culpable idleness compared with the time I took for Conference speechwriting as Party Leader. That autumn, however, I spoke from notes, which gives extra spontaneity and the flexibility to insert a joke or jibe on the spur of the moment. Although the debate I was answering was on taxation, the cheers came in response to what I said about the way in which the Government was undermining the rule of law by the arbitrary powers it had taken through incomes policy and tax policy. With more than a touch of hyperbole, it must be admitted, I said: ‘All this is fundamentally wrong for Britain. It is a step not merely towards socialism but towards communism.’ Some of the more squeamish journalists demurred. But not the new and still left-of-centre
I was right to see a connection between the socialist approach to public expenditure and taxation on the one hand and to incomes policy on the other. They were both aspects of the same collectivist programme which, if taken to its ultimate conclusion, would jeopardize not just economic but political freedom as well. But what I and almost all of my colleagues at this time failed to do was to think through the full implications for our own policies. Although we wanted lower and simpler taxes on people and businesses, we were still inclined to assume — and not just for public presentation, but because we really thought it — that faster economic growth would allow us to cut taxes, as public expenditure measured as a share of GDP fell. We had some proposals to reduce public expenditure on socialist projects and waste. But we thought that we could create an atmosphere favourable to enterprise and so establish what was called a ‘virtuous circle’ in which higher growth allowed larger tax revenues with lower tax rates, which in turn stimulated further growth. Consequently, we were not as serious about making real public expenditure cuts as we should have been. Indeed, over the whole of this period — whether in 1956, 1966 or above all in 1976 — real cuts in public spending were only made by governments of either party under the exigent circumstances of a sterling crisis, a gilt strike or the arrival on the scene of the International Monetary Fund. This approach was only finally changed when in the run-up to the 1979 election the Conservative Opposition actually planned for public expenditure cuts because we believed in them.
Our failure in the 1960s to consider as an alternative government where we really stood on incomes policy was at least as serious. As Iain Macleod and I demonstrated by our vigorous opposition to Labour’s statutory incomes policy, we knew what we were against, but we were much less clear about what we were for. There was good reason for this, because the Shadow Cabinet itself was sharply divided. Ted Heath, true to the pragmatic, problem-solving approach which he prided himself on taking, was never able to give the lead required on this question. Probably the only member of the Shadow Cabinet who was opposed in principle to all kinds of incomes policy — voluntary or involuntary — was Enoch Powell, and he had failed to persuade his colleagues by the time I entered the Shadow Cabinet in 1967.
But Enoch was right. He had made the two intellectual leaps in economic policy which Keith Joseph and I would only make some years later. First, he had grasped that it was not the unions which caused inflation by pushing up wages, but rather the Government which did so by increasing the supply of money in the economy. Consequently, incomes policies — quite apart from their other effects of diminishing incentives, imposing distortions and leading to strikes which pitted the state against organized labour — were a supreme irrelevance to anti-inflation policy. In effect, Government was creating a problem which it then blamed on others. The only aspect of the matter which Enoch then and later failed sufficiently to grasp was the importance of the
Secondly, he had seen that the consensus economic policy nurtured another damaging delusion. This concerned the ‘constraint’ allegedly exercised by the current account of the balance of payments. It was in order to increase exports and reduce imports that corporatist, interventionist industrial policies were considered necessary. But the real ‘constraint’, which was assumed and not challenged, was that imposed by a pegged exchange rate. If sterling were allowed to float freely, as Enoch advocated, the alleged constraint of the balance of payments disappeared. And so did some of the pressure for other kinds of interventionism. As he put it in a seminal Institute of Economic Affairs pamphlet in 1967: ‘The control of the international price of currencies, like every other suppression of market prices, leads to other controls, which make a mockery of the individual’s freedom to trade, travel or invest.’[11]
True, in abandoning pegged exchange rates, one loses the anchor of the dollar (or gold). True too, a country which persists in running a large trade deficit may well be one with a weak economy which needs radical restructuring. (Though that may not always be so: a current account deficit may be evidence of large inflows of private capital into an economy which,
None of these qualifications, however, diminishes the fundamental importance of Enoch Powell’s contribution. By showing that it was government monetary policy rather than wages which caused inflation, and that freely floating exchange rates would break free of the ‘constraint’ allegedly exercised by the current account of the balance of payments, Enoch permitted a radical revision of Conservative economic policy. He allowed us to break out of the mind-set which seemed to condemn Britain to an increasingly planned economy and society.
In October 1967 Ted made me front-bench spokesman on Fuel and Power and a member of the Shadow Cabinet. It may be that my House of Commons performances and perhaps Iain Macleod’s recommendation overcame any temperamental reluctance on Ted’s part. My first task was to read through all the evidence given to the inquiry about the causes of the terrible Aberfan disaster the previous year, when 116 children and 28 adults were killed by a slag tip which slipped onto a Welsh mining village. Many of the parents of the victims were in the gallery for the debate, and I felt for them. Very serious criticisms had been made of the National Coal Board and as a result someone, I thought, should have resigned, though I held back from stating this conclusion with complete clarity in my first speech to the House as Shadow spokesman. What was revealed by the report made me realize how very easy it is in any large organization to assume that someone else has taken the requisite action and will assume responsibility. This is a problem which, as later tragedies have demonstrated, industrial civilization has yet to solve.
Outside the House, my main interest was in trying to find a framework for privatization of electricity generation. To this end I visited power stations and sought all the advice I could from business contacts. But it turned out to be a fruitless enterprise, and I had not come up with what I considered acceptable answers by the time my portfolio was changed again — to Transport — in October 1968. Transport was not one of the more interesting portfolios, because Parliament had just passed a major Transport Bill reorganizing the railways, nationalizing the bus companies, setting up a new National Freight Authority — in effect, implementing most of the Government’s transport programme in one measure. In the brief period during which I shadowed Transport I argued our case against nationalization of the ports. But, all in all, Transport proved a brief with limited possibilities.
TED AND ENOCH
As a member of the Shadow Cabinet I attended its weekly discussions, usually on a Wednesday, in Ted’s room in the House. Discussion was generally not very stimulating. We would begin by looking ahead to the parliamentary business for the week and agreeing who was to speak and on what line. There might be a paper from a colleague which he would introduce. But, doubtless because we knew that there were large divisions between us, particularly on economic policy, issues of principle were not usually openly debated. Ted was a competent chairman. On matters which really interested him, like Europe and trade union legislation, he would lead the discussion. But generally he allowed the spokesman to make the running on whatever subject was being
