The Path to Power

and anyway might be tempted by blandishments from the Government Whips. And, of course, this is what happened. It was not until almost three years later that the Government’s lack of a majority finally brought it down.

Meanwhile, the state of the economy was worsening. In February 1976 the Government had announced spending cuts of ?1,600 million for 1977/78 and ?3,000 million for 1978/79 (in today’s terms the equivalent of ?6,000 million and ?11,500 million). Impressive though this might sound, it amounted to no more than a modest cut in large planned increases. In December 1975 the International Monetary Fund had granted an application for stand-by credit to tide over Britain’s finances. Even so, in March there was a full-scale sterling crisis. The pound came under heavy pressure yet again in June, and more international stand-by credit had to be obtained, repayable in six months, failing which Britain agreed to apply again to the IMF. Inflation was falling by then, but large negative interest rates, combined with the failure to make real cuts in public spending and borrowing, prevented the Government from getting to grips with its underlying financial and economic problems. The new sterling crisis in September, which would lead to the humiliating abdication of control over our economy to the IMF, was the final result of an entirely justified loss of confidence by international markets in the Labour Government’s handling of the economy.

It might be expected that all of this would make an Opposition’s life easier, no matter how bad it was for the country. But that was not so.

And this was our third problem. For we were expected to support the Labour Government’s hesitant and belated moves to apply financial discipline. That was fair enough. But we were also under a more general pressure to be ‘responsible’ in dealing with the Labour Government’s self-contrived tribulations. However commendable, this inevitably cramped my attacking style.

For example, the 1976 Party Conference, held against the background of an uncontainable financial crisis, ought to have been a triumph. But it was not. All of us in Brighton were almost neurotically conscious of the need for responsibility and caution. Of course, in practice nothing I said about the Government’s economic policy was likely to give the financial markets a worse opinion of it than they already had. But interest rates were raised to 15 per cent on the day before my speech. I called a Shadow Cabinet meeting at Brighton to see what our stance should be before I did the final draft. Reggie Maudling helped me rewrite the already tortured economic passages. But it was a poor text and, probably because I lacked confidence in it, I delivered it badly in the uncongenial atmosphere of a cramped temporary hall — before going next door to the overflow of the Conference and delivering an off-the-cuff speech, praised by the few journalists who heard it but which, being untexted, sank without trace.

All in all, the regular Party politics of 1976 were frustrating and inconclusive. Despite the large Tory lead in the opinion polls and the disappearing Labour majority in the Commons, the Government managed to stagger on. Our opening to the TUC ran into the sand, and with the IMF superintending economic policy, the air of extreme crisis began to subside. At a more fundamental level, however, things were looking up.

ON THE HIGH GROUND

The Right Approach, which we published on the eve of the 1976 Conference, gave a persuasive account of the new Conservatism. Indeed, it still reads well and, stylistically at least, ranks with Change is our Ally as one of the best-written documents produced by the post-war Conservative Party. The credit for this must go to Chris Patten and Angus Maude who, with Keith Joseph, Geoffrey Howe and Jim Prior, drafted it.

It was helped by the fact that a truce had been reached in the internal arguments about where we all stood on incomes policy. A speech by Geoffrey Howe to the Bow Group (a Conservative ginger group) in May 1976 provided an agreed ‘line to take’ which was broadly followed in The Right Approach. The document pointed out that prices and incomes policies did not offer a long-term solution to inflation, while noting that it would be unwise ‘flatly and permanently’ to reject the idea, and nodding favourably in the direction of the West German system of ‘concerted action’. It was a fudge — but temporarily palatable.

But it was the fact that The Right Approach concentrated on the big general arguments, restating what differentiated our approach from that of socialism, that made it the success it was. It received a good press, not least because I and my colleagues put in considerable effort to explain it to the editors beforehand. The confident, authoritative tone of the opening sections pleasantly surprised the critics, lifting their vision above daily political infighting and the Government’s obsession with ever-changing ‘norms’.

The success of The Right Approach illustrates an important paradox about the whole of this period. For a variety of reasons, we were not a particularly successful Opposition in the ordinary sense of the word. Differences kept on emerging between us. We were usually unsuccessful in the House of Commons. We found it difficult to capitalize on the Government’s mistakes. Yet on the higher plane of belief, conviction and philosophy we were extremely effective. We were winning the battle of ideas which was the necessary preliminary not just to winning the election but to winning enduring popular support for the change of direction we wanted to make.

Keith Joseph’s speeches continued to put over the powerful themes he developed in the CPS. In March he delivered a speech in Harrow which took head-on the Government’s claim that high public expenditure was necessary for high levels of employment. In fact, as Keith pointed out:

Government overspending is a major and continued cause of unemployment. Immediate cuts in runaway state expenditure are essential if we are to save the economy now, and eventually restore a high and stable level of employment… Several Peters go on the dole for every Paul kept in a protected job. Several wealth-creating private-sector Peters are thrown out of work to keep each wealth-consuming public sector Paul in make-work. The saved jobs are identifiable and concentrated: the lost jobs are anonymous and dispersed.

I wrote the introduction to the published version of Keith’s Stockton Lecture, entitled Monetarism is Not Enough, which appeared a few months later. Since monetarism was far from accepted by most members of the Shadow Cabinet, this title was a deliberately bold way of expressing an important truth. It was ‘not enough’ to exert monetary control alone. That would indeed bring down inflation. But if we also failed to cut public expenditure and public borrowing, the whole burden of disinflation would then be placed on the wealth-creating private sector.

Alfred Sherman, who had assisted Keith with his Stockton Lecture, helped me draft the speech I made to the Zurich Economic Society on Monday 14 March 1977. Although delivered in Switzerland, it was aimed very much at the domestic audience. Alfred and I worked particularly hard on the text, which, in spite of the economic crisis in Britain, took an optimistic view of Britain’s future, arguing that:

The tide is beginning to turn against collectivism… and this turn is rooted in a revulsion against the sour fruit of socialist experience. The tide flows away from failure. But it will not automatically float us to our desired destination… It is up to us to give intellectual content and political direction… If we fail, the tide will be lost. But if it is taken, the last quarter of our century can initiate a new renaissance matching anything in our island’s long and outstanding history.

It played well in Zurich to the bankers, who were joined by Carol and my friends Douglas and Eleanor Glover — Douglas had been for many years the MP for Ormskirk. But it was how it played in London that mattered. In fact, it was extremely important that I should reach out for the high ground at such a time because there were more than enough difficulties on the low ground of Westminster politics.

I have already described some of the tactical difficulties which the economic crisis now engulfing Britain presented to us. A new one now arose. There was a growing crisis of confidence in Labour, and the polls showed us more than ten points ahead. By-election victories at Walsall North and Workington with big swings to us would shortly confirm the picture. It was at this juncture that talk of a coalition began again among those Conservatives determined at all costs to snatch defeat for me from the jaws of victory.