Joseph, however, found the practice of non-intervention much harder than the theory. As a humane man, and as a practical politician, he could not wash his hands while whole industries went to the wall. He could not simply close down British Steel, British Leyland or Belfast shipbuilders, however chronic their losses. So he agonised and, against his principles, ended up – to his subsequent shame – spending more taxpayers’ millions: in two years his budget actually increased by 50 per cent, from ?2.2 billion to ?3.3 billion per annum.
Mrs Thatcher despaired of him. He was both her economic mentor and the man who, more than anyone else, had opened the way for her to become Prime Minister. She still listened to his advice in private; but he was a hopelessly indecisive minister. ‘In the end’, Jim Prior wrote, ‘it all became impossible and Keith was moved to Education.’47
Joseph’s first big test was a major steel strike at the beginning of 1980.The ostensible issue was pay; but behind that lay the British Steel Corporation’s plans for drastically restructuring – that is, shrinking – the industry. In the first half of 1979 British Steel lost ?145 million; by the end of the year it was losing ?7 million a week. Clearly this could not continue. Joseph set the BSC a target to cut its deficit by the end of 1980. At the end of November 1979 the corporation announced the closure of plants with the loss of 50,000 jobs – one-third of the workforce.At the same time it offered the remainder a pay rise of just 2 per cent. The two main steel unions called a strike from 2 January; both unions and management then sat back and waited for the Government to come up with more money. But Joseph refused to intervene. The effect of a long steel strike on the rest of industry was potentially devastating. Mrs Thatcher was worried – she personally chaired a special group of ministers and officials to keep close watch on the situation – but she was adamant that the Government would not weaken. She was determined to teach the lesson that steel must stand on its own feet.
Finally, the two sides agreed to an old-fashioned inquiry, headed by the former Labour Cabinet Minister Harold Lever. Mrs Thatcher was deeply suspicious; her doubts were confirmed when Lever predictably split the difference between the BSC’s final offer and the union’s demand and recommended a settlement around 16 per cent, including productivity deals. (Inflation was then around 20 per cent.) Both sides accepted it and the strike was called off at the beginning of April.
On the face of it this was not much of a victory for the Government. Yet Joseph and Mrs Thatcher had made their point by not intervening, despite great pressure from the rest of industry (and much of the Cabinet), leaving management and unions to make their own deal. The real victory for the Government was that, under cover of the pay rise, BSC’s plant closures were accepted. On this basis Joseph agreed to carry on subsidising the corporation for another year. Then, after a long search, the sixty-eight-year-old Scottish-born but Americanised Ian MacGregor – a tough manager with a reputation for defeating strikes – was recruited from Lazard Freres at a huge salary.
MacGregor earned his salary. In two years he transformed British Steel from the least efficient to one of the best steelmakers in Europe, bringing it almost into profit – at the cost of losing nearly half the workforce. Five years later the slimmed-down corporation was successfully privatised. This was Thatcherite industrial policy as it was meant to work – the long-term reward for the Government standing firm in the early months of 1980. The casualties – apart from the workers who lost their jobs – were, ironically the private steelmakers who were forced out of business while BSC was subsidised into profitability.
Less happy in the short term – indeed a major embarrassment to a government pledged not to support lame ducks – was the necessity to go on funding British Leyland. BL symbolised everything that was wrong with British industry: it was overmanned, underproductive, racked by unofficial strikes, a once-major car manufacturer increasingly unable to compete with European and Japanese rivals. Here was a prime candidate for the new Government’s free-market philosophy: if Joseph was true to his convictions, he would refuse to subsidise BL any further but simply close it down. Nothing the Government could have done in its first year would have sent a clearer message to the rest of industry. But two considerations pulled the other way. First, BL was a big employer in the politically marginal West Midlands. The effect of closure would have been devastating. Second, BL had a dynamic new chairman, the South African-born Michael Edwardes, who was making a real effort to solve the company’s labour problems. This was a factor that made a special appeal to Mrs Thatcher. ‘I knew that whatever we decided to do about BL would have an impact on the psychology and morale of British managers as a whole’, she wrote in her memoirs, ‘and I was determined to send the right signals… We had to back Michael Edwardes.’48
In December 1979 BL was given an additional ?300 million, with a warning that if the latest Corporate Plan was derailed by the militants there would be no more. Yet the company lost another ?93 million in the first half of 1980. By the end of the year Edwardes was asking for another ?900 million to carry forward his restructuring during 1981 – 2. The same arguments applied. In Cabinet Committee before Christmas Joseph still favoured paying up. Mrs Thatcher was pragmatically clear that, for political not economic reasons, ‘BL had to be supported.’49
On television she graphically presented the decision to keep on funding BL as a matter of timing. With productivity improving and a new model – the Metro – soon to be launched, she explained in one of those surprising phrases which occasionally came to her that this was not the moment to say, ‘No, I’m going to chop you off at the stocking tops.’50 This was a bravura defence of what might easily have been seen as a U- turn. In fact this rescue too was vindicated in the long run. After a couple of hiccups, BL – its name by then changed to Rover – was finally sold to the already privatised British Aerospace in 1987. By that time Mrs Thatcher was just glad to be rid of it.
Two hard-nosed managers like Michael Edwardes and Ian MacGregor provided cover for the Government continuing to fund British Leyland and British Steel through their difficulties. No such fig leaf was available to explain a third reversal, which really did seem to suggest that the Government’s resolution was weaker than its rhetoric when it came to implementing its industrial strategy. This third challenge came from the miners – still the vanguard of the union movement, whose two strikes in 1972 and 1974 had humiliated and then destroyed the previous Conservative Government. Of all the beasts in the industrial jungle, the National Union of Mineworkers (NUM) was the one Mrs Thatcher knew she would have to take on and defeat at some point. Detailed planning to withstand a coal strike had begun the moment the Government came into office. Yet when the opportunity for a showdown with the NUM arose in February 1981 it was Mrs Thatcher who backed down. It was her decision, overriding her Energy Secretary who was preparing to stand firm. (The Cabinet was not consulted.) Three years later, of course, it was very different. That epic confrontation in 1984–5 sealed her rout of the unions. From the perspective of 1985 the earlier retreat could be understood as merely tactical. But at the time it appeared to show that Mrs Thatcher had learned from Ted Heath’s experience that it was wiser not to tangle with the miners.
The issue, as in 1984, was the closure of uneconomic pits. The NCB’s announcement of plans to close twenty-three pits with the loss of 13,000 jobs raised fundamental fears for the future of the industry. Faced with the threat of a strike, Mrs Thatcher was initially robust. Asked by Michael Foot in the Commons if she would reconsider the closures before she was forced to, she replied defiantly: ‘No, Sir… I am not forced to do many things.’51 Pit closures were a matter for the NCB. ‘I am not directing that industry.’52 But she was appalled to discover that the NCB had made no contingency plans to withstand a strike: surplus coal was piling up at the pithead, but there were only minimal stocks at the power stations where it was needed. With her instinct for the realities of power she swiftly concluded that this was a dispute the Government could not win.
‘All we could do’, she wrote in her memoirs, ‘was cut our losses and live to fight another day.’53 But the NUM’s crowing, and her own supporters’ undisguised dismay, must have been hard to bear. The
One group of workers she had no compunction about taking on, however, was the Civil Service. Any Government intent on cutting public spending was bound to start with its own servants. But more than that, it was Mrs Thatcher’s positive intention to ‘deprivilege’ the Civil Service. Though she admired individual officials, she regarded the bureaucracy as a whole as an obstacle to the culture she was trying to create. One of Geoffrey Howe’s first actions in 1979 was to set a target to cut the Civil Service by 100,000 jobs over the next five years. At the beginning of 1981 he announced that the 6 per cent cash limit already set for local authorities would also apply to central government. The nine Civil Service unions promptly rejected an offer of 7 per cent and started a highly
