in an accident in the middle of the Falklands war, she insisted that he must go and look after her: she told him firmly that she did not expect to see him back at work for several days.42, there is the joyfully repeated story of a lunch at Chequers when one of the service personnel waiting at table spilled a plate of hot soup in Geoffrey Howe’s lap. The Prime Minister immediately leapt up, full of concern, not for her Foreign Secretary but for the girl. ‘There, there,’ she comforted her. ‘It’s the sort of thing that could happen to anyone.’ The contrast between the way Mrs Thatcher fussed over her staff and the cavalier way she treated her colleagues – particularly Howe – was perfectly emblematic. With the benefit of hindsight, Ronnie Millar wondered whether she was ‘altogether wise to treat Sir Geoffrey any old how’.43Ingham became the Prime Minister’s chief press secretary towards the end of 1979.A pugnacious former Labour supporter, he quickly transferred his loyalty to his new mistress and became one of her most devoted servants. His robust and highly personalised briefings strained Civil Service neutrality to the limit, but Mrs Thatcher trusted him absolutely and he remained at the heart of her entourage until the end.key figure in her first administration was her Parliamentary Private Secretary, Ian Gow. MP for Eastbourne since February 1974, Gow was a balding, tweedy solicitor who cultivated a self-consciously old fogeyish manner, though only in his early forties. He had scarcely met Mrs Thatcher before May 1979, and was astonished to be invited to become her PPS; but he too immediately fell under her spell. ‘Ian loved her,’ Alan Clark wrote after Gow’s murder in 1990, ‘actually loved, I mean, in every sense but the physical.’44 He escorted her everywhere, protected her in public and helped her unwind in private with late night whisky and gossip. At the same time he was the most sensitive link with the back benches that any Prime Minister ever had. ‘Known affectionately as “Supergrass”,’ according to Ronald Millar, ‘he had a knack of reporting back to the lady everything she needed to know about the gossip of the bazaars without ever betraying a confidence, a rare feat in the political world.’45 He was also an old friend of Geoffrey Howe, which helped lubricate the key relationship at the heart of the Government, one that later turned disastrously sour. Gow played a crucial part in Mrs Thatcher’s political survival in the dark days of 1981 – 2 when her premiership hung in the balance. She felt bound to reward him with a ministerial job in 1983; but thereafter she never found a successor with the same qualities. As a result her relationship with her backbenchers steadily deteriorated. Gow was unique and irreplaceable.there was Denis. It was the presence of the Prime Minister’s husband, coming and going as he liked amid the press of government business, frantic speechwriting and impromptu meals, that gave Mrs Thatcher’s Downing Street much of its special flavour. Denis had officially retired from Burmah Oil in 1975, but he still had a string of non-executive directorships as well as his drinking chums and his golfing companions. He lived his own life, as he and Margaret had always done; but he was continually in and out, and when he was there he often sat in on meetings contributing his views without restraint. On business matters where he had real expertise – for instance on British Leyland – Margaret listened seriously to what he had to say. (She once said that she did not need briefing on the oil industry because ‘I sleep with the oil industry every night.’)46 On other subjects he served to keep her, and her staff, in touch with what the man in the golf-club bar was thinking.Denis would go to bed long before Margaret, leaving her working. But he was also very protective and she deferred to him. There are numerous stories of Denis breaking up late night speechwriting sessions by insisting in his inimitable way that it was time she went to bed (‘Woman, bed’); or reminding her, ‘Honestly, love, we’re not trying to write the Old Testament.’47 At least at a superficial level he never lost the masculine authority which a husband of his class and generation expected to assert over his wife.[c] His interventions often came as a relief to her hard-pressed staff. Willie Whitelaw was another who frequently found that a quiet word with Denis was the way to get through to her when all else failed.fact, living and working above the shop, with neither of them commuting any more, the Thatchers were closer in Downing Street than at any previous time in their marriage. They were both excellent hosts, and Denis was infinitely skilful at supporting and protecting Margaret, talking to those she could not or did not want to speak to and deflecting people who tried to monopolise her. He accompanied her on the most important of her overseas trips, and developed his role as the Prime Minister’s consort with extraordinary tact and skill. He stuck firmly to his policy of never giving interviews and the press – particularly the travelling press accompanying the Prime Minister to international summits, who had ample opportunity to witness him sounding off over several stiff drinks on long flights home – respected his privacy by never quoting him. ‘He was off limits, out of bounds,’ Bernard Ingham wrote. ‘Everybody loves him because he is straight and decent and loyal.’48,49Thatcher has always paid extravagant tribute to Denis’s part in her career. In the early days his contribution was frankly more material than emotional: his money gave her the financial security to pursue her legal and political career. They lived very separate lives, which suited her admirably. But theirs was a rare marriage, which grew deeper the longer it went on: being the Prime Minister’s husband gave him the best retirement job imaginable. He had no defined functions, but he played an important humanising role and was always on hand when required, helping to calm her when she was upset or buck her up when she was depressed. At the end of the day, she told the 1980 party conference, ‘there is just Denis and me, and I could not do without him’.50 Many of her closest advisers felt that the one thing that might have induced her to resign before 1990 would have been Denis becoming seriously ill.Prime Minister and WhitehallThatcher hit Whitehall, in Peter Hennessy’s words, ‘with the force of a tornado’.51 While many officials had welcomed the prospect of a dynamic government which knew its own mind, and enjoyed a secure parliamentary majority, after years of drift and hand-to-mouth expediency under Labour, they were not prepared for the degree of positive hostility which the new Prime Minister exuded, and encouraged her ministers to express, towards the Civil Service as an institution. Both from her personal experience of the Department of Education and the Ministry of Pensions, and as a matter of political principle, she came into office convinced that the Civil Service bore much of the blame for Britain’s decline over the past thirty-five years: that civil servants as a breed, with some individual exceptions, were not the solution to the nation’s ills but a large part of the problem. She considered the public service essentially parasitic, a drag upon national enterprise and wealth creation: too large, too bureaucratic, self-serving, self-satisfied and self-protective, corporatist by instinct, simultaneously complacent and defeatist. She was determined to cut the bureaucracy down to size, both metaphorically and literally. Word quickly spread through Whitehall that Mrs Thatcher’s purpose was to ‘deprivilege’ the Civil Service., the Civil Service was the softest target for the new government’s promised economies in public spending. An immediate freeze was placed on new recruitment and pay levels were held down. The resentment that resulted led to an unprecedented strike which in 1981 closed down regional offices, delayed the collection of tax revenues and altogether cost the Government around £500 million before it was settled. All those directly involved would have liked to compromise earlier; but Mrs Thatcher was determined to make a demonstration of the Government’s resolve to control public spending and believed that cutting its own pay bill was the best possible place to start., she set up an Efficiency Unit in Number Ten, headed by Sir Derek Rayner, to scrutinise the working of every department, looking for economies. By the end of 1982 ‘Rayner’s Raiders’, as they were known, had carried out 130 of these departmental scrutinies, saving £170 million a year and ‘losing’ 16,000 jobs. In the first four years of the Thatcher Government Civil Service numbers were cut by 14 per cent; over the following six years, as the privatisation of nationalised industries removed whole areas of economic activity and administration from the public sector, that figure climbed to 23 per cent, while salaries relative to the private sector fell still further.52 At the same time the core function of the service was shifted inexorably from policy advice to management: the efficient implementation of policy and the delivery of services. Senior officials who preferred writing elegantly argued memos increasingly found their time taken up by targets, performance indicators and all the other paraphernalia of modern business methods.new Prime Minister imposed her will not by structural reform or sacking people but by sheer force of personality: by showing the Whitehall village who was boss. One way of doing this was by constant requests for figures or information at short notice: even quite junior officials felt the presence of the Prime Minister continually prodding and pressing their minister for results, never letting an issue go but demanding ‘follow-through’.53 Another way was by personally visiting every department in turn, something no previous Prime Minister had ever done, confronting civil servants on their own territory, questioning their attitudes and challenging their assumptions. This alarming innovation dramatically signalled Mrs Thatcher’s determination to make her presence felt; at the same time it reflected her awareness of her inexperience of departments other than the Department of Education and Science (DES) and her genuine desire to learn. In fact these visits had two distinct aspects. On the one hand she was marvellous – as she had been at the DES – at going round talking to the junior staff, taking an interest in their work, thanking and encouraging them: something which most ministers do far too little beyond the immediate circle of their private office. Her encounters with their superiors, on the other hand, were often bruising: she lectured more than she listened, and the exercise tended to confirm rather than modify her preconceptions.the next decade it was often alleged that she ‘politicised’ Whitehall by appointing only committed Thatcherites to senior positions. But she was not so crude as that. Mrs Thatcher certainly took a close interest in appointments and intervened more directly than previous Prime Ministers in filling vacancies, not just at Permanent Secretary level but further down the official ladder. She undoubtedly advanced the careers of her favourites, sometimes those who had caught her eye with a single well-judged briefing; conversely she sidetracked or held back those who failed to impress her. Thus the longer she stayed in office, the more she was able to mould the Civil Service to her liking. By 1986 the entire upper echelons of Whitehall were filled by her appointees.was nothing wrong in principle with this approach: quite the contrary. It was natural for a radical Prime Minister to want activist officials who would help, not hinder or obstruct. Most of the more unconventional choices Mrs Thatcher made were excellent appointments, fully merited. But questions did arise about her judgement, particularly lower down the scale: her instant estimates of people were not always accurate or fair. Officials often felt that she made up her mind about individuals on first impression and then never changed it. She did not always appreciate that it was sometimes the civil servant’s job to raise objections. In her memoirs Lady Thatcher boasted: ‘I was never accused of thinking like a civil servant. They had to think like me.’54 But equally it was not the official’s job to think like a politician. It was only in this sense, however, that she could be accused of ‘politicising’ the service. Even after ten years, Peter Hennessy wrote, ‘the Prime Minister… would… find it hard to muster a true believer from the top three grades of the Civil Service’.55 Really what she did over the next eleven years was to personalise it. Nevertheless there is no doubt that the effect was seriously to demoralise it.
of Intenteconomynew Parliament met on Wednesday 9 May to re-elect the Speaker. But the House did not meet again for serious business until the State Opening the following Tuesday, with the formal unveiling of the Government’s legislative programme in the Queen’s Speech. It comprised a curiously modest assortment of Bills, since the radical thrust of the Government’s agenda was not primarily legislative. There was – there had to be, after the events of the previous winter – a measure of trade-union reform. There was legislation to oblige local authorities to sell council houses and slow the advance of comprehensive schools. In addition the Government announced tighter immigration controls, the deregulation of intercity coach services and the establishment of a second commercial television channel.usual, however, Mrs Thatcher’s language implied a good deal more than the Gracious Speech promised. Contradicting Callaghan, who complacently predicted that the period of Tory rule would be ‘a brief interruption’ before Labour resumed its forward march, and the Liberal leader David Steel, who reminded her that she had won the lowest share of the poll of any post-war Conservative Government, Mrs Thatcher hailed her victory as ‘a watershed election’ which marked a decisive rejection of ‘the all-powerful corporatist state’. In its place she promised to restore incentives and individual choice, particularly in housing, health and education. Where once she had been sceptical about selling council houses, she now saw the right to buy as one of those things ‘so fundamental that they must apply to all citizens regardless of the local authority area in which they live’. The Government was taking power to force reluctant Labour authorities to sell their housing stock because ‘we believe that the right to buy council houses should belong to everyone’. She also warned that ‘there is no such thing as a free service in the Health Service’., she dealt with the trade-union question under the heading of law and order. Yet she was careful – as she had been during the election – not to be provocative. She still went out of her way to stress that ‘a strong and responsible trade union movement must play a large part in our economic recovery.’1 Perhaps fearing that she had been too conciliatory, however, she emphasised her personal commitment to action on union reform. ‘I am not known for my purposes or policies being unclear,’ she assured a backbench questioner. ‘I believe that my policies on this are known.’ She believed that they were ‘overwhelmingly supported by the vast majority of people in this country, who believe that a law must be introduced to deal with certain aspects of the closed shop, picketing and the postal ballot’.2 To the disappointment of the Tory right, however, Jim Prior’s Employment Bill, when it was eventually published at the end of the year, turned out to be a very cautious measure. While she hinted at her sympathy for the hardliners behind Prior’s back, Mrs Thatcher had no wish to plunge into battle with the unions before she was ready. All the Government’s initial energy was concentrated on setting a new course for the economy. Howe’s first budget was fixed for the earliest possible date, 12 June, just five weeks after the election.first objective was quite clear. The Prime Minister and her inner group of economic ministers were determined to mount an immediate assault on public spending. But this was a goal easier to proclaim in opposition than to realise in government. On taking office, ministers found their room for major economies seriously constrained – partly by inescapable external factors, but also by their own political choices. On the one hand the value of sterling, already high due to the recent tripling of the price of oil (since sterling was now a petrocurrency), was boosted further by the weakness of the dollar and the markets’ satisfaction at the Government’s election. The high pound sharply increased the cost of British exports, creating unemployment, which swelled the social security budget while reducing revenue. But at the same time ministers had tied their own hands by commitments they had made during the election.opposition the Iron Lady had lived up to her reputation by supporting NATO’s request for an extra 3 per cent annual spending on defence. Once in office, Howe tried to row back from this pledge, but Mrs Thatcher was immovable: in her book, strong defence took precedence over everything else, even cutting public spending. Likewise she had promised substantial pay rises to the armed forces and the police; and the Tory manifesto also committed the new Government to increase old-age pensions. Finally Patrick Jenkin as Shadow Health Secretary had bounced Howe into promising that spending on the NHS would be protected for at least three years. All these undertakings left very little scope for the sort of big savings the Prime Minister and Chancellor were looking for. As Mrs Thatcher wrote in her memoirs: ‘We seemed to be boxed in.’3fact, Howe squeezed £1.5 billion from a variety of soft targets. Civil Service recruitment was frozen and tough limits imposed on local government spending. Prescription charges were raised for the first time in eight years, foreshadowing virtually annual increases for the next decade. Cuts were announced in the provision of school meals and rural school transport. Most significantly, though the basic old-age pension was increased in the short term, the long-term link between pensions and average earnings was broken – a major saving in the future. Another projected £1 billion was saved by imposing cash limits on departmental budgets; and a further billion by selling shares in public-sector assets, following the lead already set by Labour and condemned by the Conservatives in opposition. This saving of £3.5 billion announced in the June budget was quickly followed by a further £680 million package in October, made up of more Civil Service cuts and steep rises in gas and electricity prices.economies were designed to make room for dramatic tax cuts. In the end Howe was able to cut the standard rate of income tax by three pence in the pound, from 33 to 30 per cent, and reduce the top rate from Labour’s penal 83 per cent to a more moderate 60 per cent. This was a bold early signal of the new Government’s intentions. But it was made possible only by virtually doubling Value Added Tax (VAT). It had always been part of the Tories’ strategy to switch a greater proportion of the burden from direct to indirect taxation. But during the election Howe specifically denied that he planned to double VAT. In the event he could not finance the income-tax cuts he was determined on in any other way. Mrs Thatcher was very worried by the drastic impact that such a steep hike would have on prices. With inflation already rising, she had reason to be worried: however long planned, it was the worst possible moment for such a switch. In his memoirs Howe wryly noted ‘the ambivalence which Margaret often showed when the time came to move from the level of high principle and evangelism to practical politics’.4 Nigel Lawson wrote more bluntly that she was ‘fearful’ of the political fallout, ‘but Geoffrey persuaded her that if we did not grasp this nettle in the first budget it would never be grasped at all’.5 For her part Lady Thatcher acknowledged that ‘Geoffrey stuck to his guns’ and overcame her doubts.6 But this – the first really unpopular decision the Government had to take, within three weeks of taking office – was not the last time that a cautious Prime Minister had to be hauled over the hurdle by her more resolute colleagues.instance was the abolition of exchange controls. This was arguably the single most important step the Thatcher Government took to give practical effect to its belief in free markets: by doing away with the restrictions on the movement of capital which had been in place since 1939, the Government dared to expose the British economy to the judgement of the global market. It was an act of faith which might have resulted in a catastrophic run on sterling. In the event it had the opposite effect: the markets were impressed by the new Government’s show of confidence and the pound, already strong, dipped only momentarily and then went on rising. Howe later wrote that the abolition of controls was ‘the only economic decision of my life that ever caused me to lose a night’s sleep. But it was right.’7the long run it undoubtedly was; and it was brave to take the decision in the first few months in office. But in the short run it played havoc with the Government’s monetary policy. Controlling the money supply was supposed to be the linchpin of the Government’s new monetarist approach. The trouble was that Labour had already been controlling it very effectively before the election. Denis Healey and the Permanent Secretary of the Treasury, Douglas Wass, were not ideological monetarists like Joseph, Howe and Lawson, who had embraced monetarism with quasi-religious certainty: they were ‘reluctant monetarists’ who had pragmatically concluded – at the prompting of the International Monetary Fund (IMF) – that tight monetary targets were a necessary part of economic policy. But in practice monetary policy did not change in May 1979 so dramatically as either Labour or the Government liked to pretend. When Healey denounced Tory policies it sometimes suited Mrs Thatcher to remind the House that ‘the previous Labour Chancellor was more of a monetarist than he now cares to admit’.8’s first budget was a bold statement of intent, taking a huge gamble on early tax cuts at the risk of inflation. It was taken for granted that, though the Chancellor held up the dispatch box outside Number Eleven, the political will had come from Number Ten. ‘Either she succeeds,’ the Daily Mirror commented, ‘or we go bust.’9 Mrs Thatcher was widely reported to have insisted on a bigger tax cut than the expenditure savings warranted and on a steeper rise in VAT than her Chancellor had wanted. The reality was in fact quite the opposite.impact of Howe’s June budget was as damaging as its critics predicted. The virtual doubling of VAT and the cutting of subsidy to the nationalised industries, along with the ending of pay and dividend controls and John Nott’s swift abolition of the Price Commission, added 6 per cent to the Retail Price Index almost overnight, leading inevitably to large compensating pay claims, while the income-tax cuts boosted consumption and further fuelled inflation that way. For a Government that had come into office proclaiming the conquest of inflation as its first priority, this was a perverse beginning. Inflation actually doubled from 10.3 to 21.9 per cent in the first year. As industry laid off workers under the impact of the high pound, benefit payments had to keep pace with inflation, while Government revenue fell.against these rising commitments, Howe’s two packages of spending cuts were insufficient to dent the inexorable rise in Government borrowing. The Government’s only other means of curbing the growth of money was raising interest rates. Howe had already raised the minimum lending rate (MLR) from 12 to 14 per cent in June. He warned that it would not fall until the money supply and public-sector borrowing were under control; but this only caused more money to flow into London. Instead of falling, £M3 – which measures the amount of money in circulation, including bank deposits – actually rose by 14 per cent in four months between June and October. In November Howe was obliged to hike the lending rate another three points to 17 per cent – an unprecedented rise to an unprecedented level. Thinking more of the effect on mortgages than of the cost to industry, Mrs Thatcher hated having to do this. ‘It bothered me enormously,’ she told Patricia Murray. ‘It really was devastating.’10 But monetarism prescribed no other remedy, so she bit the bullet. ‘We would not print money,’ she insisted at Prime Minister’s Questions; therefore ‘it was necessary to raise interest rates to conquer inflation’.11 Thus the Government got the worst of both worlds: its first actions were simultaneously too much and too little, painful enough to raise howls of fury from industry, unions, homeowners, educationists and others, yet ineffective in cutting spending and positively counterproductive with regard to inflation. Mrs Thatcher and her economic team had come into office with a doctrinaire prescription which they proceeded to apply, undeterred by the most unfavourable economic circumstances. After a few months of rising unemployment, rising inflation and record interest rates, the Government’s monetarist experiment was already widely dismissed as a dogmatic folly., however, was where the composition of the Cabinet prevented any loss of purpose. The central quintet of Mrs Thatcher, Howe, Joseph, Nott and Biffen was firmly in control of economic policy. Sceptics like Prior, Ian Gilmour, Peter Walker and Michael Heseltine first learned of the abolition of exchange controls when they read it in the newspapers.12 While individual ministers fought more or less successfully to defend their own budgets, it was too soon for any concerted rebellion. The most unflinching doctrinaire was Geoffrey Howe. It is clear from the memoirs of both Howe and Lawson, and the recollections of Nott and Biffen, that if any one of the central directorate faltered in the early days it was the Prime Minister herself. Not that her sense of purpose faltered. Relentlessly every Tuesday and Thursday in the House of Commons and in radio and television interviews she reiterated the simple message that the country must learn to live within its means, that public expenditure must be cut to a level the wealth-producing taxpayer could support, that the Government must tax and spend less of the national income.13 Publicly she never weakened; but she was always vividly conscious of the political risks. It was the Chancellor, intellectually stiffened by Lawson, who stubbornly put his head down and got on with what he was determined must be done. The Prime Minister’s function, quite properly, was to be the last to be persuaded that each course of action – doubling VAT, abolishing exchange controls, scrapping the Price Commission or raising interest rates – was both necessary and politically practicable. In her memoirs, despite their later differences, she paid due tribute to Howe’s tenacity: ‘In my view these were his best political years.’14 In truth she could not have done without him. Though their relationship deteriorated later, for these first two or three years of the Thatcher Government they made a formidable combination, perhaps the most successful Prime Minister – Chancellor partnership of the twentieth century.steps in foreign policywas really after Howe moved to the Foreign Office in June 1983 that their relationship deteriorated. By that time – after the Falklands war and with the assurance of a second term in front of her – Mrs Thatcher’s self-confidence in foreign affairs had grown and she was ready to be her own Foreign Secretary. In 1979, by contrast, she was conscious of her relative lack of experience and was content to leave foreign policy largely to Lord Carrington. This was a surprising abdication, since one of her prime ambitions was to restore Britain’s ‘greatness’ in the eyes of the world. Like Churchill she had a clear view of Britain’s place as America’s foremost ally in the global battle against Communism, and she regarded the Foreign Office as a nest of appeasers. For her first sixteen years after entering Parliament in 1959 her energies had been almost exclusively diverted to domestic responsibilities: pensions, energy, transport and education. On becoming Leader of the Opposition in 1975, however, she had quickly made up this deficit, marking her arrival on the world stage by launching a series of uncompromising verbal assaults on the Soviet Union. For four years she had avoided appointing a shadow Foreign Secretary with the authority to make the portfolio his own, but travelled tirelessly in parliamentary recesses to educate herself and meet the leaders she hoped to have to deal with in office.elected, however, she recognised that she could not do everything. Her priority was the economy. Moreover, she believed that restoring British influence abroad depended essentially on restoring the economy at home. ‘A nation in debt,’ she told the House soon after becoming party leader, ‘has no self-respect and precious little influence.’15 For all these reasons she told her aides that she did not intend to waste her time on ‘all this international stuff’.16 In appointing Peter Carrington as her first Foreign Secretary, with Ian Gilmour his deputy in the Commons, she made a tacit concordat to leave the detail of foreign policy to them, while Carrington in return suppressed his doubts about her economic policy.fact, she soon found that there was a crowded calendar of international meetings which she was bound to attend: European councils, G7 summits (attended by the leaders of the seven leading industrial nations) and Commonwealth conferences. That first summer there was one of each, respectively in Strasbourg, Tokyo and Lusaka. She confessed to Patricia Murray in 1980 that she had been ‘surprised at the amount of time we actually have to spend on foreign affairs.The amount of summitry we have now is terrific.’17 At first she was nervous – though she was careful not to show it. Conscious of her inexperience, she felt patronised by senior European leaders like the West German Chancellor Helmut Schmidt and the French President Valéry Giscard d’Estaing, who treated her with patrician disdain which stopped barely short of outright rudeness. She did her homework more anxiously than ever, only to find that they were much less well briefed than she was. Her self-confidence visibly increased as she discovered that with the Rolls-Royce machine of the despised Foreign Office behind her, she was more than a match for any of them.18chance one of her first meetings was with the Soviet leadership. The Soviet Union was one major country she had not visited in opposition, preferring to denounce the Communist menace from the safety of Kensington Town Hall. But on her way to the Tokyo summit at the end of June her plane made a refuelling stop in Moscow. To her surprise Prime Minister Kosygin, with half the Politburo, came out for an unscheduled dinner in the airport lounge. They were reported to be ‘very curious’ to meet the famous ‘Iron Lady’ who wore their intended insult as a badge of pride. ‘They were absolutely mesmerised by her,’ Lord Carrington recalled, ‘because… she was very direct with them.’19 She questioned them specifically on the plight of the Vietnamese ‘boat people’ – refugees from Communist persecution who had taken to the sea in a perilous effort to reach Hong Kong – and was unimpressed by their answers. This brief stopover confirmed her contempt for the moral and intellectual bankruptcy of the Soviet system, without in the least diminishing her perception of the challenge it posed to the West., as Carrington recalled, ‘distrust of the FO… was never far from the surface, and could erupt in impatient hostility unless ably countered’.20 Ably countered it usually was: this was Carrington’s great skill. Certainly they had their rows. But better than anyone else in her first Cabinet he knew how to handle the Prime Minister. For all her belief in meritocracy, Mrs Thatcher had a curious weakness for a genuine toff; and the sixth Baron Carrington was the real thing. Though a close colleague of Ted Heath who personified many of the attitudes of the Establishment she most despised, Carrington’s hereditary peerage gave him a special immunity: unlike the other Heathites in the Cabinet he posed no threat to her leadership. At the nadir of her popularity in 1981 there was actually a flurry of speculation that he might renounce his peerage to challenge her; but Carrington firmly quashed the idea.21 He was delighted to get the Foreign Office and had no greater ambition. Moreover, he was effortlessly charming, undeferential and irreverent: he made her laugh. Sometimes when she was inclined to lecture visiting foreign leaders without drawing breath, he would pass her a note saying, ‘He’s come 500 miles, let him say something.’ Once, with the Chinese leader, Chairman Hua, the situation was reversed: it was Mrs Thatcher who could not get a word in as Hua talked non-stop for fifty minutes. So Carrington passed her a note saying, ‘You are speaking too much, as usual.’ ‘Luckily,’ he recalled, ‘she had a handkerchief – she held it in front of her face and didn’t laugh too much.’22 The episode became part of Foreign Office mythology; but none of her subsequent Foreign Secretaries would have dared to tease her in this way.her general intentions, there was one central area of foreign policy where Mrs Thatcher was always going to take the lead. She came into office determined to restore Britain’s credentials as America’s most reliable ally in the war against Soviet expansionism. That central ideological struggle was the global reflection of her mission to turn back socialism at home. Although in practice she was quickly drawn into two major foreign-policy questions in other spheres – the acrimonious quarrel over Britain’s contribution to the European Community budget and the long-running saga of Rhodesia – these were to her mind subordinate sideshows to the over-arching imperative of the Cold War. Accordingly she was keen to visit Washington as soon as possible to forge a special relationship with President Jimmy Carter.Thatcher’s premiership overlapped so closely with the presidency of her Republican soulmate Ronald Reagan that it is easily forgotten that Reagan was not elected President until November 1980. For her first twenty months in Downing Street Mrs Thatcher had to deal with his very different Democratic predecessor. She had first met Jimmy Carter when visiting Washington in 1977 and again at the G7 summit in Tokyo in June, when Carter was not altogether impressed. ‘A tough lady’, he wrote in his diary, ‘highly opinionated, strong willed, cannot admit that she doesn’t know something.’23 After this encounter the State Department put Mrs Thatcher off until December. Before she left Carrington privately ‘doubted whether Mrs Thatcher would become great buddies with President Carter’.24 In fact, they got on better than he expected. As she later wrote, ‘it was impossible not to like Jimmy Carter’. He was a more serious man than his rather folksy manner suggested – ‘a deeply committed Christian and a man of obvious sincerity’, with a scientific background like her own. Though in retrospect she was scathing about his ‘poor handle on economics’ and what she saw as weakness in the face of Soviet expansionism, he was the leader of the free world and she was determined to get on with him.25arrived in Washington six weeks after the seizure of fifty American diplomats in Teheran. It was a measure of her early uncertainty that she initially intended to say nothing about the prolonged hostage crisis, feeling that to do so would be to intrude on a private American agony. Carrington and Frank Cooper (Permanent Secretary at the Ministry of Defence) had to tell her that the Americans were interested in nothing else at that moment: she must give them unequivocal support. She agreed only reluctantly (‘Margaret, you have got to say yes. You have got to,’ Carrington urged her). But then, once persuaded, she came out with a ‘clarion call’ on the White House lawn which instantly confirmed the impact she had made on her first visit to Washington as leader in 1975:times like these you are entitled to look to your friends for support. We are your friends, we do support you. And we shall support you. Let there be no doubt about that.26
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