The Iron Lady

the temptation to meddle in the citizens’ lives’ was soon forgotten. The drive to reform every corner of British society was taken up by a new generation of ambitious younger ministers – many of them originally Heathites, now keen to make up for lost time by jumping on the Thatcher bandwagon, believing they could get away with anything, with no cautionary elders like Whitelaw and Hailsham left in the Cabinet to restrain them. Meanwhile, the economic miracle which was supposed to make all things possible was turning sour.

Thus Mrs Thatcher’s third term was a saga of boastful talk and loudly proclaimed radicalism, but also a lot of misdirected energy due to a fundamental contradiction at the heart of the Government’s purpose and a crippling lack of trust and sympathy between an increasingly irrational Prime Minister and her closest colleagues, which eventually resulted in her brutal deposition.

The new Cabinet

The old division of the Cabinet into ‘wets’ and ‘dries’ had long since been superseded. Of the original wets, only Whitelaw and Walker now survived. From 1981, with the accession of Lawson, Tebbit, Parkinson and Ridley to senior positions, Mrs Thatcher had begun to forge a Cabinet much more in her own mould than the one she had been obliged to form in 1979. By 1987, however, with the departure of Tebbit, Brittan and Biffen, the balance was tilting against her again. The critical mass of the new Cabinet was made up of up-and-coming pragmatists from the centre-left of the party – Hurd, Baker, Clarke, MacGregor, Fowler, King, Rifkind and Major – who had come into politics under Heath.They had absorbed the lessons Keith Joseph and Mrs Thatcher had taught, but they were by no means natural Thatcherites. Of course the Cabinet as a body counted for very little in the determination of policy. Most of its members would continue to support her so long as she was riding high. But its changing composition should have been another warning that it would not automatically back her when the going got rough.

In addition, after only seven months she lost Willie Whitelaw, who was taken ill at a carol service in December and resigned in January 1988. Many see this as a critical turning point. It was during a late-night speechwriting session with her wordsmiths at Blackpool that Mrs Thatcher famously remarked that ‘Every Prime Minister should have a Willie’. When she realised what she had said she swore them all to secrecy; but the story inevitably got out.⁵ The unconscious double entendre drew a lot of ribaldry, but her point was absolutely true: every Prime Minister does need a Willie, though few are lucky enough to have one. Whitelaw was not only rigidly loyal himself, but he had the authority to impose loyalty on others. For eight and a half years his reassuring and defusing presence was hugely important to the survival and success of Mrs Thatcher’s governments. His departure left the Government without its sheet anchor in the increasingly heavy seas of the next three years.

‘What’s to stop us?’

The Government made a much more purposeful start to its third term than it had done to its second. Following her usual very brief holiday in Cornwall – interrupted on 19 August by a horrific incident in the quiet Wiltshire town of Hungerford when a single gunman ran amok, killing sixteen people – she used the latter part of the recess to demonstrate that she did care about the forgotten parts of Britain which she had seemed wilfully to ignore in the election. She visited several run-down inner cities – Glasgow, Cleveland and Wolverhampton – touring carefully selected scenes of urban decay to preach her message that enterprise, not Government subsidy, would create the jobs to bring regeneration. A photo-call in Cleveland resulted in a famous picture of the Prime Minister, with her handbag, marching determinedly into a wasteland which had once been a steelworks. When a journalist asked where the money would come from to revive such areas, she demanded that he tell her.⁶ She saw the solution less in terms of money than in the anticipated impact of the three Bills already announced – Ridley’s new forms of tenancy, Baker’s education reforms and the community charge, all designed to weaken the grip of Labour councils which she saw as the cause, not a reflection, of urban deprivation. ‘Where one finds poverty in the inner cities,’ she had declared back in 1979, ‘there one finds that Socialist government has operated for many years.’⁷

So far as physical regeneration was concerned her model was the redevelopment of London’s docklands, which she praised during the election as ‘a classic example of Toryism at work. Take the dereliction, improve it, make progress, do it by putting in a little bit of taxpayer’s money to prime the pump and along comes industry.’⁸ There was actually nothing specifically Tory about it – the proposal for a Docklands Development Corporation had first been put forward by the Labour MP Bob Mellish in the 1960s – but it fitted well with Mrs Thatcher’s desire to bypass obstructive councils. The idea was to create a body which could override the local authorities, cut through the jungle of local planning regulations, buy up and redevelop derelict land and offer incentives to attract business to the area. The London Docklands Development Corporation was eventually established in 1981 by Michael Heseltine, with a similar body for Merseyside (planned before that summer’s riots). Their success encouraged Ridley to announce another four Urban Development Corporations in 1986. Now Mrs Thatcher resolved to set up four more and more than double the amount of money put into them. In December Ken Clarke – rather than Ridley – was put in charge of the inner-city programme, initially with a budget of ?2 billion. By the time Mrs Thatcher herself chaired a multi-departmental press conference in March 1988 to launch a White Paper, Action for Cities, that figure had been raised to ?3 billion.

The programme, with a multiplicity of subordinate schemes – Enterprise Zones, Business in the Community, City Action Teams, Derelict Land Grants – achieved considerable success over the next decade, at least in physically redeveloping derelict areas. Much of the benefit, however, particularly in London, accrued to ‘yuppies’ and other middle-class incomers, rather than to the original inhabitants who could not afford the new housing and found themselves either displaced or servicing the new population.

The 1987 party conference at Blackpool was an unabashed victory rally not spoiled as the 1983 equivalent had been by revelations about Cecil Parkinson. ‘That makes three wins in a row,’ Mrs Thatcher told the adoring faithful. ‘Just like Lord Liverpool. And he was Prime Minister for fifteen years. It’s rather encouraging.’ Dismissing calls for a period of ‘consolidation’, she insisted that the third victory was just ‘a staging post on a much longer journey’, and tempted fate by demanding ‘What’s to stop us?’ ⁹

One week later the mood was abruptly punctured by the collapse of the New York stock market. When the markets reopened on Monday morning, London duly followed New York and Tokyo down the tube: 23 per cent was wiped off share values in one day. ‘Black Monday’ delivered a devastating blow to Mrs Thatcher’s view of Britain’s restored ‘greatness’. Though in principle she believed in the global market, she was shocked by the reminder of the British economy’s vulnerability to a crash on Wall Street, and the helplessness of her government to act independently.

The most embarrassing effect in the short run was the wreck of the privatisation of British Petroleum, whose shares went on sale at the worst possible moment. After a string of successes over the spring and summer with British Airways, the British Airports Authority and Rolls-Royce, the Government was suddenly left with millions of shares on its hands in what The Times called ‘the biggest flotation flop in history’.¹⁰ Lawson refused to ‘pull’ the sale, but the Treasury was obliged to underwrite the issue itself at just seventy pence a share – instead of 120 pence – giving rise to gleeful Labour jeers of renationalisation. In fact, the losers were neither the Government nor the public, but the bankers. The episode proved to be only a blip in the sequence of successful privatisations. The second instalment of BP shares the following summer netted the taxpayer the biggest yield yet.

Far more serious in the long run were the measures Lawson took to try to mitigate the impact of the stock-market crash on the British economy. Amid widespread – but as it turned out erroneous – fears of an American-led recession, he cut interest rates by half of one per cent on 20 October, then by another half per cent on 4 November, to boost demand. Both he and Mrs Thatcher claim to have been unmoved by the general panic over a perfectly normal ‘correction’ of overvalued stocks.¹¹ Nevertheless, with the economy in fact