doubled in price, but how long would that last? A mixture of sophisticated energy policy and obsolete Marxism- Leninism was involved, and Scargill was determined to make life difficult for Margaret Thatcher and the ‘capitalists’. He had already helped destroy the Heath government. Marauding bands of striking miners had attacked the power stations, so as to keep them from getting coal. The lights had gone out, as the power stations failed, and Heath had been left blustering angrily into the nation’s television sets. The unions had then been invited to take responsibility for running affairs, after Heath had been overthrown. They had not proved to be any good there, either: running the country was not their job. But the lesson learned by Margaret Thatcher and her allies was a valuable one: do not act precipitately. In her first year she used ministers who talked, with every evidence of conviction, of finding common ground with the unions, and her keener supporters were disappointed. Civil servants made trouble in March 1981, refusing to pay pensions. The miners threatened to strike, in response to a plan to close twenty-three obsolete pits, with 13,000 jobs. Here, the Prime Minister gave way: it was not the moment to fight. An initial round with the miners was conceded, with a flexibility that surprised. But inflation, itself driving the miners and other unions, had to stop. She was dismissive as to three-cornered German solutions — suitable for regimented Germans, no doubt, but unworkable anywhere else. As with other matters German, she was right but for the wrong reasons: the institutions of the (untranslatable)
British institutions were dealing with a rubber currency, and proper planning was not possible. Besides, as costs rose, employers looked to machinery, new technology, to reduce them. There was such new machinery in printing. Newspapers could just take news from an agency, and dispense with many journalists; the money would come from advertising. Accordingly, the National Union of Journalists, then led by Denis MacShane, took a lead in stopping provincial newspapers; not just stopping, through strike pickets, their delivery, but also trying to stop, through ‘secondary picketing’, the functioning of the agencies. MacShane even won a court case, and the
Whatever the troubles of the first year, there was no doubt as to Margaret Thatcher’s determination to avoid ‘decline on the instalment plan’. It was true that target plans for the money supply (a 10 per cent increase, at most) were overshot. Unemployment had gone up by almost one million, and manufacturing output was in decline, as exports became dearer through the strong pound. It was an immensely difficult time. She was under attack, open and surreptitious, from men such as Chris Patten and other Heathites, and knew that she herself was irreplaceable: ‘If I give up, we will lose. If I give that up, I just think we will lose all that faith in the future… I hope that doesn’t sound too arrogant.’ Earlier, there had been breaches in her line — the inflation-upgrading of ‘benefits’ (?1bn) and an increase in defence estimates even though everyone knew, at the time, that defence could have been more prudently and more productively handled. Even John Hoskyns said that, if a U-turn were intended, it should be done quickly. In the winter, unemployment touched 3 million, and output fell by 6 per cent. But in January 1981, just as Alfred Sherman was losing influence (his own fault: he lectured at length on the private telephone line as to his own merits and deserts), Alan Walters joined the financial team (in 1975, like several others, he had gone to the USA, out of contempt for what was happening in England, where he had a post at the LSE). He and the Chancellor, Geoffrey Howe, had agreed on a measure of the money supply (M0, crude but reasonably accurate given the inflow of foreign money) and said the deficit must come down, from its ?11bn. This meant higher taxes, and of course at least a stop on further spending. Walters called this ‘the biggest fiscal squeeze of peacetime’ as ‘benefits’ were not index-linked whereas inflation stood at 21.9 per cent.
That was an outright challenge. At the time, there were 3 million unemployed, three times as many as in 1979, and the real figure, given some manipulation of the figures, was probably considerably higher. Up to 1982, manufacturing output had fallen by 15 per cent, the GDP by 5 per cent. Mrs Thatcher’s anchor figure, Whitelaw, did not think there would be an election victory: probably a ‘hung’ parliament, without any natural majority. Besides, as Hugo Young says of this period, ‘another count on which ministers were vulnerable was their detailed failure to achieve what they said they would achieve by the methods they said they would use’. Taxes had not been reduced, except for people earning more than twice the average, and the doubling of VAT had affected the poorest hardest. No-one really knew how to measure money: M3 had grown by 65 per cent from 1980 to 1984, as against the 24-44 per cent expected. No-one, as yet, had noticed that privatization would be this government’s real innovation. The only bright spot was the fall in inflation (from 21.9 per cent in May 1980 to 3.7 per cent by May 1983). At the turn of 1980-81 there were ugly scenes, and what even appeared to be race riots. Interest rates, because of the dollar’s movements, went up to 16 per cent. The economists were almost all in favour of spending. A new political party, set up by Labour grandees who had also been distressed at the turn of events, was winning in the polls, and at her own later party conference the level of grumbling was such that she had to acknowledge it in her speech, saying, ‘the lady is not for turning’. Some of the more obvious critics left the Cabinet (including Sir Christopher Soames, responsible for the civil service, who berated her for twenty minutes: ‘he was, in effect, being dismissed by his housemaid’). It was Margaret Thatcher herself who stiffened Howe’s faltering resolve: and when she saw Walters before the budget, as she was packing hats in the private flat at 10 Downing Street, she said, ‘You know, Alan, they may get rid of me for this. At least I shall have gone, knowing I did the right thing.’ In any case, she was sceptical, or even contemptuous, of the welfare system: ‘I asked myself how people could live in such circumstances without trying to clear up the mess and improve their surroundings. What was clearly lacking was a sense of pride and personal responsibility — something which the state can easily remove but almost never give back… television undermined common moral values… The results were a rise in crime (among young men) and illegitimacy (among young women).’ She simply thought, ‘Oh, these poor shop-keepers’ as she saw the mayhem on television. In her memoirs she rightly says of the 1981 budget, ‘I doubt that there has ever been a clearer test of two fundamentally different approaches to economic management.’ There was much anger when the budget appeared (Tory enemies heard of it only a few hours before). It was famously denounced by 364 academic economists, including the best- known names, in a letter to
Far from collapsing, as these academic economists warned, the economy began to move up, headed by the Stock Exchange, in spring 1981. As 1982 began, exports recovered, and retail sales rose. Investment returned, and property prices moved up again. At least the government’s determination to deal with inflation was not, now, doubted, and that had its own effect, for confidence returned. The very clever Nigel Lawson was now at Energy, with a brief to prepare for trouble with the miners. He had devised the Medium-Term Financial Strategy, which laid out plans for budgets and monetary growth in a credible way, a more sophisticated method of presenting monetarism. It was the start of the ‘Golden Eighties’, and any economist with a sense of history ought to have known that its verities were being reasserted. There were blocks — ‘rigidities’, they had once been called — to the proper exploitation of this in an England so strongly marked by the recent past. In America, Donald Regan was saying in public that Margaret Thatcher had failed for not being radical enough, but, as she replied, in England
