members’ actions. These events increased the pressure on the Government to widen the scope of Prior’s Bill. The papers built up the issue as the critical first test of the Government’s mettle. ‘If you don’t act now,’ the
Mrs Thatcher was bound to respond. She accordingly pressed Prior to add a new clause outlawing secondary action. Since that would not have immediate effect on the steel strike, she also wanted to rush forward a single-clause Bill to ban secondary picketing immediately, without waiting for the Employment Bill to go through all its stages. But Prior resisted both proposals, and was supported in Cabinet by a powerful combination of senior ministers. Defeated in Cabinet in the morning, however, Mrs Thatcher got her own back the same afternoon by simply announcing at Prime Minister’s Questions that plans to cut strikers’ benefits were going ahead after all, and provision for cutting strikers’ benefits was duly included in Howe’s budget six weeks later.
Meanwhile – before his Bill was even on the Statute Book – Prior was pressured to publish a Green Paper foreshadowing further curbs on the closed shop and other measures. But he still firmly resisted ending the unions’ legal immunity. Mrs Thatcher missed no opportunity to repeat that she intended to go further: ‘The Bill is a first step,’ she said in July. ‘It is not a last step.’40 But it was clear that the next step would have to await a new Employment Secretary; and she was not yet strong enough to be rid of Prior.
In this way she got the best of both worlds. On the one hand she saw a significant first measure of reform enacted without provoking serious union opposition, and opened the way for another, while gaining credit for moderation and keeping her Cabinet intact. On the other she contrived to preserve her reputation with her core supporters as a radical who would have liked to do more, were she not constrained by her colleagues. Her blatant undermining of Prior was an early instance of what became a familiar tactic whereby she distanced herself from her own Government, running with the hare while hunting with the hounds. It was clever politics, but it was essentially two-faced and disloyal to colleagues who never felt they could rely on her support. In the short run this skilful ambiguity helped establish her authority over colleagues, many of whom were not naturally her supporters. But over time it strained the loyalty even of her handful of ‘true believers’, undermined the cohesion of her Government and ultimately wrought her downfall.
Over the whole decade 1979 – 90, curbing the power of the unions was perhaps the Thatcher Government’s most unarguable achievement, ending a culture of institutionalised abuse which had hobbled enterprise and broken three previous Governments – Labour and Conservative – in the previous ten years. The Government’s legislation was successful partly because it was introduced against a background of high unemployment which weakened the unions’ industrial muscle and shrank their membership from thirteen million to ten million over ten years, but also because it was implemented in cumulative instalments which offered the unions no popular cause on which to make a stand. The result vindicated Prior’s gradualism – but also Mrs Thatcher’s caution in backing him.
Joseph on the rack
The second great dragon waiting to be tackled was the nationalised sector of the economy. Here again the Government’s first steps disappointed its keenest supporters. The fact that privatisation on the scale that occurred after 1983 was not foreshadowed in the 1979 manifesto subsequently gave rise to a belief that it was not on the Government’s agenda when Mrs Thatcher first came to power, but was merely a sort of opportunist afterthought. There is enough truth in this to give the story an ironic piquancy, but it is not the whole truth.
It was always a central part of the vision of an enterprise economy that the nationalised sector, if it could not be wholly eliminated, should at least be substantially reduced. Mrs Thatcher was instinctively much keener on privatisation than Heath had ever been. She believed that the public sector was inherently inefficient and a drag on the wealth-creating enterprise of the private sector, and talked freely in private about the need to reduce it. But up to 1979 her overriding concern was not to alarm the voters by striking attitudes that could be labelled ‘extreme’.
There is no question that privatisation did take off unexpectedly after 1983. That is not to say, however, that finding ways of cutting the public sector was not a high priority from the beginning. In her very first speech as Prime Minister, Mrs Thatcher spoke of making a start ‘in extending the role of private enterprise by reducing the size of the public sector’ – adding emphatically: ‘It needs reducing’;41 and a few weeks later she promised proposals for ‘attempting to have less public sector ownership and more private sector ownership’.42 Her language constantly suggests that she did not think it would be easy. What she mainly meant in these early days was selling shares in profitable state-owned companies like BP – where Labour had already shown the way – and dismantling the ragbag portfolio of odd companies taken into public ownership by Labour’s National Enterprise Board (NEB). She was particularly keen to give priority to the workers employed in these firms, so that ‘those who work in industry… should make great strides towards being real capital owners’.43 Neither she nor anyone else at this stage envisaged selling whole industries, mainly because their concern was less with ownership than with promoting competition. The Government’s early effort was concentrated on selling off profitable ancillary parts of the nationalised industries, like gas and electricity showrooms, British Rail hotels and the cross-Channel hovercraft. They did not see how the core utilities themselves could be sold. ‘In those industries,’ Mrs Thatcher told the Commons in November 1981, ‘we must ensure that the absence of market forces is replaced by other pressures to induce greater efficiency.’44 While clear about the desirability of the objective, she remained persistently cautious, always talking of ‘trying’ to denationalise ‘wherever possible’ and stressing the practical difficulties.45
Nevertheless a very substantial start was made in 1979–82. Only by comparison with what came later can it be represented as small beer. Norman Fowler, as Transport Secretary, duly sold the National Freight Corporation, but also deregulated long-distance coach travel, creating new private competition with the state-owned railways. Keith Joseph began the process of selling British Aerospace. Several large NEB holdings were successfully sold. As Energy Secretary, David Howell began the process of turning the British National Oil Corporation (BNOC), the North Sea oil exploitation company, into Britoil as a first step to privatising it. The sale of British Airways was also planned, under the dynamic leadership of John King, one of Mrs Thatcher’s favourite businessmen, but had to be delayed for commercial reasons. Most significantly, Joseph split up the Post Office, creating a separate telecommunications company (British Telecom), initially as a way of attracting private money to pay for new technology; he also licensed a private telephone company, Mercury, to inject some competition into the telecommunications business.
By any standard except that of the bonanza years 1983–90, this was a remarkable record. Moreover, in November 1981 Lawson announced the principle that ‘No industry should remain under State ownership unless there is a positive and overwhelming case for it so doing.’46 The momentum of privatisation was well under way before the 1983 election. The Tory manifesto for that election targeted British Telecom, British Airways and the profitable parts of British Steel, British Shipbuilders and British Leyland. Yet ministers themselves did not realise the scale of the revolution that was around the corner.
In a sense, however, all this activity was marginal because it did not touch the core of the Government’s problem – the great loss-making dinosaurs of the nationalised sector: British Rail, British Steel, the National Coal Board (NCB) and the permanently struggling car maker British Leyland. Much as they would have loved to have been rid of them, Mrs Thatcher and Keith Joseph were stuck with these monsters. Their ambition in 1979–81 was limited to trying to cut their costs, to reduce the drain on the Exchequer of their annual losses as part of the drive to cut public borrowing. To this end Joseph imposed tight cash limits on each industry, within which financial discipline they were expected to operate as far as possible like commercial companies – shedding surplus labour, raising productivity, selling off ancillary businesses and resisting unearned pay demands in order to meet their financial targets within a fixed timescale; meanwhile, the Government ostentatiously stood back and proclaimed its refusal to print money to buy off strikes or underwrite further losses. In 1981 the CPRS proposed a scheme for groups of outside industrialists to monitor the nationalised industries; and a search was set in hand for a new breed of tough, commercially minded managers from the private sector to replace the old style of corporatist bosses.
