The Falklands: Big Hair and Bald Men

One of the many ironies of the Thatcher story is that she was rescued from the political consequences of her monetarism by the blunders of her hated Foreign Office. In the great economic storms of 1979–81, and on the European budget battle, she had simply charged ahead, ignoring all the flapping around her in pursuit of a single goal. In the South Atlantic she would do exactly the same and with her great luck she was vindicated. A pattern was being established – ‘blinkered and proud of it’ – and she would move in the space of a couple of months from being one of the least popular prime ministers ever to being an unassailable national heroine. It could all so easily have gone wrong. A few more fuses working on Argentine bombs, another delivery of French-made Exocet missiles, a different point chosen for the attack, and the Falklands War could have been a terrible disaster, confirming an Argentine dictatorship in power and ending Mrs Thatcher’s political career. Of all the gambles in modern British public life, sending a task-force of ships from the shrunken and underfunded Royal Navy 8,000 miles away to take back some islands by force was one of the more extreme.

On both sides, the conflict derived from colonial quarrels. The Falkland Islands had been named after a Royal Navy treasurer when English sailors first landed there in 1690 and though there had been Spanish and French settlements, the scattering of islands had been declared a British colony in 1833. Argentina, formed out of old Spanish colonies, had claimed them from the start too on the basis of proximity. By the sixties, the economic future of the 1,800 islanders who depended on sheep-farming and fishing looked bleak and the Foreign Office was clearly keen to somehow dispose of the problem. Labour had sent a submarine at one point to warn off an increasingly menacing Argentina. Under the Conservatives, however, a couple of serious mistakes were made. First there was a proposal to give sovereignty to the Argentines, but to lease back management of the islands for a fixed period, so that their Britishness would remain intact. Margaret Thatcher later distanced herself from the whole idea, but it was seriously entertained at the time and only withdrawn after protests from the islanders and angry backbench criticism. Then came the announced withdrawal of the only British naval vessel in the region, a patrol vessel HMS Endurance, while the Falkland islanders were given no special status in new legislation on British nationality. In Buenos Aires a newly installed junta under General Leopoldo Galtieri thought it understood what was going on. Galtieri was heavily dependent on the backing of the Argentine navy, itself passionately keen on taking over the islands, known to Argentina as the Malvinas. The following year would see the 150th anniversary of British ownership which the Argentines feared would somehow be used to reassert the Falklands’ British future. The junta misread Whitehall’s lack of policy and concluded that an invasion would be easy, popular and never reversed.

In March an Argentine ship tested the waters, or rather the land of South Georgia, a small dependency south of the Falklands, landing scrap-metal dealers there without warning. Then on 1 April the main invasion began, a landing by Argentine troops which had been carefully prepared for by local representatives of the national airline. In three hours it was all over, and the eighty British marines surrendered, having nonetheless killed five Argentine soldiers and injured seventeen with no losses of their own. In London, there was mayhem. Thatcher had had a few hours’ warning of what was happening from the Defence Secretary, John Nott. Calling a hurried meeting in her Commons office, she had to wait while the Chief of the Naval Staff, Sir John Leach, was rescued by a Tory whip after being detained by the Commons police, who had not recognized him in his civilian clothes. But Leach made the difference, giving her clarity and hope when her ministers offered confusion. He was her kind of man. He told her he could assemble a task-force of destroyers, frigates and landing craft, led by Britain’s two remaining aircraft carriers, Hermes and Invincible. The task-force would be ready to sail within forty-eight hours and the islands could be retaken by force. She told him to go ahead. She would decide later whether to authorize it to actually try to re-invade the islands. Could some kind of deal be done?

A part of the Falklands story not revealed at the time was the deep involvement, and embarrassment, of the United States. Mrs Thatcher and Ronald Reagan had already begun to develop a personal special relationship. But the Argentine junta was important to the US for its anti-communist stance and as a trading partner. The United States began a desperate search for a compromise while Britain began an equally frantic search for allies at the United Nations. In the end, Britain depended on the Americans not just for the Sidewinder missiles underneath her Harrier jets, without which Thatcher herself said the Falklands could not have been retaken, but for intelligence help and – most of the time – diplomatic support too. These were the last years of the Cold War. Britain mattered more in Washington than any South American country. Still, many attempts were made by the US intermediary, the Secretary of State, Alexander Haig, to find a compromise. They would continue throughout the fighting. Far more of Thatcher’s time was spent reading, analysing and batting off possible deals than contemplating the military plans. Among those advising a settlement was the new Foreign Secretary, Francis Pym, appointed after the thoroughly decent Lord Carrington had insisted on resigning to atone for his department’s sins. Pym and the Prime Minister were at loggerheads over this and she would punish him in due course. She had furious conversations with Reagan by phone as he tried to persuade her that some outcome short of British sovereignty, probably involving the United States, was acceptable.

But as with the European budget Thatcher broke down the diplomatic deal-making into undiplomatic irreducibles. Would the islanders be allowed full self-determination? Would the Argentine aggression be rewarded? Under pulverizing pressure she refused to budge. She was confronted too by a moral question she did not duck, which was that many healthy young men were likely to die or be horribly injured, to defend a word, sovereignty. In the end, almost a thousand did die, one for every two islanders, and many others were burned, maimed and psychologically wrecked. But she argued that the whole structure of national identity and law were in play. She wrote to President Reagan, who had described the Falklands as ‘that little ice-cold bunch of land down there’, that if Britain gave way to the various Argentine snares, ‘the fundamental principles for which the free world stands would be shattered’. Reagan kept trying. Pym pressed. The Russians harangued. Michael Foot, who had been bellicose at first, now entreated her to find an answer. Later she insisted that she was vividly aware of the blood-price that was waiting and not all consumed by lust for conflict. As it happened, the Argentine junta, divided and belligerent, ensured that a serious deal was never properly put. Their political position was even weaker than hers. Buenos Aires always insisted that the British task-force be withdrawn from the entire area; that Argentine representatives take part in any interim administration and that if talks failed Britain would lose sovereignty.

Politically, Thatcher had believed that from the start that to cave in would finish her. The press and the Conservative Party were seething about the original diplomatic blunders. Pressed to the wall, even Labour seemed to be in favour of force to recapture the islands, with Foot harking back to the appeasement of fascism in the thirties. For the SDP David Owen was as belligerent as any Tory. Thatcher established a small war cabinet, keeping her Chancellor, and hence mere money, out of it. Nor were the politicians out of touch with the mood of the country. The polls showed anger with the government for allowing the invasion to happen. So the task-force, now up to more than twenty vessels strong, was steadily reinforced. Eventually it would comprise more than a hundred ships and 25,000 men. The world was transfixed, if also bemused. The headline on a New York paper read ‘The Empire Strikes Back.’

Well so it did. By the end of the month South Georgia was recaptured and a large number of Argentine prisoners taken: Thatcher urged questioning journalists simply to ‘rejoice, rejoice’. Then came one of the most controversial episodes in this short war. A British submarine, the Conqueror, was following the ageing but heavily armed Argentine cruiser, the Belgrano. The British task-force was exposed and feared a pincer movement, although the Belgrano later turned out to be outside an exclusion zone announced in London, and steaming away from the fleet. With her military commanders at Chequers Thatcher authorized a submarine attack. The Belgrano was sunk, with the loss of 321 sailors. The Sun newspaper cheered: ‘Gotcha!’ The Labour MP Tam Dalyell, a rare early opponent of the war in the Commons, began a lonely campaign to show that the sinking was politically motivated and immoral, possibly connected to an attempt to scotch the latest peace move. Soon afterwards, a British destroyer, HMS Sheffield, was hit by an Argentine Exocet missile. Forty died and she later sank. The war had started for real.

On 18 May 1982 the war cabinet agreed that landings on the Falklands should go ahead, despite lack of full air cover and worsening weather. By landing at the unexpected bay of San Carlos in low cloud, British troops got ashore in large numbers. Heavy Argentine air attacks, however, took a serious toll. Two frigates were badly damaged, another was sunk, then another, then a destroyer, then a container ship with vital supplies. In London the success of the landing seemed on the edge. The requisitioned liner Queen Elizabeth 2 was nearby, vulnerable and carrying 3,000 troops. Thatcher called it the worst night. And indeed, had the Argentine air force bombs been properly fused for the attacks, far more would have exploded; had their navy had more Exocets, far more would have been launched. Had British Harrier jets not been equipped with the latest US missiles and helped by the secret provision of American AWACS radar cover, the situation would have been desperate. As it was, 3,000 British troops had a secure beach-head and began to fight their way inland. Over the next few weeks they captured the settlements of Goose Green and Darwin, killing 250 Argentine soldiers and capturing 1,400 for the loss of twenty British lives. Colonel ‘H’ Jones became the first celebrated hero of the conflict when he died leading 2 Para against heavy Argentine fire along with Sergeant Ian McKay of 3 Para.

The battle then moved to the tiny capital, Port Stanley, or rather to the circling hills above it where the Argentine army was dug in on Mount Tumbledown, Wireless Ridge, Sapper Hill and Mount William. Before the final assault two British landing ships, the Sir Tristram and the Sir Galahad, were hit by missiles and the Welsh Guards suffered dreadful losses, many of the survivors being badly burned. Ministers talked of losing a ship a day, while at a summit in Versailles Thatcher was again swatting off attempts to halt the fighting by diplomatic means. By now she was determined that nothing short of Argentine surrender would do. The United States, on the other hand, was still desperately hoping to preserve the junta and avoid its humiliation. The scenes at the United Nations were close to farce. They ended after the final attack on the demoralized and badly led Argentine troops forced their leader, General Menendez, to surrender. The British commander arrived at the door of the West Store in Stanley, where many islanders were taking refuge, with the immortal words, ‘Hullo, I’m Jeremy Moore. Sorry it’s taken rather a long time to get here.’7

Many people thought the war mere butchery for a meaningless prize. The most famous comment came from that mordant South American writer Jorge Luis Borges who said it reminded him of two bald men fighting over a comb. Tam Dalyell hounded the Prime Minister with parliamentary questions as he sought to prove the sailors on the Belgrano had been killed to keep the war going, not for reasons of military necessity. He was not alone in his outrage. One of the few genuinely dramatic moments in the 1983 election campaign came when Mrs Thatcher was challenged on television about the Belgrano by a woman who seemed a match for her, as few men were. Among the Labour leadership, Denis Healey accused her of glorying in slaughter and the next leader, Neil Kinnock, got into trouble when, responding to a heckler who said that at least Margaret Thatcher had guts, he replied that it was a pity other people had had to leave theirs on Goose Green to prove it.

The Falklands War was both throwback and throw-forward. For millions it seemed utterly out of time, a Victorian gunboat war in a nuclear age. Yet for more millions still (it was a popular war) it was a wholly unexpected and almost mythic symbol of rebirth. Margaret Thatcher herself lost no time in telling the country what she thought the war had meant. Speaking at Cheltenham racecourse in early July, she said: ‘We have ceased to be a nation in retreat. We have instead a newfound confidence, born in the economic battles at home and found true 8,000 miles away . . . Printing money is no more. Rightly this government has abjured it. Increasingly this nation won’t have it . . . That too is part of the Falklands factor.’ The old country had rekindled her old spirit, she concluded: ‘Britain found herself again in the South Atlantic and will not look back from the victory she has won.’ The Toxteth riots may not have had anything to do with sterling M3 but apparently the activities of 2 Para did.

The Falklands War changed Margaret Thatcher’s personal story and the country’s politics. But it merged into a wider sense that confrontation was required in public life. There was a raw and bloody edge to the spirit of the age. In Northern Ireland, from the spring of 1981, a hideous IRA hunger-strike was going on, which would lead to the death of Bobby Sands and nine others. ‘A convicted criminal,’ Margaret of Lincolnshire briskly called him. ‘He chose to take his own life. It was a choice that his organisation did not allow to many of its victims.’ As with civil service strikers or the United Nations peace party, Thatcher was utterly determined not to flinch, as rock-hard as her ruthless Irish republican enemies. They had assassinated Lord Mountbatten in 1979 and the mainland bombing campaign went on, with attacks on the Chelsea barracks, then the Hyde Park bombings, when eight people were killed and fifty-three injured. And, indeed, none of them were offered any choice.

Overhanging the violence at home and part of the backdrop of the Falklands War, was the residual fear of global nuclear war. With hindsight the grey old Soviet Union of Brezhnev, Andropov and Chernenko may seem a rusted giant, clanking helplessly towards its collapse. This was not how it seemed in the early eighties. The various phases of strategic arms reduction treaties were under way but to well-informed and intelligent analysts the Soviet empire still seemed mighty, belligerent and unpredictable. New SS20 missiles were being deployed by the Russians, targeted on cities and military bases across Western Europe. In response, Nato was planning a new generation of American Pershing and Cruise missiles to be sited in Europe, including in Britain. In the late winter of 1979 Russian troops had begun arriving in Afghanistan. Mikhail Gorbachev was an obscure candidate member of the Politburo, twenty-eighth in the pecking order, working on agricultural planning, and glasnost was a word no one in the West had heard of. Poland’s free trade union movement Solidarity was being crushed by a military dictator.

Western politics echoed with arguments over weapons systems, disarmament strategies and the need to stand up to the Soviet threat. Moscow had early and rightly identified Thatcher as one of its most implacable enemies in the West and when, eighteen months after her election victory, she was joined by a new US President, Ronald Reagan, she had a soul-mate in Washington. Reagan may have been many things Thatcher was not – sunny, lazy, uninterested in detail and happy to run huge deficits. But like her he saw the world in black and white terms, a great stage where good and evil, God and Satan, were pitched in endless conflict. Their shared detestation of socialism in general and the Soviet Union in particular underpinned a remarkably close personal relationship; she was his first overseas visitor after his election; for her he was always ‘Ronnie’. To young politicians watching from the wings – people such as Tony Blair – lessons about the effect of a popular war and the importance of keeping close to the White House were being quietly absorbed.

To the public who had barely focused on Thatcher a few years earlier, she was now becoming a vividly divisive figure. On one side were those who felt they at last had a warrior queen for hard times, a fighter whose convictions were clear and who would never quit, someone who had cut through the endless dispiriting fudging of earlier decades. On the other were those who saw her as a dangerous and bloodthirsty figure, driven by an inhumanly stark world view. To the cartoonists of the Sun, Daily Mail and other right-wing papers she was a Joan of Arc, a glorious Boudicca, surrounded by cringeing wets, apelike trade unionists and spitting Irish terrorists. To the cartoonists of the Guardian, Daily Mirror and Spitting Image she was simply mad, with sharply curved vulture’s beak nose, staring eyes and rivets in her hair. Sexual confusion was rife. She was the only real man in her cabinet, or the ultimate housewife who had seized control of the country; or she was the eerie repudiation of femininity, cold, barren and vengeful. France’s President Mitterand, who in fact had quite a good relationship with her, summed up the paradox better than any British observer when, after an early meeting he told his Europe minister, ‘She has the eyes of Caligula but she has the mouth of Marilyn Monroe.’

The Falklands War confirmed and underlined these opposing views of Thatcher. In a flush of over-confidence she seized her moment so hard she nearly throttled it. She encouraged the government’s internal think tank, the Central Policy Review Staff, to come up with a paper about the future of public spending. They came up with a manifesto which can be summed up as Margaret Thatcher unplugged, what she would have liked to do, unconstrained. They suggested ending state funding of higher education; student loans to replace grants; no increases in welfare payments in line with inflation and the entire replacement of the National Health Service with a system of private health insurance, including charges for doctors’ visits and medicines – in effect, the end of the Attlee Welfare State. Though some of these ideas would become widely discussed much later and student loans would be brought in by a Labour government, at the time the prospectus was regarded as bonkers by most of those around her. The Prime Minister battled for it but ministers who regarded it as her worst mistake since coming to power leaked the CPRS report to the press in order to kill it off. In this they were successful. The episode was an early indication, long before the poll tax, that Thatcher’s charge-ahead politics could produce mistakes as well as triumphs.

The electoral consequences of the Falklands War have been argued about ever since. The government had got inflation down and the economy was at last improving but the overall Conservative record in 1983 was not impressive. The most dramatic de-industrialization of modern times, with hundreds of recently profitable businesses disappearing for ever, had been caused in part by a very high pound, boosted by Britain’s new status as an oil producer. This, with the Howe squeeze, was deadly. Later Joseph admitted that ‘we hadn’t appreciated, any of us’ that this ‘would lead to such rapid and large de-manning’. Unemployment ‘had not been considered a huge problem’.8 Given the shrinking of the country’s industrial base and unemployment at 3 million this was a mistake and a half. Further, this pro-tax-cutting government had seen the total tax burden rise from 34 per cent of GDP to nearly 40 per cent. Public spending, intended to be 40 per cent of GDP, was 44 per cent. The apparently crucial measurement of the money supply showed that it had grown at about double the target.

So there were plenty of large and obvious targets for competent Opposition politicians to take aim at. In an ordinary election the state of the economy would have had the governing party rocking back on their heels. But this was no ordinary election. After the war the Conservatives shot into a sudden and dramatic polls lead over the two Opposition groups now ranged against them, finishing the equally sudden and dramatic rise of the SDP. In the 1983 general election the new party and its partners, the Liberals, took nearly a quarter of the popular vote. But the electoral system rewarded them with just twenty-three MPs, only six being from the SDP, a bitter harvest after the iridescent bubble-year of 1981–2. Labour was nearly beaten into third place in the votes cast. And the Conservatives won a huge victory, giving Mrs Thatcher a majority of 144 seats, a Tory buffer which kept them in power until 1997. Though there were other factors at play it seems perverse to deny that the Falklands conflict was crucial. It gave Thatcher a story to tell about herself and the country which was simple and vivid and made sense to millions.

The Plague

On 4 July 1982, a gay man called Terry Higgins died in St Thomas’s Hospital in central London. He was thirty-seven and one of the first British victims of AIDS, acquired immune-deficiency syndrome, that weakens the body’s natural defences and is passed through a virus, HIV. A group of his friends set up a small charity in a flat, the Terrence Higgins Trust, to spread the word about AIDS among gay men, encouraging the use of condoms – since it is spread by blood and body fluid contact – and offering support for others. Though the disease had undoubtedly been present in the late seventies, it was first identified in California in 1981 when gay men started to turn up in medical centres complaining of a rare lung disease and a form of skin cancer until then confined to the elderly. Within a year hundreds of cases had been found, many deaths were occuring and it was clear that the vast majority were among homosexual men – though other groups began to be affected, including some women, intravenous drug users, Haitians, and in Uganda villagers suffering from a mysterious and deadly ailment they called ‘slim’. The first target in America was the gay bath houses and saunas known for promiscuous, wild and unprotected sex. These had grown up in San Francisco and Los Angeles, and in New York too, as gay men migrated across America during the sixties and seventies to find the most liberal and liberated culture available.

A similar shift had happened in Britain after the legalization of homosexual acts by men. As in America, gay liberation was confined to the most liberal areas of the largest cities only, in this case mainly London – the gay scenes of Manchester, Edinburgh and other towns followed slightly later. Gay clubs, gay discos and gay saunas, the latter really places for as much promiscuous sex as possible, flourished. Men came south and made up for lost time. Something close to a climate of sexual frenzy developed – a frenzy which would later be imitated by heterosexual youngsters on foreign holidays and resorts. After the years of rationing, the sweetie shop was open. Through the seventies, amid the political and economic grime, a street culture of excess flourished. The excess in clothing, music and football violence has already been discussed. It was accompanied for many by a breaking of sexual restraint, the arrival of the freely available pill for heterosexuals and the new climate of legality for homosexuals. If there was optimism around in these years, it was personal – new freedoms that allowed respite from the surrounding climate of national failure.

So the arrival of AIDS came at a particularly cruel time. Just when homosexuals felt the centuries of repression and shame were finally over, along came a deadly and mysterious disease to destroy their new way of life. For social conservatives, this was exactly the point. AIDS was the medical and moral consequence of promiscuous and unnatural sexual behaviour. As you sow, so shall you reap – almost literally. And thus the scene was set for a confrontation between contending moral philosophies that had been at war since the sixties. Gay culture was briefly on the retreat, clubs closed, clerics drew conclusions. Though gay men were at the cutting edge of the AIDS crisis, it had wider implications. It was not only among homosexuals that promiscuity had become more common; in many ways, gay culture had drawn straight culture along in its wake. So for traditionalists there was a message to the whole society, the possibility of a turn away from the new liberalism.

Except, in the end, it did not turn out quite as anyone expected. Gay organizations sprung up to spread the safe sex message very quickly – the Terrence Higgins Trust became a national institution and is now one of the biggest sexual health charities in Europe, with a staff of 300, plus 800 volunteers. The establishment turned out to be far more sympathetic than might have been expected, from Princess Diana opening the first AIDS-specific ward at Middlesex hospital in 1987, to Thatcherite ministers talking about condoms. It was a cultural turning point of a kind, and certainly a national education. In the early days, the media fell prone to ‘we’re all doomed’ panics, and the moral condemnation of homosexuals as unnatural creatures, getting what they deserved. James Anderton, the chief constable of police in greater Manchester, talked of homosexuals ‘swirling about in a human cesspit of their own making’. His language was widely condemned, but many millions of Britons, mainly but not exclusively older people, are likely to have agreed with his condemnation of buggery and other ‘abominable practices’. Dislike of homosexuality was, and still is, strongly rooted. Alongside this was a prudishness about sex generally, which meant early discussion of how AIDS was transmitted was so vague it simply was not understood.

Tabloid newspapers described the ‘gay plague’ which could, according to rumours passed on by newspapers, be variously caught from lavatory seats, kisses, handshakes, communion wine or sharing a restaurant fork with an infected person. In the early eighties, the BBC was predicting that 70,000 people in England and Wales would die within four years (nearly twenty-five years later the total death toll is 13,000) and that ‘by the end of the century there won’t be one family that isn’t touched in some way by the disease.’ The BBC science programme Horizon had led public awareness of AIDS in the early days, but in 1986 its film about gay men’s sex lives and how the disease was actually transmitted was considered so close to the bone that it was banned, and the negatives solemnly destroyed. Yet across the media, as throughout the political world, attitudes changed rapidly. The same newspapers that spoke about buggers getting their just desserts, now enthusiastically promoted AIDS awareness. The homophobic jibes continued but with less self-confidence. Campaigns for abstinence or the reclaiming of gays back into heterosexual life, which have been common among church groups in America, barely touched more secular Britain. Gay Pride parades, which began as angry, edgy affairs in the eighties, slowly became mainstream to the point where politicians rushed to be associated with them. None of this was expected when AIDS first arrived.

In retrospect, part of the shift in attitude happened not in spite of AIDS but because of it. The public health crisis jolted the way sexuality was discussed. There needed to be a new frankness. This wounded, if not fatally, the grand British tradition of titter and snigger. As it became clear that AIDS could be caught from infected needles and blood transfusions, and occasionally through heterosexual sex, the gay stigma was diluted. Indeed, by rapidly changing sexual practices, gay men were for a time ahead of the rest of the population. Coping with AIDS was one of the most effective public information and healthcare stories of modern times. The turn came in 1986 when Norman Fowler, the health secretary, and Willie Whitelaw, Mrs Thatcher’s deputy prime minister, were told to create a national public awareness campaign that would be properly effective. Two more conventional and straight men it would be hard to imagine; Fowler’s main concern was family values and he was quickly lobbied by church groups, MPs and others to send out a traditionalist moral message of abstinence. He did nothing of the kind. The advertising agency TBWA was commissioned to produce a campaign, ‘Don’t Die of Ignorance’, which would shock the country into changing sexual habits. They came up with an iceberg image, and a gravel-voiced commentary by the actor John Hurt, which began with the words, ‘There is now a dreadful disease . . .’ Every single household in Britain received a clear and for the time explicit leaflet.

Over the next few years £73 million was allocated to the campaign. Broadly speaking, it worked. New diagnoses of AIDS, running at more than 3,000 in 1985, fell dramatically over the next few years, staying stable until 1999, when they began to rise again, because of heterosexual cases, mostly connected to Africa, which was undergoing a much worse, indeed genuinely catastrophic pandemic. Because of the wider use of condoms, all sexually transmitted infections fell in the same period, so that cases of syphilis were just a tenth of their pre-AIDS level by the end of the decade. Fowler said later that all the research on his campaign showed that ‘the public saw it, that they understood it, that they remembered the campaign, and most of all it actually did change habits’. Britain’s figures on the fall of new cases were better than almost any other country’s.

The Enemy Within

If the first Thatcher government had been dominated by monetarism and the Falklands War, the second would be dominated by the miners’ strike. This was the longest such strike in British history, one of the most bloody and tragic industrial disputes of modern times, and resulted in the total defeat of the miners followed by the virtual end of deep coal-mining in Britain. For Thatcher the lessons were even bigger: ‘What the strike’s defeat established was that Britain could not be made ungovernable by the Fascist Left. Marxists wanted to defy the law of the land in order to defy the laws of economics. They failed and in doing so demonstrated just how mutually dependent the free economy and a free society really are.’ It was a confrontation which was peculiarly soaked in history on all sides. For the Tories, it was essential revenge after the miners’ humiliation of Heath, a score they had long been waiting to settle; Margaret Thatcher did indeed speak of ‘the enemy within’, as compared to Galtieri, the enemy without. For thousands of militant members of the National Union of Mine-workers it was their last chance to end decades of pit closures and save communities under mortal threat. For their leader Arthur Scargill it was an attempt to pull down the government itself and win a class war. As we shall see he was not interested in the detail of pay packets, or in a pit-by-pit discussion of which coalmines were economic. He was determined to force the government, in Thatcher’s contemptuous but accurate words, to pay for mud to be mined rather than see a single job lost.

The government had prepared more carefully than Scargill. An early dispute with the NUM had been settled quickly because the battlefield was not yet ready. For two years the National Coal Board had been working with the Energy Secretary, Nigel Lawson, to pile up supplies of coal at the power stations; stocks had steadily grown, while consumption and production both fell. After the Toxteth and Brixton riots the police had been retrained and equipped with full riot gear without which, ministers later confessed, they would have been unable to beat the miners’ pickets. Meanwhile, Thatcher had appointed a Scottish-born American, Ian MacGregor, to run the NCB. He had a fierce reputation as a union-buster in the United States and had been brought back to Britain to run British Steel where closures and 65,000 job cuts had won him the title ‘Mac the Knife’. He was briefly idolized by the Prime Minister, rather as she admired John King, later Lord King, who had turned round British Airways in the same period, sacking 23,000 staff, about 40 per cent of the total, and turning the loss-maker into a hugely profitable business. These were her tough, no-nonsense men, a refreshing change from the cabinet, though later she would turn against MacGregor, appalled by his lack of political nous. MacGregor’s plan was to cut the workforce of 202,000 by 44,000 in two years, then take another 20,000 jobs out. Twenty pits would be closed to begin with. Though elderly and rich, he was no suave PR man. When MacGregor turned up to visit mines he was pelted with flour bombs, abused and, on one occasion, knocked to the ground.

Arthur Scargill seemed to be relishing the fight as much as the Prime Minister. We last glimpsed him in the miners’ confrontation with Heath, when he had led the flying pickets at Saltley coke depot, and then tangling with Kinnock during Labour’s civil war. Some sense of his unique mix of revolutionary simplicity and wit comes from an exchange he had with the Welsh miners’ leader Dai Francis, when he called to ask for flying pickets to come to Birmingham and help at the coke depot. Francis asked when they were needed:

‘Tomorrow, Saturday.’

Dai paused: ‘But Wales are playing Scotland at Cardiff Arms Park.’

There was a silence and Scargill replied, ‘But Dai, the working class are playing the ruling class at Saltley.’9

Many found Scargill inspiring; many others found him frankly scary. He had been a Communist and retained strong Marxist views and a penchant for denouncing anyone who disagreed with him as a traitor. Some found a megalomaniac atmosphere at his Barnsley headquarters, already known as Arthur’s Castle. Kim Howells, then a Communist and later a New Labour minister, visited him there and was taken aback to find him sitting at ‘this Mussolini desk with a great space in front of it’ and behind him a huge painting of himself on the back of a lorry, posed like Lenin, urging picketing workers in London to overthrow the ruling class. Howells thought anyone who could put up a painting like that was nuts and returned to express his fears to the Welsh miners. ‘And of course the South Wales executive almost to a man agreed with me. But then they said, “He’s the only one we’ve got, see, boy. The Left has decided.” ’10

Scargill had indeed been elected by a vast margin and had set about turning the NUM’s once moderate executive into a reliably militant group. His vice-president, Mick McGahey, was a veteran Scottish Communist who, though wiser than Scargill, was no moderate; and the union’s general secretary, Peter Heathfield, was well to the left in union politics. Scargill had been ramping up the rhetoric for some time. ‘Sooner or later our members will have to stand and fight,’ he said repeatedly – not on the traditional issue of wages, but on the very future of coalmining in Britain. He told the NUM conference in 1982, ‘If we do not save our pits from closure then all our other struggles become meaningless . . . Protection of the industry is my first priority because without jobs all our other claims lack substance and become mere shadows. Without jobs, our members are nothing . . .’ Given what was about to happen to his members’ jobs as a result of the strike, there is a black irony in those words. By adopting a position that no pits should be closed on economic grounds, even if the coal was exhausted – more investment would always find more coal, and from his point of view the losses were irrelevant – he made sure confrontation would not be avoided. Exciting, witty Arthur Scargill brought coalmining to a close in Britain far faster than would have happened had the NUM been led by some prevaricating, dreary old-style union hack.

The NUM votes which allowed the strike to start covered both pay and closures. But from the start Scargill emphasized the closures. To strike to protect jobs, particularly other people’s jobs, in other people’s villages and other counties’ pits, gave the confrontation an air of nobility and sacrifice which a mere wages dispute would not have enjoyed. Neil Kinnock, the new Labour leader, the son and grandson of Welsh miners, found it impossible to forthrightly condemn the aims of the dispute despite his growing detestation of Scargill. As we shall see, it cost him dear. With his air-chopping, flaming rhetoric, Scargill was a formidable organizer and a conference-hall speaker on Kinnock’s level. Yet not even he would be able to persuade every part of the industry to strike. Earlier ballots had shown consistent majorities against striking. In Nottinghamshire, 72 per cent of the area’s 32,000 miners voted against striking. The small coalfields of South Derbyshire and Leicestershire were against, too. Even in South Wales, half the NUM lodges failed to vote for a strike. Overall, of the 70,000 miners who were balloted in the run-up to the dispute 50,000 had voted to keep working. This is crucial to understanding what happened. Scargill felt he could not win a national ballot so he decided on a rolling series of locally called strikes, coalfield by coalfield, Yorkshire then Scotland, Derbyshire and South Wales. These strikes would merely be approved by the national union. It was a domino strategy; the regional strikes would add up to a national strike, without a national vote.

But Scargill needed to be sure the dominos would fall. He used the famous flying pickets from militant areas and pits to shut down less militant ones. Angry miners were sent in coaches and convoys of cars to close working pits and the coke depots, vital hubs of the coal economy. Without the pickets, who to begin with rarely needed to use violence to achieve their end, far fewer pits would have come out. But after scenes of physical confrontation around Britain, by April 1984 four miners in five were on strike. To Scargill’s horror, however, other unions refused to come out in sympathy, robbing him of a re-run of the 1929 General Strike. It became clear that the NUM had made other historic errors. Kinnock was not the only one from a mining background baffled as to why Scargill had opted to strike in the spring, when the demand for energy was relatively low. The stocks at the power stations were not running down at anything like the rate the NUM hoped, as confidential briefings from the power workers confirmed. It seemed the government could indeed sit this one out. There were huge set-piece confrontations with riot-equipped police bussed up from London or down from Scotland, Yorkshire to Kent, Wales to Yorkshire, generally used outside their own areas to avoid mixed loyalties. It was as if the country had been taken over by historical re-enactments of civil war battles, the Sealed Knot society run rampant. Aggressive picketing was built into the fabric of the strike. Old county and regional rivalries flared up, Lancashire men against Yorkshire men, South Wales miners in Nottinghamshire.

The Nottinghamshire miners turned out to be critical. Without them the power stations, even with the mix of nuclear and oil and the careful stockpiling, might have begun to run short and the government would have been in deep trouble. Using horses, baton charges and techniques learned from the street riots of the previous few years, the police defended the working miners with a determination which delighted the government and alarmed many others. A battle at Orgreave in South Yorkshire was particularly brutal. As the strike went on, macho policing was matched by violence from striking miners. Scargill could count on almost fanatical loyalty to the union in towns and villages across the land. Miners gave up their cars, sold their furniture, saw their children suffer and indeed lost materially all they had in the cause of solidarity. Food parcels arrived from other parts of Britain, from France and even from Russia. There was a gritty courage and selflessness in mining communities most of the rest of country could barely understand. The other side of the coin was a desperation to win which turned ugly. A taxi-driver taking a working miner to work in Wales was killed when a block of concrete was dropped on his car. There were murderous threats to ‘scabs’ and their families. When Norman Willis, the affable general secretary of the TUC spoke at one miners’ meeting, a noose was dangled above his head.

Violence relayed to the rest of the country on the nightly news, followed eventually by legal action on the part of Yorkshire miners complaining that they had been denied a ballot, put the NUM on the back foot. Scargill’s decision to take money from Libya found him slithering from any moral high ground he had once occupied, though some believe this was part of a Security Service ‘sting’ operation to discredit the NUM leadership. As with Galtieri, Thatcher was lucky in her enemies. Slowly, month by month, the strike began to crumble and miners began to trail back to work, first in tens and scores, then in their hundreds, then in their thousands. There were many crises on the way – a possible dock strike; a vote to strike by pit safety officers and overseers, which would have shut down the working pits too and was promptly bought off, and problems with local courts too overloaded to prosecute strikers. But by January 1985, ten months after they had first come out, strikers were returning to work at the rate of some 2,500 a week; by the end of February more than half the NUM’s membership was back at work. In some cases they marched back behind pipes and drums, weeping.

Scargill’s gamble had gone catastrophically wrong. He has been compared to a First World War general, a donkey leading lions to the slaughter. There is something in the comparison. The political force ranged against the miners in 1984 was entirely different from the ill-prepared, Heath administration they had defeated ten years earlier. A shrewder non-revolutionary leader would not have chosen that fight at that time or, having done so, would have found a compromise after the first months of the dispute. Today, there are a handful of thousand miners left of the 200,000 who went on strike. Scargill himself lingers on as an official of an international miners’ union because he has run out of miners to lead at home. He might once have dreamed the revolution would raise a statue to him. If anyone does, it should be the green lobby, in a spirit of irony. An industry whose origins went back to the Middle Ages and which made Britain a great industrial power, but which was always dangerous, dirty and polluting, lay down and died. For Conservatives, indeed for the majority of people, Scargill and his lieutenants were fighting parliamentary democracy and were an enemy which had to be defeated. But the miners of Kent, Derbyshire, Fife and Yorkshire, Wales and Lancashire were nobody’s enemy, just abnormally hard-working, traditional people worried about losing their jobs and overly loyal to their wild and incompetent leader.

Whirlybird Madness

It is a reasonably safe rule in politics that the big fights are about big issues. The great Westland Helicopter crisis that broke over the Thatcher government in the winter of 1984–5 was on the face of it a barmy thing for ministers to fight about. Should a European consortium of aerospace manufacturers or an American defence company, working with an Italian firm, be favoured to take over a struggling West Country helicopter maker? Who cared? This was a government that boasted about its refusal to micro-manage industry, yet the fight about the future of a Yeovil manufacturer cost two cabinet ministers their jobs and led at one point to Margaret Thatcher herself doubting whether she would last the day as Prime Minister. It pitted her against the only other member of her government with real glamour – and as big a shock of hair as hers – and it dominated political life for months. It produced the only walk-out resignation from a cabinet meeting in modern times, indeed since 1903, and the only spontaneous one ever. So what was it all about?

The small storm of Westland gave early notice of the weaknesses that would eventually destroy the Thatcher government, though not for another five years. One was the divide throughout the Tory Party about Britain’s place in the world. Helicopters were by the mid-eighties no longer a marginal defence issue. For projecting Western power in countries as far afield as Somalia, Bosnia and Iraq, they would be crucial – the new army mule hauling cannon over mountains, the new floating gunship. Supply an army’s helicopters and you have a big hold over that country. United Technologies, the American company whose Sikorsky subsidiary built the Black Hawk helicopter, wanted control over part of Britain’s defence industry. Alexander Haig, the US Secretary of State who had been so helpful during the Falklands War, was now back with his old company, and ‘called in his markers’ for the American bid. The Prime Minister, adopting a position of outward neutrality, would probably have favoured it anyway as further strengthening of the British-American alliance. But on the other side, supporting the European consortium of companies, were those who felt that the EU had to be able to stand alone in defence technology. Michael Heseltine and his business allies thought this was vital to preserve jobs and the cutting-edge science base. The United States must not be able to dictate prices and terms to Europe. So this was about where Britain stood: first with the US, or first with the EU? It was a question which would grow steadily in importance through the eighties until, in the nineties, it tore the Conservative Party apart.

The second issue thrown up by Westland mattered almost as much. It was the Thatcher style of government, which was more presidential and disdainful of her cabinet than that of any previous Prime Minister. We have already seen how she despatched the ‘wets’ who challenged her on economic policy. She would rage against, mock and browbeat ministers who were on her side too. Sir Geoffrey Howe in particular had a miserable time from her tongue-lashings. The satirical television puppet show Spitting Image began to dress their Thatcher figurine in trousers and summed up the popular perception in a sketch showing her lunching with her ministers. She orders her beef. Asked by the waiter, ‘What about the vegetables?’ her puppet snarls, ‘They’ll have the same.’ Rather more seriously in the real world, she was conducting more and more business in small committees or bilaterally, with one minister at a time, ensuring her near-absolute dominance. A small clique of advisers assumed more significance than the ministers with their grand offices and titles. Later, just before her fall, Nigel Lawson would conclude that she was taking her personal economic adviser Sir Alan Walters more seriously than she was taking him, her Chancellor of the Exchequer. Throughout it all, she was using her beloved press officer Bernard Ingham to cut down to size any ministers she had taken against, using the then-anonymous lobby system for Westminster journalists to spread the message.

In her memoirs she portrays Heseltine as a vain, ambitious and unprincipled man who flouted cabinet responsibility. The Westland crisis, in her view, was simply about his psychological flaws. Ingham, in his memoirs, angrily defends himself against improper briefing. Yet there are too many other witnesses who found the Thatcher style more like a Renaissance court than a traditional cabinet, a place which demanded absolute loyalty and was infested with favourites. It would destroy her, as it would cripple New Labour, this way of ruling. But in the mid-eighties it was a new phenomenon and to ministers on the receiving end, freshly humiliating. And if there was one minister unlikely to take such treatment for long, it was Michael Heseltine. He was the only serious rival as darling of the party and media star in the glory days of Thatcherism. Handsome, glamorous, rich and an excellent public speaker, he was popularly known as ‘Tarzan’. The story was told about him by his fellow Tory MP, friend and biographer Julian Critchley, that at Oxford he had mapped out his future career on the back of an envelope, running through the need to make a fortune, marry well, enter Parliament and then, ‘1990s, Prime Minister’. Though Heseltine said he could not remember doing this it was in character. As a young man he had flung himself into the characteristic sixties businesses of property investment and magazine publishing, coming close to bankruptcy before handing his worldly goods to his bank manager and slowly turning his companies round. A passionate anti-socialist, he had won a reputation for hot-headedness since once picking up the Mace, symbol of parliamentary authority, and waving it at the Labour benches during a Commons row about steel nationalization. His speeches to Tory Party conferences were music-hall extravaganzas, full of blond hair-tossing, hilarious invective and fist-thwacks-palm drama. So macho that he was almost camp, he was known for the swoop on Merseyside already described and for dressing up in army gear while taking on the female CND protesters of Greenham Common. As an experienced businessman with a relish for vehement anti-Labour rhetoric he was hardly a typical ‘wet’, and indeed agreed with Thatcher about much. But he was a more committed anti-racialist than her and deeply in favour of the EU; she always regarded him as a serious and dangerous rival. The two biggest beasts of the Tory Party in the eighties had been eyeing each other and quietly sharpening their claws under the cabinet table well before Westland.

They went to war on behalf of the two rival bidders for Westland. She was livid that he was using his considerable leverage as Defence Secretary to warn the company’s shareholders about the dangers of going with the Americans, potentially shutting out European business. She thought he was tipping the scales against Sikorsky, despite Westland’s preference for them. Certainly, Heseltine repeatedly made it clear the Ministry of Defence would not be buying their Black Hawk helicopter and did much to rally the European consortium. Thatcher, meanwhile, was deploying the public line that she was only interested in what was best for the shareholders while trying to make sure the Americans were kept in the race, ahead of the Europeans. Eventually she sought advice from the government law officers about whether Heseltine had been behaving properly. A private reply, meant to weaken his case, was leaked. Furious at this wholly improper act which he suspected was the responsibility of Thatcher and Ingham, Heseltine demanded a full inquiry. During a meeting of cabinet she counter-attacked, trying to rein him in by ordering that all future statements on Westland must be cleared first by Number Ten. Hearing this attempt to gag him, Heseltine calmly got up from the cabinet table, announced that he must leave the government, walked by himself into the street and told a startled solitary reporter that he had just resigned.

The question of exactly who had leaked the Attorney General’s legal advice in a misleadingly selective way to scupper Heseltine and the European bid then became critical. The leaking of the private advice broke the rules of Whitehall confidentiality, fairness and collective government. The instrument of the leak was a comparatively junior civil servant, the Trade Secretary Leon Brittan’s head of communications, Colette Bowe. But who had told her to do this? Many assumed it was her boss, the Number Ten press chief Bernard Ingham. He denied it. He had known she was going to leak the advice and had not ordered her to stop, which he later said he bitterly regretted. But the initiative, he said, had not come from him or Mrs Thatcher. For her part she said she had not known and would not have approved the leaking of the letter had she been asked. None of this matters, except that it nearly finished off the Lady in her prime. After dramatic Commons exchanges during which she seemed vulnerable to the charge of lying to the House, she pulled through. It was Brittan who went for a comparatively trivial mis-statement about another confidential letter – a scapegoat, said the Opposition, which had singularly failed to get the glossy scalp they had hoped for.

After the political row there was a dirty and in some ways even more dramatic struggle for control of the company conducted in hotels and City boardrooms. Some of Thatcher’s greatest business supporters such as Rupert Murdoch weighed in on the side of the American-led bid. Eventually amid accusations of arm-twisting and dirty tricks the Europeans were defeated and the company went to Sikorsky. The storm subsided. But it had revealed the costs of the new Thatcher style. Getting your way at all costs with foreign dictators and militant union leaders was one thing. Behaving similarly with senior politicians in your own party was another. Heseltine later wrote: ‘I saw many good people broken by the Downing Street machine. I had observed the techniques of character assassination: the drip, drip, of carefully planted, unattributable stories that were fed into the public domain, as colleagues became marked as somehow “semi-detached” or “not one of us”.’ The great strength of Thatcher’s way of governing was the way her self-certainty gave her administration and the country a surging sense of direction. Its weakness was it cut out so many others, ignored advice and humiliated anyone not seen as an uncritical supporter.

Very Big Bang

The City, with its huge bonuses and salaries, freshly sprouted glass towers, banks and merchants from across the world, is so familiar it can be taken for granted, as naturally British as the Jurassic coast. Yet in the fifties there would be no good reason for an observer to believe that the sleepy world of the London Stock Exchange, the venerable merchant banks and the rest would become a global success story, while British car-making, for instance, with its splendid variety of models and its famous names, would wither to nothing. The great days of the City had been a lifetime earlier in the heady financial markets before the First World War when sterling was a dominant world currency, loans and bonds sluiced freely round the world, and Britain was a great creditor nation. After the Second World War the pound was under almost constant pressure, the dollar was king, postwar exchange controls hobbled any chance of big overseas deals and Britain was a big global debtor.

The wizened traditions of Money remained – the obscure hierarchies, the bowler hats, the rigid division between brokers and jobbers, the long lunches and coal fires, and the exotic titles of firms that had risen in the days of Queen Victoria, engraved on nameplates between the bombed-out squares. But the City was no longer buccaneering. In the age of Macmillan and Wilson its grandees were forced to concentrate on humble domestic business and the modest trade of the unwinding empire, occasionally pootling along to their masters at the Bank of England to lobby for a loosening of regulations, fruitlessly. Magazines and films still exploited the image of the crisp young banker with a furled brolly and bowler hat. But, in truth, the Square Mile was becoming part of heritage Britain, its declining firms like the cashless Palladian houses of Oxfordshire, in which grumpy men with famous names stamped their feet against the cold and mentally apologized to grandpapa. Perhaps it was inevitable? Historically, financial clout had run alongside commercial and political power. A weak Britain meant a weak pound and a weak City. In the forties, fifties and sixties, the golden age of the great US dollar, it was as obvious that New York would replace the Square Mile, as it was equally obvious that the US fleet would take over from the Royal Navy.

That it did not happen was the result of paranoia and bad judgement far away from London, exploited by bright British financiers. At the height of the Cold War, Moscow and her satrapies declined to let wicked capitalist New York look after their dollars. These dollars ended up instead in (apparently less wicked) London and were used from 1957 by a few far-seeing British banks to finance overseas trade in the capital-hungry post-war world. If you are not allowed to fund the world with home-grown pounds, why not do it with other people’s dollars? The boss of the Bank of London and South America, Sir George Bolton, was heard in clubs and boardrooms loudly asking why London, with her expertise, should not jump into a new age of world capitalism? London’s second opening came thanks to New York itself. Since the war, American bankers had been enjoying the easy pickings from loans to other countries and overseas investors. They were lazily uninterested in the secondary market in such loans. By the early sixties, the ballooning US balance of payments deficit turned the mood in Washington against loans to overseas customers in general. In 1963 President Kennedy worsened Wall Street’s position dramatically with a new tax on Americans buying foreign stocks from foreigners. With New York cut off from a surging new international business, London moved in.

The first such ‘Eurodollar’ loans were negotiated in 1963 between the British merchant banks Warburgs and Samuel Montagu on the one hand, and an Italian state-owned steelmaker and the Belgian government on the other. To avoid British regulations and taxes, deals were done in Holland’s Schiphol airport and Luxembourg. Warburgs dodged and hopped around endless obstacles until at the end they found there was no one to print the new bonds to the high pre-war standards demanded by the London Stock Exchange. At the last moment the playing card manufacturers De La Rue found two very old Czech engravers who were brought out of retirement to do the job.11 Dollar loans by Hambros for hydroelectric schemes in Norway and by a group of merchant banks for the Austrian government quickly followed. Then a spate of loans for the Japanese . . . and a new world suddenly opened up for the beaten-up old City of London. Pipelines across the Alps, American oil refineries and exploratory ventures, Japanese office buildings, early computer factories, all would be financed from London, just as in the days of Edwardian finance. As overseas bankers realized what was happening, they began to converge on London for some of the action. European banks were already present, but the big four finance houses in Tokyo opened London offices and so too did the big names on Wall Street. Citibank, Chase Manhattan, Merrill Lynch and Nomura were all there, taking traditional British business as well as trading in the Eurodollar markets. The influence of the Eurodollar and Eurobond market on the culture of the City and by extension British business life generally can hardly be overstated. From the early sixties, it was internationalizing and shaking up London, introducing more aggression, fatter salaries and less of the old school tie. Harold Wilson might complain about sinister international financiers. The traditionalists of the Stock Exchange and the older banks might hint at sharp practice and unsavoury deals. But the Euro-market thrived and grew, shrugging off the crash of 1974 and the Arab boycott of Jewish businesses alike. Just a whiff of the can-do, devil-may-care Wild West spirit was suddenly felt again in the streets of old London.

Only in the side streets, however. For most investors the world of controls still applied. Sir Nicholas Goodison, later Chairman of the Stock Exchange in the Thatcher years, looked back on the mood by the late seventies: ‘We still had exchange controls. We had a Labour government intent on controlling everything, and no freedom of capital movement. British people were not allowed to take capital abroad; British institutions weren’t allowed to invest capital abroad except by special Treasury permissions . . . we were an insulated market.’12 It was this world which was swept away on 23 October 1979 when Geoffrey Howe, to general shock, abolished exchange controls. Despite what she later said, Thatcher was wobbly and uncertain about the gamble. Howe himself likened it to walking off a cliff to see what happened. Bankers noted there was no planning for this revolution. Tony Benn said it showed that international capitalism had finally defeated democracy. What is certainly clear is that abolishing exchange controls made it inevitable that the core of the ‘old City’ would be exposed to the cultural revolution that the Eurodollar market-makers had already enjoyed in the side streets. The smaller merchant banks, Antony Gibbs, Keyser Ullman and others, were already disappearing; even the biggest London merchant banks such as Kleinwort Benson had profits of little more than a tenth of Japan’s Nomura and a seventh of Wall Street’s Merrill Lynch. For the huddled world of the traditional City, it was suddenly a choice between looking for big protective overseas partners or struggling to survive alone.

In 1982, another slice of American business life came to London in the multi-coloured jackets and raucous bear-pit atmosphere of the new international financial futures market, or LIFFE. Here the high-risk bets were made on the future value of commodities and currencies, in one of the older buildings of the City, the Royal Exchange. Inside its elegant shell roared an atmosphere borrowed straight from Chicago, likened by startled observers at the time to an ill-bred casino. LIFFE would turn out to be very profitable for the traders, the raucous ‘barrow boys’ pumped up on booze, cocaine and fear of failure who became such an emblem of eighties life, many retiring exhausted and vastly rich by their early thirties. It would also be the scene of broken dreams. It was in the derivatives market that old Barings Bank, one of the grander names of the traditional City, lost its money and died. And so to the next question for the City: for how long could the traditional distinction between brokers, dealing with the public, and the jobbers or wholesalers, dealing only with stockbrokers, be maintained? It had been seen as an essential barrier to protect the public, as important for the City as the division between barrister and solicitor was in English law courts. Yet in these new markets it was barely recognized.

The new Chancellor after the 1983 election, Nigel Lawson, a former financial journalist, and the new Trade Secretary, Cecil Parkinson, decided to do a deal with the increasingly archaic looking Stock Exchange. It was struggling with a long and wearisome court case brought by the Office of Fair Trading. The ministers promised the legal action would be dropped if the Stock Exchange reformed itself. This was the final piece of action which led to the ‘Big Bang’ of City deregulation, something which has a claim to be the single most significant change of the whole Thatcher era, on a par with confronting the unions or privatization. The situation in 1983–4 could be compared to an old market town high street, with its long-established specialist shops, the fishmonger and the drapers, old Mr Bunn at the bakery and Miss Manila the trusted postmistress, at just the moment when a huge new retail park opens on the outskirts. The supermarkets in it are the international financial service companies and the global-trading banks offering every financial service under one roof. Chase Manhattan and Merrill Lynch here play the role of Tesco and Walmart. The high street shops are the City firms, small and specialized but without the financial clout and scale to compete. What do they do? Some doggedly hang on, hoping their name, expertise and traditional customer base will see them through. Others negotiate with the supermarkets, trying to find a space under the roof to carry on trading. Others frantically merge, creating newer, bigger high street retailers.

This is what happened in the City when it became clear that the old rules were about to be abolished. During the winter of 1983–4 jobbers, brokers and bankers began to merge in an unprecedented explosion of defensive alliances. Old merchant banks opened talks with the US mega-banks. Scores of ancient names disappeared or were compressed into new assemblages of initials. In family firms such as N. M. Rothschild and Barings, there were family fights, with sons and brothers going different ways. The streets echoed to the sound of cultures clashing. Cricket and baseball were at war on the same pitch. With a new market for shares in smaller, riskier companies (the Unlisted Securities Market) and the creation of a new joint index of the shares of the hundred biggest companies on the Stock Exchange, the FTSE 100, or ‘Footsie’, there was a revolutionary mood in the air, a frenzy of optimism and activity which roared through 1984. Many noted the contrast with the devastation of Britain’s coal-mining industry as the strike dragged on during just the same time. Across the City big gleaming new dealing rooms were unveiled, filled with computers, edged with glass and marble. Paintings of venerable Jewish patriarchs from Edwardian days were rehung in bland new surroundings. Minimum commissions, bedrock of the old cartel, went overnight. Outsiders were at last ushered into the temple of temples, the Stock Exchange itself.

And then on 27 October 1986, this London Stock Exchange ceased to exist as the institution it had formerly been. Its makeover made it all but unrecognizable. The new screen-quoted system SEAQ finally came on stream, the moment remembered as the ‘Big Bang’ itself. A few months later the physical floor of the Stock Exchange, once heaving with life, was almost desolate as the deals were made by computer screen and phone. Scandals, shocks, crashes would follow but as the spring and summer of 1987 arrived, it was clear there would never be any way back to the cosy, particular, tradition-hallowed old high street of London’s City a few years before. Twenty years on, share deals which had taken quarter of an hour or longer to process were completed in a few seconds. The markets were opening two and a half hours earlier each morning, and closing a couple of hours later. The volume of trading was fifteen times higher than it had been in the early eighties. A country which had exported £2 billion of financial services a year before the Big Bang was exporting twelve times that amount. With only 330,000 people working there in City jobs, it was supporting the entire country’s overseas account.13 Though the City brought a super-rich class to Britain, whose vast salaries and staggering annual bonuses made a good swathe of the middle class feel ill over their breakfast newspapers when they were reported each year, and which pushed the more beautiful, well-placed and prestigious homes out of reach of hospital consultants, criminal lawyers, head-teachers and diplomats, the truth is that without the Big Bang, Britain’s books would be in much worse condition.

For millions of ordinary Britons who had only the haziest idea about the world of finance, the revolution in lending to buy their houses was as big a shock. Until the early eighties, most people’s experience of getting a mortgage involved a barrage of suspicious questions from a building society manager, followed by a long wait (for the loans were rationed) and eventually followed by a mortgage whose cost was fixed by the Building Societies’ Association. Generally speaking, the size of the low-cost loan, funded by deposits from building society members, would be limited to two and a half times the would-be homeowner’s annual salary. But by 1983 the ordinary clearing banks were muscling in on the business and this cartel began to go too. American and other mortgage lenders offered better deals. As Nigel Lawson later wrote, this happened in the new deregulated world ‘in which direct credit controls were out of the question; and the only checks on excess were the price of credit, which the Government remained able to control [it cannot do so now] and prudence, which it cannot.’ Three years later he responded to the clamour of building societies who felt unfairly hampered by their old status. He freed them to raise money in the capital markets, issue chequebooks and cheque guarantee cards, make other loans and indeed behave almost like banks. He also allowed them to convert themselves into banks if they got a sufficiently large majority of their members to agree. This duly happened, beginning with the Abbey National.

The effect of this was to suddenly take the brake off mortgage lending and to upend the old power relationship. Before, would-be borrowers limped along to the local building society and patiently endured many obstacles before they were allowed a mortgage. Now the building societies and banks started to ingratiate themselves with the public, thrusting credit at them. It became a good thing, a virtuous thing, to be a big-time borrower. People found themselves harangued in advertisements and junk mail to borrow more, to defect from one bank to another, to extend the mortgage rather than paying it off. The old rules about the maximum proportion of income began to dissolve – four times income began to be acceptable in some cases. House prices began to rise accordingly. (Today the average cost of a house in Britain is rising towards five times average income.)

In many cases banks and building societies began to lend people more than the total value of the house they were buying. The extra helped fuel a more general high-street splurge. The old system of checking people’s real financial status went out of the window. During 1986–8 a borrowing frenzy gripped the country, egged on by swaggering speeches about Britain’s economic miracle from the Chancellor and Prime Minister. The abolition of mortgage tax relief saw a rush of borrowing to meet the deadline. Lawson, not a man to underrate his achievements, acknowledged a critic who said ‘my real mistake as Chancellor was to create a climate of optimism that, in the end, encouraged borrowers to borrow more than they should and lenders to lend more than they should.’ All this would end in tears with the bust that followed and would be used for many years afterwards by Labour’s Gordon Brown as evidence of the Tory ‘boom-and-bust’ policies. But it was the consequence of a decisive break in the financial regulations governing City and everyday life, which changed Britain, probably for ever. It felt heady and exhilarating to millions. It was like getting properly drunk for the first time.

The Big Bang itself was thus only a moment in a longer process, rooted in the Eurodollar market of the sixties and given its most dramatic kick by Geoffrey Howe’s abolition of exchange controls, followed by the deregulation of lending. It meant that Britain for the first time in her history, and entirely willingly, gave up control over financial dealings done from her soil except as a neutral regulator. The State lost control over credit. In return the City gained a huge quantity of international financial business, the profits dripping down from some of the biggest deals in the world which might otherwise have gone to Berlin, Tokyo or (more likely) New York. The end of the age of controls and nationalistic finance meant also that British manufacturing lost any hope of the kind of long-term banking arrangements that German and French rivals had enjoyed. The asset-stripping habit, buying companies, dismantling them into component parts and selling them on, had become a controversial part of British business life in the seventies. The eighties’ financial revolution ensured it would remain so. There would be no room for old connections or long-term thinking in the new world.

For politics, the freeing of the City gave Margaret Thatcher and her ministers an entirely loyal and secure base of rich, articulate supporters who helped see her through some rough times. Rothschilds and other banks would spread the get-rich-quick prospect to millions of people in Britain through the privatization issues and the country would, for a time, come closer to the share-owning democracy Thatcher dreamed of. But all this came at a price – the crude and swaggering ‘loadsamoney’ years satirized by the comedian Harry Enfield and the culture of excess and conspicuous display that would percolate from the City through London, then the Home Counties, then much of southern England. For one generally sympathetic observer of the City in the mid-eighties it was worryingly infected with hype: ‘Febrile, driven by greed, pushing back the boundaries of acceptable behaviour, this was a brief, intense phase that in some ways was a rerun of the late 1920s, this time with added attitude.’14

Sid Gets Lucky: the Privatization Years

There is a popular belief that the Thatcher governments never really intended to privatize very much, and that they stumbled upon an easy way of raising cash by selling off assets almost by accident. If so, it was one heck of a stumble. During the decade £29 bn was raised in sales of land and businesses and £18 bn from the sale to their tenants of 1.24 million council homes. The gas that cooked meals and warmed houses, oil coming ashore, aircraft taking businessmen and holiday-makers, and the airports they flew from, the phones and phone-lines used to communicate, cars, engines, steel and the water pipes and filtration systems bringing the British their baths and tea – all would be affected by the greatest shift of assets from the State to private companies and individuals in the history of this country. By the 1992 election, forty-six businesses had left the public sector, carrying with them 900,000 people. The notion that this was accidental is wrong. The Conservatives had promised to sell off council houses to their tenants from the mid-seventies. Privatization of state corporations had not featured much in the 1979 manifesto only because the party’s plans were still sketchy and partly because its leader did not want to scare off the voters. But privatization had been long discussed on the right. In his first Budget speech Howe said he wanted to reduce the size of the public sector, that ‘the scope for the sale of assets is substantial’ and that this was ‘an essential part of our long-term programme’.

So it would prove. One of the influential economic writers about the Thatcher years said that coining the word privatization was ‘a master-stroke of public relations’ by the government, which put it into worldwide circulation. Privatization would become the major idea exported from Britain in modern times, though as it happens the word was not one Mrs Thatcher liked or much used. (‘De-nationalization’ was even uglier, however, and inaccurate, since some of the corporations and assets sold had never been nationalized in the first place.) It started tentatively, with small steps in 1981–2 including shares in BP, the scientific corporation Amersham, half of Cable & Wireless and then the British National Oil Corporation, discussed elsewhere. The motives were mixed. Early on, with a horrendous public sector borrowing requirement to fund, simply raising cash was important. Yet this was neither the origin of the idea, nor its real point. Howe and Lawson were making clear from 1980 onwards that creating a large bulwark of new shareholders was essential to the Tories’ political vision. Lawson would cite the fears of extending voting in the nineteenth century, allowing political power to people who had no stake in the country: ‘But the remedy is not to restrict the franchise to those who own property: it is to extend the ownership of property to the largest possible majority of those who have the vote. The widespread ownership of private property is crucial to the survival of freedom and democracy.’

Another way of putting it was that this was one part of the one-way ratchet, pulling Britain away from socialism. If Labour had been accused of creating a giant state sector whose employees depended on high public spending and could therefore be expected to become loyal Labour voting-fodder, then the Tories were intent on creating a ‘property-owning democracy’ of voters whose interests were entirely different. The despair of Labour politicians as they watched it working was obvious. There was now to be a large and immovably pro-private sector Britain of share-owners and home-owners, probably working in private companies and increasingly un-unionized. The cost of renationalizing the industries made Labour pledges about it increasingly hollow. Twenty years later the idea of reversing privatization is something discussed only on the very margins of politics. The proportion of adults holding shares rose from 7 per cent when Labour left office, to 25 per cent when Thatcher did. Thanks to the ‘right to buy’ policy, more than a million families purchased their council houses, repainting and refurbishing them and watching their value shoot up, particularly since they had been sold them at a discount of between 33 and 50 per cent. The proportion of owner-occupied homes rose from 55 per cent of the total in 1979 to 67 per cent a decade later. And people did indeed become much wealthier, overall, during the Tory years. In real terms, total personal wealth rose by 80 per cent in the eighties, entirely changing the terms of trade of ordinary politics. Old Labour was killed off not in the Commons but in the shopping centre and the estate agents’ office.

Yet if we look a little below the surface, the story is more blurred. Of that huge rise in wealth, relatively little was accounted for by shares. An increase in earnings and the first house-price boom were much more important. And the boom in shareholding was fuelled more by the prospect of a bargain than by any deep change in culture. Clearly, there was always a potential conflict between the government’s need to raise money quickly, and its hopes of spreading share ownership – both of them intensely political, since the former affected tax levels and the latter the size of the property-holding electorate. Again and again, from the grossly undervalued Amersham sale, to the later and greater privatizations, ministers erred on the side of getting the maximum spread of ownership, rather than the maximum price. The breakthrough privatization was that of 52 per cent of British Telecom in November 1984, which raised an unheard-of £3.9 bn. It was the first to be accompanied by a ballyhoo of television and press advertising. It was easily oversubscribed.

In the event 2 million people, or 5 per cent of the adult population, bought BT shares, almost doubling the number of people who owned shares in a single day. After this came British Gas. Natural gas fields had been supplying Britain from the North Sea since the late sixties, pumping ashore at Yarmouth and Hull, and replacing the old ‘town gas’ system of coal-produced gas, which had long given so many neighbourhoods their distinctive architecture and smell. With its national pipe network and showrooms it had become the country’s favourite source of domestic energy and was, in most respects, a straightforwardly monopolistic business. Its chairman Sir Dennis Rooke fought a riotously aggressive private campaign to avoid British Gas being broken up before the sale, and was successful. Again, the government and its advisers prepared for the sale with a TV campaign featuring an anonymous neighbour who had to be kept away from a good thing – ‘Don’t Tell Sid’ – and then, when the issue details were finally announced, ‘Tell Sid’. This raised £5.4 bn, the biggest single privatization of all.

Yet there was something about the very name that fell oddly on the ear. Does ‘Sid’ perhaps have a half-echo of ‘spiv’? Was someone in the advertising team subconsciously sending a message? For the truth was that the huge oversubscribing of shares reflected a general and accurate belief that something was being given away for nothing, that this was a one-way bet. Sid knew which side his bread was buttered on, but this did not necessarily make him a kitchen capitalist. With the equally bargain-price shares offered to members of building societies, such as Abbey National, when they demutualized and turned themselves into banks, Britain developed a ‘thank you very much’ class of one-off shareholders. In the early years of the twenty-first century, the Office of National Statistics looked back at the privatization story and found that the proportion of stockmarket wealth held by private shareholders had fallen from 20 per cent in 1994 to 14 per cent. ‘Many shareholders’, they said, ‘have clearly subsequently disposed of their holdings rather than become long-term stockmarket investors as was once hoped.’ Of the 22 per cent of adults holding stocks or shares, more than half only had their old privatization or building society ones. The UK Shareholders’ Association concluded that ‘there are enormous number of shareholders in the UK (about 10m perhaps) but the vast majority hold only a few shares, and many of those will have come from privatisations, demutualisations or former employments. Such shares are rarely traded.’

The failure to get a shareholding democracy properly rooted, despite endless Treasury initiatives to nurture it, is a more telling criticism of privatization than the one most commonly heard at the time, which was that the assets were being sold off too cheaply. They were – to the tune in total of some £2.5 bn, according to the National Audit Office. But in part this was deliberate – ‘wider share ownership was an important policy objective and we were prepared to pay a price for it,’ said Lawson. Second, as the government and its advisers learned from each privatization, the pricing grew shrewder. Third, the price critics would not have sold the companies anyway. What the stultified share ownership pattern showed was that, below the level of political rhetoric, there were limits to the Thatcher revolution.

The other great question is whether privatization increased the efficiency and responsiveness of the corporations being sold. This was supposed to happen not because public sector managers were inherently lazy but because they lacked the spur and whip of a stockmarket price and the possibility of going out of business. Yet the impetus of being in the private sector would be much less if the business was still a monopoly. The most successful privatizations in that sense were the ones where the company was pushed instantly into full competition, as British Airways was, or Rolls-Royce, or British Aerospace. But the utilities – gas, electricity, water – were always different. It was hard to envisage rival North Sea natural gas companies competing in every part of the country with their own system of pipes and storage. It was hard to imagine many different energy companies with their own grids. Yet without competition, where would the efficiency gains come from? The technical and political argument behind these privatizations was how to break up the state monopolies to create competition, without infuriating and discommoding the consumer.

In the heyday of the Thatcher privatizations, it was more common for public corporations to be sold as single entities than broken up. British Telecom made the case that to compete in international markets, it must stay as a single unit, able to make the big investments needed for the telecommunications revolution. British Gas, under its pugnacious boss, managed to play the Whitehall power game sufficiently well to stay single. The water and electricity industries were split up, but to create local monopolies, with power generation being split into just two mega-companies, National Power and Powergen. (The railway industry would prove one of the most intellectually demanding and least successful of all, though this story comes later.) In essence, what ministers did was to replace competition by regulation and the growth of new public bodies, such as the National Rivers Authority. Oftel, Ofcom, Ofgas, Ofwat were all given detailed targets and penalty systems to oversee the newly privatized utilities. Only much later would some of them, such as British Gas, be further broken up in the private sector, generally by government diktat through new competition policies, and exposed to more realistic market pressures. Soon, foreign firms would begin to move in and buy up the fragmented privatized utilities, causing remarkably little public protest, except when years of poor investment or management meant a service was patently failing, such as the leaking pipe systems of German-owned Thames Water.

Politicians learned two things. The first was that outside the Westminster village, few British people seemed to care at all who owned the companies and services they depended upon, so long as the service was acceptable. This was becoming a much less ideological country. The second thing they learned was that politics could not step back and wash its hands of what the privatized companies then did. Ministers, not simply chief executives, would still be the target of public anger and held responsible for any failings. This was becoming a more aggressively consumerist country. The result was that, while hundreds of thousands of employees left the public sector to work for newly private corporations, the State grew in other ways, through the quangos, regulatory bodies and bureaucrats now found necessary to regulate and oversee the privatized services.

Rainbows and Pots of Black Gold

Jim Callaghan was brought up piously, so when he told an audience in 1977 that God had given Britain her best opportunity for a hundred years in the shape of North Sea oil, there is a chance that he meant it. The Foreign Office, in a memo a little earlier, had called it ‘a rainbow spanning the sombre horizon’. These had been terrible days for Britain, with 25 per cent inflation and the stockmarket plunging. The oil seemed like a fairytale intervention, for whichever group of politicians found themselves in power when the pot of gold could finally be yanked open. The story of what happened to the Almighty’s handout, a ripple of organic residue left 9,000 feet below the seabed from dinosaur-haunted landscapes and warm seas of 200 million years earlier, is one of the most remarkable and under-discussed in modern British history. The discovery and exploitation of huge oil and gas fields far out under cold, stormy and turbulent waters – so far out that the biggest fields were roughly equidistant between Scotland and Norway – is a modern epic of technical skill, bold finance, endurance and individual courage. Hundreds would die, few fortunes would be made. By the boom year before prices suddenly fell, 1985, Britain was producing 127 million tonnes and was responsible for nearly a tenth of world exports. She had broken free from the old shackles of oil dependency, at least for a while. Official figures suggest Britain will be importing oil again by 2010 though many economists think it will be sooner. So we are talking about a span of between thirty and forty years. Was it well managed, that great gift?

This story is, to begin with, technically awe-inspiring. The oil in most of the rest of the world was ridiculously easy to win compared to the job of finding and pumping out very deep deposits a long way from dry land in very stormy seas. In civil engineering terms, from the steel and concrete jackets as tall as the Post Office Tower that had to be built in specially chosen havens and floated hundreds of miles out, to the huge undersea pipelines dropped from boats, this was a project unlike any other in peacetime since the Victorians’ creation of the railways in the 1840s.15 Its impact on the politics and public finances of Britain, first in the dying days of old Labour and then during the crucial years of the early Thatcherite experiment in monetarism, can hardly be exaggerated. It helped bankroll Thatcherism, for Britain was self-sufficient in oil by 1980. As the future Chancellor, Nigel Lawson, noted, revenues for the government ‘soared from zero in 1975 to nearly £8 billion in 1982–3, at which point they accounted for almost 8.5 per cent of all tax revenues.’ Some economists, though certainly not Lawson, have argued that without it the Thatcher experiment would have collapsed during 1981–2. One observer says: ‘The industrial shake-out of the early eighties, of which unemployment above three million was the consequence, was indeed financed with the considerable help of the oil revenues.’¹⁶ So there, to start with, is an irony. A great new source of national wealth helped to produce mass unemployment, or at least make it politically possible.

The possibilities of the oil boom were not underestimated at the time. Thanks to the oil price shocks of earlier years, the power and wealth of the Sheikhs, epitomized by the ebullient Saudi oil minister Yamani, was well understood. Could Britain have a little of that? In the seventies, in clubs of St James’s and the City offices of the Financial Times, or the new little tower-block where The Economist was edited, they argued about whether oil would so boost the pound that manufacturing industry would be destroyed; or alternatively whether it would mean a golden age for Britain, when vast fortunes could be reinvested in wonderful schools and cutting-edge high-tech industries.

Whitehall’s defence experts worried about how to defend the hundreds of miles of pipes against Irish terrorists, and the rigs against the Soviet navy. In those parts of the Commons tea-room and bars colonized by Labour MPs, there was a vigorous argument between those who wanted to see oil nationalized and kept under direct government control and those who felt this was impracticable. For by the time the big strikes had been made, the great American ‘oil majors’ were the people who had actually invested in the risky and technically difficult business of finding the stuff and preparing to bring it ashore. In the first few years, official Britain was hugely excited by the whole thing. When the first oil arrived ashore in November 1975 at Cruden Bay in Aberdeenshire, the Queen was present with the Prime Minister, assorted other ministers, pipers, a huge tent, red carpets and crowds with Union Jacks. (The oil workers, being in general rather hairy and impolite, were kept well out of the way.)

So it is curious that this great technical, economic and social story features so little afterwards in the memoirs and biographies of the politicians most affected by it. In her autobiography Margaret Thatcher barely touches on North Sea oil, even though her husband Denis was an oilman, involved in the near-collapse of Burmah Oil in 1975, and even though she took a close day-to-day interest in the relevant cabinet committees. About this awesome story she manages just four or five throwaway references, tacked to the end of remarks about exchange controls or tax policy. Geoffrey Howe dismisses the epic tale in a few words, far fewer than he devotes to the mildly amusing theft of his trousers from a train. Neither of them mentions the great tragedy of Piper Alpha, when 185 men were burned or blown to death (two thirds of the British toll in the Falklands War). The great tomes on Wilson and Callaghan, Major and Blair, likewise find nothing much to say about North Sea oil. Nigel Lawson writes lucidly about it, brushing aside the arguments in favour of treating oil as a national resource to be husbanded with his customary panache. In many of the more general histories, economic and political, North Sea oil gets meagre treatment. Its cultural legacy seems slender, too: the occasional agitprop play, a few poems, but no memorable novel, television drama or film, unless one counts Local Hero, which is more about a village community. Those wild years, when 80,000 hard-drinking, hard-working, brave and often dysfunctional men turned a corner of Scotland into the Wild East have left few footprints. A rare historian of the industry points out that among Scotland’s hundreds of museums there is not one devoted to oil. Compared to the much-discussed miners’ strikes, or the IMF crisis, or the City rude-boys of the Big Bang, North Sea oil – which continues to profitably flow – is already forgotten.

Why is this? Those parts of the national story that nobody seems keen to talk about have messages of their own. In the case of oil, embarrassment and confusion are part of the answer. For the truth is that the great adventure was lived at the edge of the British experience. It was not just that the rigs were so far from the coast, halfway to Scandinavia, and that the wild scenes were played out in the bars of Aberdeen and Shetland, both remote from the media in Glasgow, never mind London. It was also that the funding of the exploration and production was so heavily dominated by the United States and that so much of the technology was designed and built outside Britain that it is hard to tell, thirty years after it began to flow, quite what message God was really sending with the oil. The number of British refineries actually fell during the great oil decade of 1980–90, from twenty-one to thirteen, and 40 per cent of that was American-owned. Government advisers had prepared detailed plans about how to grab a great industrial bonanza on the back of the oil boom but by 1974, when the rigs were desperately needed to cope with the huge discoveries out at sea, only three rigs out of 119 were being built in Britain. The ageing, underfinanced yards of the Clyde, Tyneside and Belfast, which in the forties had still produced nearly 40 per cent of the world’s ships, were now down to 4 per cent. Cheaper, better-equipped deep-water yards overseas had taken over. So when it came to the rigs, Norway, Finland even France were getting more of the business. Scotland’s specialist yards for the huge ‘jackets’, like the Meccano sets of giants, at Nigg, Ardersier and Methil, lurched, it has been well said, ‘between clamour and closure’. It was the same story with the all-important service boats bringing vital drilling supplies alongside. The technical breakthrough of positioning propellers at the bow as well as the stern, so they could keep position in heavy waters beside the platforms was made by Norwegian yards. It was their boats, not British ones, which were then sold around the world. Even when it came to oil supply services, which more or less had to come locally, British companies were slow to catch up and won little extra business overseas.17

Finance was a similar story. In the early days of exploration, the US giants were able to fund their work in the North Sea themselves, developing rigs from their earlier experiences in the Gulf of Mexico. The opaque nature of their internal accounting, and the much higher cost of getting any oil out, meant they were appallingly hard for British ministers and the Treasury to deal with. The government’s handling of early leases for exploration, blocks of a hundred square miles each, was criticized by the Commons public accounts committee in 1972 as far too generous, ‘as though Britain were a gullible Sheikhdom’. In the Middle East, they thought so too. Among the odder political vignettes of the seventies was an interview between Britain’s energy minister Tony Benn and the Shah of Iran, at the latter’s palace in Tehran. There, after noting the signed photographs of Brezhnev, Mao and the Queen, Benn was informed that North Sea oil could transform Britain’s prospects ‘if we were not imprudent’.¹⁸ The Shah warned Benn to stand up to the American giants of the oil business. Benn went back and did his best which in the case of Amoco left him ‘boiling with rage – I felt like the president of a banana republic negotiating with a multinational’. Labour’s answer was to set up the British National Oil Corporation, BNOC, in 1976, which was meant to be both the government’s eyes and ears in the industry, to buy 51 per cent of the oil landed, and then to sell it on. It gave the government some grip on the developing industry and built up formidable expertise at its Scottish headquarters. Yet it was essentially a bystander with modest powers, compared to the great oil companies. Its oil-producing business was in any case privatized by Nigel Lawson in 1982, the largest privatization the world had then seen; and the subsequent company Britoil was taken over by BP six years later.

British business as well as British manufacturing was slow to seize the possibilities of the oil boom, though the Scottish banks and the merchant banks clustered round Edinburgh’s genteel Charlotte Square began forming oil subsidiaries and hiring expert economists by the end of the seventies. Among the partnerships was one between Thomson Scottish Petroleum, part of the group which also owned the Scotsman newspaper; and Armand Hammer, the one-time business ally of Lenin, with Occidental. They found the Piper field, one of the big ones following the huge Forties find by BP and Brent by Shell and Exxon. There were many smaller oil-investing companies, some of them successful. Onshore, some Aberdeenshire companies did well in building the offices and prefabricated living quarters, servicing the endless helicopter flights, developing expertise in valves and electronic equipment. Yet the grand hopes of ministers back in the mid-seventies that the oil discoveries would kick-start a great renaissance in banking, engineering, shipbuilding and new service industry, was very wide of the mark.

Why was this? It was partly that the boom came just when British industry was at its lowest ebb, strike-prone, short of money, short of good management. It was partly that the oil-boosted pound did indeed make the recession of the early eighties even worse, rising faster and further than ministers expected. The petro-currency helped squeeze the economy and improved efficiency, at the inevitable cost of widespread closures, sufficient to enrage many naturally pro-Conservative business people. Michael Edwardes, Chairman of the State-owned carmaker British Leyland, said at the time that if the government could not find a way to deal ‘with North Sea oil, then I say: leave the bloody stuff in the ground’.19

Before 1979 Labour was struggling to rein in the American companies that had arrived early and eager. But after 1979 the Conservatives were determined to use the oil revenues quickly, to pay debt and cut taxes, rather than to invest it in some long-term plan for industry. This was the key ‘rate of depletion’ argument played out across Whitehall, which was really about how best Britain should use its bonus. The Norwegians, with a much smaller population and their industry run by the State, invested the proceeds in a great Nordic piggy-bank. When the Scottish Nationalists seized the oil issue in the early seventies they came up with a similar plan for a Scottish oil fund, paying out a permanent dividend to benefit the Scots henceforth. The argument between ‘extract as much as possible now, and spend the proceeds’ and ‘extract slowly, and invest’ was, however, a complicated one, since nobody knew what would happen to the oil price. With North Sea oil so expensive to produce, leaving the stuff under the seabed might mean that if the world price fell it became uneconomic.

Nor was it clear that money invested elsewhere by British ministers would turn out to be money well invested – particularly if it was also meant to kick-start industries. Under Labour, the so-called Varley assurances had been given to the oil industry, a promise that the government would not impose cutbacks beyond a certain level but allow the oil companies to take out most of what they could. According to Professor Alex Kemp of Aberdeen University, who has been writing the official history of North Sea oil, the argument in the early Tory years was between David Howell at the Department of Energy, who believed in slower extraction, and Howe at the Treasury, who needed the revenue as quickly as possible. Howe won the day, with Margaret Thatcher’s consent, imposing a punitive 90 per cent marginal tax rate and treating oil taxes just like income tax or VAT even though oil revenue was finite, a one-off. Professor Kemp concludes that ‘oil revenues were used as part of macro-economic management rather than energy policy, looking thirty years ahead.’

Good thing, or bad thing? This can be seen as a one-off waste, funding the squeeze of the early Thatcher years but leaving little for future generations left in the pot of gold at the end of the North Sea rainbow. Yet for those who saw that drastic economic squeeze as essential, it was money well spent. Lawson said the oil taxes gave ‘a healthy kick-start’ to the process of cutting the government deficit, though he always argued that the overall impact of North Sea oil was exaggerated. As to the profits from oil, they would be better invested privately. Lawson made his point by comparison: ‘A peasant finds gold in his garden. Should he be allowed to mine it at his own speed and be left to allocate the proceeds between extra spending and saving for the day when the gold has been exhausted? Or should some authority force him to leave some of the gold in the ground to guard against profligacy?’20 So in his view, the transfer of oil profits into investments overseas, as happened after the abolition of exchange controls, rather than in (say) British manufacturing, was a good bargain for the country as a whole.

British manufacturing continued to slither downhill, falling from 34 to 30 per cent of national output in 1970–7, before oil properly came on stream, and then from 30 per cent to 23 per cent in the great oil decade. (By 2006 it accounted for less than 15 per cent.) According to the government’s own figures, 2 million manufacturing jobs were lost at this time. Productivity inevitably rose in consequence and the economy would recover very strongly, though this does finally answer the question about whether too much expertise and chains of supply were lost, putting Britain permanently out of markets she could otherwise have retained. Whichever view you take, this ‘British revolution’ could not have been sustained without the pipes and the rigs. Why did Margaret Thatcher say so little about North Sea oil? Or Geoffrey Howe? Could it be simply that in the heroic story of their remaking of the British economy, the Almighty’s underwater gift was an embarrassingly vital support mechanism, for which they could take absolutely no credit? And that therefore they were as unlikely to draw attention to it, as actors apparently leaping through the air would be to the wires supporting them? Still, it was unfortunate. The roughnecks and roustabouts, the shuttle helicopter pilots landing in gale-force winds on postage-stamp-like platforms, and the divers taking horrible risks on the ocean bed, deserve a larger role in modern history. Un-unionized, risk-taking, freebooting, they were after all, model Thatcherites, every one.

Let us return to Lawson’s metaphor of the peasant with gold in his garden. The question is, whose garden? Had Scotland been an independent country and had the lines of national territorial waters been drawn at an appropriate angle (the legal arguments about this were dense), then Scotland would undoubtedly have been a rich country. Like Biafra in Nigeria, it could have funded a breakaway on the basis of oil – though hopefully with less tragic effects. As we have seen, the Scottish National Party had spotted the possible consequences of oil early on. They had begun to worry Labour in the sixties with a series of stunning by-election successes. Whitehall had hit back; the Treasury produced a notional Scottish budget for 1967–8 showing Scotland deeply in the red. Given that Scotland had a relatively poor and relatively scattered population, and a shrinking economic base, this was hardly surprising. But what difference would the oil revenues make? Suddenly, Whitehall came over all coy. Oil money was expertly mixed into national revenues. Jim Sillars, the MP who moved from Labour to the SNP via the briefly fashionable Scottish Labour Party, protested: ‘The potential embarrassment of each drop of the magic oil was dealt with by the simple, crooked device of removing oil revenues from any purely Scottish statistics . . . The fish caught and landed from Scottish waters are allowed to remain in Scotland’s accounts, but the oil over which those fish swim – well, that’s different!’

The SNP was not waiting for official confirmation of what it suspected, however. It had strong covert support in the Edinburgh banking world and could draw on some of the brightest economists north of the border. Within months of the first big BP oil strike its chairman Billy Wolfe was declaring that oil should be a dominant part of its propaganda. In 1972 it launched its most famous slogan, ‘It’s Scotland’s Oil’ followed a year later by the still more aggressive, ‘Rich Scots or Poor Britons?’ Thanks to the recent release of government documents we now know just how jumpy this made Whitehall. Civil servants told Labour ministers after the second 1974 election they should delay Harold Wilson’s promised Scottish assembly (‘Powerhouse Scotland’) to stop the British economy being destabilized. By then the SNP was claiming the support of a third of voters and had won eleven seats in the Commons. ‘Progress toward devolution should be delayed for as long as possible . . .’ said one mandarin: ‘The longer this can be played, the better.’ The problem was that the civil service thought the SNP’s calculations on the huge wealth that could come Scotland’s way with oil were, if anything, an underestimate. One Treasury official wrote: ‘It is conceivable that income per head in Scotland could be 25 per cent or 30 per cent higher than that prevailing in England during the 1980s, given independence.’ Another wrote bluntly: ‘The Scots have really got us over a barrel here.’21 But the Scots, whatever their suspicions and however vigorous the campaigning of the SNP, never knew quite how large that oily barrel was. Had they done so, it is likely that the politics of the later seventies and eighties would have been very different.

The Scots and the Welsh Leave Us Close to Tears

Scotland and Wales had very different political cultures but by the sixties they shared the sense of being parts of the UK in decline, whose old Labour elites no longer delivered the goods. Scotland’s industrial heartland was dominated by coal, steel, shipbuilding and engineering. South Wales, built on coal and steel, was also culturally besieged, as people migrated to the richer new towns of southern England, and the Welsh language declined. Both these smaller countries asked themselves whether, if they cut free from the United Kingdom, they might somehow achieve a new beginning. The European Common Market showed that it was possible for small countries to thrive perfectly well. Even outside it, the Norwegians, Icelanders and Swiss seemed to be managing. No Western country seriously felt threatened by her neighbours any more. Living through the political traumas of the seventies, almost everyone in England was to an extent trapped inside the nightmare. For Scots and the Welsh there was the possibility at least of simply closing the door and walking away.

Yet in neither country did the secessionists ever have majority support. In both countries, their base tended to be among small business people, academics and public servants, the kind who in England were at the same time joining the Liberals. But the Scottish National Party and Plaid Cymru had clear objectives, effective political organizations, a certain fashionable rebel quality; and they scared the wits out of the established parties. These would be years when the breakup of Britain haunted many politicians and when nightmares of IRA-style violence being copied elsewhere fuelled best-selling books and television dramas. Once it had been easy to satirize Druidical Welshmen capering about and plunking their harps, or collections of wild-eyed, bushy-haired Scottish poets in kilts and jerseys. But by the seventies, it was not funny any longer.

The Scottish story can be traced back to the beginning of this postwar story. On 29 October 1949, a raw day in Edinburgh, a solemn faced, dark suited crowd walked into the gloomy headquarters of the Church of Scotland, a parade of landowners and miners, aristocrats and shipyard workers, fat businessmen and lean clerics. They had come to sign a Scottish Covenant, a practice last heard of in the bloody seventeenth century, when fanatic Presbyterians were taking on London and the losers had their heads lopped off in public. But this lot were hardly a revolutionary sight, and their document was full of sonorous assertions about their loyalty to the Crown. There was an impromptu prayer. The Duke of Montrose signed his name. There would be another 2 million signatures in due course, nearly half of Scotland’s adult population, politely requesting a Scottish Parliament again.

Fast forward a few months, and move to Westminster Abbey at dead of night. A handful of dark-coated Scottish students were busily jemmying loose a lump of stone allegedly carried by a Greek prince and Pharaoh’s daughter in the time of Moses to Scotland, via Ireland. This is the ‘Stone of Destiny’ on which Scotland’s ancient kings sat to be crowned. It had been swiped by the wicked English and was being smuggled back to Scotland where it would be hidden as an inanimate hostage. (The Stone was eventually returned to the police, draped in Scottish flags, and was finally returned to Scotland again in the nineties by the Conservatives.) Soon afterwards brand-new postboxes with the symbol QEII for the new Queen, were being defaced or blown up across Scotland, where there had been no QEI. These are parts of the history of post-war Britain which hardly anyone in England has heard about, or understands. Yet at a time when Scotland is becoming ever more politically disassociated from London, it is a story which deserves to be remembered.

Having abolished their own parliament in the 1707 Act of Union, the Scots had become steadily keener on getting it back again, ever since Victorian times. The first National Party of Scotland was formed in 1928, merging with the Scottish Party to become the Scottish National Party or SNP in 1934. By the end of the Second World War Labour was committed to some kind of Scottish Parliament. Yet home rule disappeared as an issue again for most people during the forties and fifties, and indeed into the sixties. This was partly the binding-together effect of the war, which increased pride in being British. It was also because both Labour and the Conservatives (called Unionists in Scotland) had pursued policies of granting the Scots factories, agencies and jobs. In the age of centralism and planning, Scotland seemed to be getting quite a good deal.

During the war, Churchill had appointed a visionary socialist called Tom Johnston, who had once been considered an excellent alternative to Attlee as the next Labour leader, as his Secretary of State for Scotland. Johnson was soon dubbed ‘the uncrowned King of Scotland’ and set about scattering hydroelectric schemes through the Highlands, bringing electricity and work; ordering great commercial forests to be planted; reforming education, and generally carrying on like a progressive dictator. After the war, he continued running the hydro schemes, forestry and Scottish tourism outside party politics, a one-man socialist planning bureaucracy. He even tried to get fish farming started, half a century before the technology was ready, though it would eventually employ tens of thousands. The Tories, then quite popular in Scotland, pursued similar policies, doling out industrial plants such as the Ravenscraig steelworks and obliging the British Motor Corporation to build cars in Bathgate, and the Hillman Imp to be constructed at Linwood. During the Wilson years, Scotland was run by Willie Ross, a Scottish Secretary as authoritarian, self-certain and skilled as Johnston himself, a veritable second uncrowned king. His gifts included a nuclear reactor at Dounreay, the Invergordon aluminium smelter and rescuing a Clyde shipyard. He set up the Highlands and Islands Development Board and the Scottish Development Agency. If planning could make a country rich, Scotland would be paradise. In the sixties, public spending per head there was a fifth above the English average.

Through most of this time Scottish Nationalism was a mere midge of a movement, producing intense but very local irritation. That grand Scottish Covenant signed in 1949 had simply been ignored. Labour dropped its old commitment to a Scottish Parliament in 1956. Nationalism was associated with poets, dreaming students and the odd eccentric aristocrat, a tartan irrelevance to the modern world. The man who did most to change that is almost forgotten now, including in his own party. He was not Billy Wolfe, the SNP’s first charismatic post-war leader, but a farmer from Ayrshire called Ian Macdonald who left his farm to organize the ‘Nats’ full-time. Before 1962 when he took over, the SNP had fewer than twenty active branches and a membership of around two thousand. Three years later under Macdonald’s organizing, there were 140 branches and six years on, in 1968, the SNP had 484 branches across Scotland and 120,000 members. It is hard to think of a similar rate of growth in any British political party. With the distinctive CND logo everywhere at the time, the SNP came up with its own modernistic thistle loop, and that was soon glinting from lapels and jerseys across Scotland.

It was at this stage a classic protest party, whose members tended to be prominent in anti-Vietnam and anti-nuclear protests. As disillusion grew, both with the post-Profumo Tories and with Harold Wilson, the SNP began to win first local council seats and then parliamentary by-elections. The first breakthrough came in Hamilton, a small industrial town outside Glasgow where one of the SNP’s new generation, Winnie Ewing, won a safe Labour seat in 1967 and was driven in triumph in a scarlet Scottish-made Hillman Imp to Westminster. Though she lost the seat in the general election she was followed by Margo MacDonald, the ‘blonde bombshell’ of Govan on the Clyde, and by rising success in local elections. In 1970 Donald Stewart became the first SNP victor in a general election contest, winning the Western Isles. In the first 1974 election, the party won a further six Commons seats, and four more in the October election, taking its total to an all-time record of eleven, and the support of just over 30 per cent of Scottish voters. This would give them a crucial power-broking role in the politics of the late seventies which, as we shall see, they badly mishandled. Scotland’s economy was doing badly in profound ways. Apart from the short-term boost of oil-related jobs, mainly in the north-east, industry was old-fashioned, riven by strife, badly managed and losing ground in every direction. There was a feeling that the country could not be run worse by its own parliament; that the days of London planning and the gifts of uncrowned kings had not, in fact, produced the modern country everyone hoped for.

Labour became increasingly panicky. Harold Wilson deployed a favourite device, the setting up of a Royal Commission (‘takes minutes and wastes years’ in his own formulation) which duly suggested devolution for Scotland and Wales. After plots and counter-plots Wilson finally imposed this on a reluctant Scottish party. It was a form of devolution strong enough to outrage many Labour left-wingers at Westminster, including the young Neil Kinnock, yet too weak to please the out-and-out home rulers in Scotland. A handful of politicians, officials and journalists left the Labour Party in the winter of 1975 to form the breakaway Scottish Labour Party under the charismatic Jim Sillars. It briefly captured the headlines before being infiltrated by Trotskyists who, like crocheted bedspreads and lava lamps, seemed to turn up everywhere in the Seventies. The SLP duly split and then collapsed. Some of its members returned to Labour. Others, including Sillars, eventually ended up in the SNP.

Back at Westminster the new Labour leader Jim Callaghan began a long and weary battle to deliver home rule. Leading the fight was Michael Foot, a romantic enthusiast for devolution, despite the fact that his great hero Nye Bevan had been wholly opposed to such ‘chauvinism’. Yet the most single-minded and influential MP in the devolution debates of the seventies was probably the anti-devolution backbencher Tam Dalyell who later led the Belgrano inquisition. An Old Etonian left-winger, he fuelled himself late into the night with pockets full of hard-boiled eggs prepared by his housekeeper and a head full of hard-boiled arguments about the breakup of Britain, prepared entirely by himself. His ‘West Lothian question’ asked how Parliament could tolerate having Scottish and Welsh members who could vote on matters affecting the English, while not having any authority over the same issues in their own constituencies (because they would be handled by a devolved parliament). It has never been satisfactorily answered. Many believe it will one day end the Union of Scotland and England. A bill for Home Rule was eventually enacted on 31 July 1978 after an exhausting parliamentary battle in which the government’s fate hung in the balance night after night. But a key concession would end up scuppering the bill and Callaghan and the SNP too.

The government had accepted that the Scottish Parliament would only be set up after a referendum in Scotland in which a simple majority would not be enough; at least 40 per cent of the Scottish electorate must vote ‘Yes’. Would this be so hard to achieve? When the referendum was finally held, the ‘Yes’ and ‘No’ campaigns were both rather ragged. Most of the Scottish media were in favour of devolution revolution and a ‘Yes’ vote was generally thought to be inevitable. The timing, however, was pitch-perfect terrible. The campaign ran in February 1979 against a backdrop of the ‘winter of discontent’, terrible weather and a collapse in government prestige. Voting against devolution was for some a way of registering contempt for Labour. Others simply could not be bothered. In the end, though most of Scotland voted in favour of home rule, turnout was low and only 32.9 per cent voted ‘Yes’, far below the 40 per cent hurdle.

Devolution was dead for twenty years to come. Callaghan, Foot and John Smith did everything they could to find some way of reviving the bill or postponing it but by now the majority of the SNP had had enough. They issued ultimatums to the government and eventually put down a motion of censure, though not all of them voted. Mrs Thatcher saw her chance. Labour lost the vote by a whisker and the general election of 1979 was duly triggered. This would bring about the election of a now implacable opponent of home rule. It would plunge Labour into chaos in Scotland as well as elsewhere. The SNP group was cut from eleven MPs to just two, and never regained the initiative. Earlier in this section we noted that Mrs Thatcher was lucky in her enemies and the Scottish Nationalists were yet another good example.

Wales’s part in the story runs parallel to Scotland’s in many ways. Like Scotland, Wales had become a post-war Labour stronghold in her industrial heartland, with a Liberal tradition in the rural areas. Like Scotland, Wales had experienced a rise of interest in the national question between the wars – Plaid Cymru, the party of Wales, had been founded in 1925, nine years before the SNP. Like the Scottish nationalists, the Welsh nationalists were dominated in the early years by literary men, poets and lecturers, and had little working-class support. In the post-war years Wales, like Scotland, had benefited from the scattering of regional policy initiatives, above all the great steel rolling-mill at Llanwern in 1962 but also the Shotton blast furnace, the Licensing Centre at Swansea, the Passport Office at Newport, two nuclear power stations, and factories run by Rover, Ford, Hoover, Hotpoint and others – the equivalent to the car-making plants and aluminium smelters of the Scots. Just as in the Scottish Highlands, vast acreages of conifers were planted by the Forestry Commission, so too it happened across the hillsides of rural Wales. The Scots got a development agency. So did the Welsh. If the Scots popularly expressed their national pride through the up-and-down fortunes of their football team, and the occasional even dodgier pop phenomenon like the Bay City Rollers, the Welsh had rugby. At Cardiff Arms Park, renamed the Welsh National Stadium in 1970, England failed to win a single game between 1964 and 1979.

Politically, however, Wales was in a weaker position. She had been incorporated by England too early in her history to have developed separate institutions of modern statehood. Her ‘Act of Union’ came in 1536, not 1707, and it was a crucial difference. Wales had no single powerful national church, no parliament to look back on, no Enlightenment universities or modern legal code of her own. Indeed she had no official capital until Cardiff was recognized as such as late as 1955; no minister or administrative offices until the fifties and no Secretary of State for Wales until 1964. Welshness was celebrated more as a linguistic and religious quality, though the decline in religious attendance hit the nonconformist chapel tradition almost as hard as it hit the Church of England. Politically, the Welsh had looked to Westminster men as their heroes, David Lloyd George most obviously, but Nye Bevan too. The decline of Liberalism had left Wales dominated by Labour and with all the drawbacks of the one-party statelet – internal backbiting, political stagnation and an unbalanced attitude to London, which was simultaneously the remote and alien capital and the source of power, money and jobs. Clever Welshmen from Raymond Williams to Dylan Thomas often emigrated, becoming exiled professors and writers, endlessly harking back to the romantic day-before-yesterday.

In the Fifties Welsh nationalists began to find cultural and political issues which spurred them on. Instead of attacking post-boxes and stealing the Stone of Destiny, Welsh nationalism was inspired to fight for the survival of the Welsh language. English road-signs would be painted out, people refused to fill in forms written in English and there were successful campaigns for more Welsh broadcasting. But the biggest early spur was water. Indeed it could almost be said that water was the Welsh oil, particularly after the drowning of the Tryweryn valley in north-west Wales to create a reservoir for the people of Liverpool. This was done by Act of Parliament in 1957, despite almost all Welsh MPs voting against it. As one historian put it: ‘Liverpool’s ability to ignore the virtually unanimous opinion of the representatives of the Welsh people, confirmed one of the central tenets of Plaid Cymru – that the national Welsh community, under the existing order, was wholly powerless.’22 Attacks on the Tryweryn reservoir followed and the Free Wales Army was formed in 1963. Violent Welsh nationalism was, thankfully, almost as unpopular and badly organized as violent Scottish nationalism, but there were explosions in the sixties and two men died in 1969 trying to blow up the Royal train during the Prince of Wales’s Investiture. There would also be a more widespread and persistent campaign of burning out holiday homes and full-time homes owned by English incomers to Welsh-speaking areas.

Plaid Cymru’s first breakthrough came at the Carmarthen by-election of 1966, a year before the SNP won Hamilton. Gwynfor Evans, a nationalist campaigner since the thirties and Plaid Cymru’s leader since 1945, would lose the seat in the 1970 general election but two striking Plaid Cymru by-election performances in Rhondda West and Caerphilly in 1967 and 1968 suggested it was no flash in the pan. At last complacent Welsh Labour was being challenged. In the first 1974 election, Plaid Cymru would win two seats, and take a third in the second election of that year. Just as in Scotland, this produced a divided response among Labour in Wales. Should the nationalists be fought, as Neil Kinnock believed, or should they be paid to go away, with offers of devolution, as Michael Foot thought?

By then, like Scotland, the client economy of Wales was in very deep trouble. Yet despite the success of Plaid Cymru in local elections during the final years of ‘old Labour’ rule, they did not seem to pose quite the threat of the SNP. And of course, there was no oil boom in Welsh waters. So the proposed Welsh assembly was to have fewer powers than the Scottish one. It was to oversee a large chunk of public expenditure but would not be able to make laws. This was hardly likely to make anyone’s blood pound. When the matter was put to a referendum the Welsh voted overwhelmingly against the planned assembly, by 956,000 votes to 243,000. Every one of the new Welsh counties voted ‘No’. Plaid Cymru, unlike the SNP, did not vote for the end of the Labour government but in the Thatcher years Wales, like Scotland, was dominated by the politics of resistance to Conservatism. It would be a long wait.

The Boyo and the Bolsheviks

Michael Foot’s leadership saved the Labour Party from splitting into two but was in all other respects a disaster. He was too old, too decent, too gentle, to take on the hard left or to modernize his party. Foot’s politics were those of a would-be parliamentary revolutionary detained in a second-hand bookshop. When roused (which was often), his hair would flap, his face contort with passion, his hands would whip around excitedly and denunciations would pour from him with a fluency Martin Luther would envy. He was in his late sixties during his time as leader – he would be seventy just after the 1983 election – and he looked his age. Contemptuous of the shallow presentational tricks of television, he could look dishevelled and was famously denounced for wearing a ‘donkey jacket’ (it was actually, he insisted, rather a smart green woollen coat) at the Cenotaph. His skills were for whipping up the socialist faithful in meetings or for finger-stabbing attacks on the Tory enemy in House of Commons debates. He seemed to live in an earlier century, though it was never clear which one, communing with heroes such as Swift, Byron or Hazlitt, rather than in a political system which depended on television performance, ruthless organization and managerial discipline. He was a political poet in a prose age.

Perhaps nobody in the early eighties could have disciplined the Labour Party or reined in its wilder members. Foot did his best yet he led Labour to the party’s worst defeat in modern times, on the basis of a hard-left, anti-Europe, anti-nuclear, if-it-moves-nationalize-it manifesto aptly described by Gerald Kaufman as ‘the longest suicide note in history’. Kaufman had also bravely but fruitlessly urged him to stand down before the election. The campaign which followed has gone down in history as one of the least competent, most disorganized few weeks of chaos ever arranged by a modern political party. Foot impersonated a late nineteenth-century radical, touring open meetings and making long semi-literary effusions from crowded platforms to gatherings of the faithful. It was as if he had not condescended to notice the radio age, never mind the television one. He appeared with the very Trotskyists he had earlier denounced and was clearly at odds with his deputy, Denis Healey, over such minor matters as the defence of the country. Labour’s two former prime ministers, Wilson and Callaghan, both publicly attacked Foot’s principled unilateralism. After all this, it was surprising that the party scraped into second place and held off the SDP-Liberal Alliance. It is a measure of the affection felt for Michael Foot that his swift retirement after that defeat was greeted with little recrimination.

Yet it also meant that when Neil Kinnock won the subsequent leadership election he had a mandate for change no previous Labour leader had enjoyed. ‘Enjoyed’ is perhaps not the word. Kinnock had won by a huge majority. He had 71 per cent of the electoral college votes, against 19 per cent for his nearest rival Roy Hattersley, while Tony Benn, the obvious left-wing challenger, was out of Parliament briefly, having lost his Bristol seat. Kinnock had been elected after a series of blistering campaign speeches, a left-winger by the standards of anyone who wasn’t actually a revolutionary. He wanted the swift abandonment of all Britain’s nuclear weapons. He believed in nationalization and planning. He wanted Britain to withdraw from Europe. He wanted to abolish private medicine and to repeal the Tory laws on trade union reform. And to start with, the only fights he picked with his party were over organizational matters, such as the campaign to force Labour MPs to submit to reselection, which handed a noose to militant local activists. Yet after the chaos of the 1983 campaign, he was also sure that the party needed radical reform.

Though the modern age of attempted ruthless control over the media is popularly believed to have begun with Peter Mandelson’s arrival as Labour’s director of communications, it actually began when Patricia Hewitt, a radical Australian known for her campaigning on civil liberties, joined Kinnock’s new office. It was she who began keeping the leader away from journalists, trying to control interviews and placing him like a precious stone only in flattering settings. Kinnock, for his part, knew how unsightly old Labour looked to the rest of the country and was prepared, if not happy, to be groomed. He gathered round him a rugby scrum of tough and aggressive aides, many of whom went on to become ministers in the Blair years – Charles Clarke, the burly son of a powerful Whitehall mandarin; John Reid, a wild former Communist Labour backbencher; Hewitt; and Peter Mandelson. Kinnock was the first to flirt, indeed to enter into full physical relations, with the once-abhorred world of advertising, and to seek out the support of pro-Labour pop singers such as Tracey Ullmann and Billy Bragg, long before ‘Cool Britannia’ was thought of in the Blair years. He smartened up his own style, ending the informal mateyness which had made him popular among colleagues, and introduced a new code of discipline in the shadow cabinet, a code which would have had him thrown out a few years earlier.

In the Commons he tried hard to discomfit Thatcher at her awesome best, which was not easy and rarely successful. The two of them loathed each other with a chemical passion. Labour’s dreadful poll ratings very slowly began to improve. There was talk of ‘the Kinnock factor’. But there were awesome problems for Labour which could not be dealt with by pop stars, friends in the advertising world or well-educated Australian ladies barking at journalists. The first of these was that the party harboured a substantial and vocal minority of people who were not really parliamentary politicians at all, but revolutionaries of one kind or another. They included Arthur Scargill and his brand of insurrectionary trade unionism; the Trotskyist Militant Tendency, which had been busy infiltrating the party since the sixties; and assorted hard-left councils, determined to defy ‘Thatcher’ (also known as the democratically elected government) by various illegal stratagems.

Kinnock dealt with them all. Had he not done so New Labour would never have happened and Tony Blair would have enjoyed a well-remunerated and obscure career as a genial barrister specializing in employment law. Yet Kinnock himself was a passionate man whose own politics were to the left of the new mood of the country. He was beginning an agonizing journey which meant confronting and defeating people who sounded not so different from his younger self; while moving steadily, but never quite far enough, towards the centre. On this journey much of his natural wit, his balls-of-the-feet, exuberant, extempore rhetoric and convivial bounce would be silenced, sellotaped and sedated (as he might well have alliterated). He had come into politics as if it was rugby, us against them, a violent contact sport much enjoyed by all participants. He found that in leadership it was more serious, drearier and nastier than rugby. The game was changing. Week after week, he was confronting in Thatcher someone whose principles had set firm long before and whose politics, love them or hate them, seemed to express those principles. Yet he was by necessity changing, a man on the move, who could not renounce his former beliefs nor yet quite stand by them. He was always having to shade, to hedge and to qualify, to dodge the ball, not kick it. The press soon dubbed him ‘the Welsh windbag’.

The first and hardest example of what he was up against came with the miners’ strike. As we have seen, Kinnock and Scargill loathed each other – indeed, the NUM president may have been the only human being on the planet that Kinnock disliked more than Margaret Thatcher. He distrusted Scargill’s aims, despised his tactics and realized early on that he was certain to fail. As the spawn of socialist Welsh miners, Kinnock could not demonize the strike without demonizing his own upbringing and origins, yet he knew it was a disaster. As the violence spread, the Conservatives and the press were waiting for him to denounce the pickets and to praise the police. He simply could not. Too many of his own side thought the violence was the fault of the police. As the strike hardened, one obvious tactic was to attack Scargill’s failure to hold a national ballot. Yet acutely conscious of the feelings of striking miners, he could not bring himself to attack the embattled trade union. So he was caught, volubly, even eloquently inarticulate, between the rock of Thatcher and the hard place of Scargill. In the Commons, white-faced, week by week, he was taunted by the Tories for his weakness. In the coalfields he was denounced as the miner’s son too frightened to come to the support of the miners. So he made lengthy arguments about the case for coal and the harshness of the Tories which were, as he knew full well, only adjacent to the row consuming the nation. These were impossible circumstances. In them, Kinnock at least managed to avoid fusing Labour and the NUM in the mind of floating voters, ensuring that Scargill’s utter political defeat was his alone. But this lost year destroyed his early momentum and damped down his old blazing certainty. It stole his hwyl – and a Welsh politician without hwyl is like a Jewish agent without chutzpah.

It is said that the difference between being an Opposition politician and a Government one is that in Government you get up each morning and decide what to do while in Opposition you get up and decide what you are going to say. It is hardly Kinnock’s fault that in British politics he is remembered for talking. His critics recall his imprecise long-windedness, the product of self-critical and painful political readjustment. His admirers recall his great platform speeches, the saw-edged wit and air-punching passion. There was one time, however, lasting for just a few minutes, when Kinnock spoke so well he united most of the political world in admiration.

This happened on 1 October 1985 at the main auditorium in Bournemouth, the well-off Dorset coastal resort where Labour conferences never seem entirely at home. A few days earlier Liverpool City Council, formally Labour-run but in fact controlled by the Revolutionary Socialist League, had sent out redundancy notices to its 31,000 staff. The revolutionaries, known by the name of their newspaper Militant, were a party-within-a-party, a parasitic body nuzzled inside Labour and chewing its guts. They had some five thousand members who paid a proportion of their incomes to the RSL, so that the Militant Tendency had 140 full-time workers, more than the staff of the Social Democrats and Liberals combined.23 They were present all round the country but Liverpool was their great stronghold. There they practised Trotsky’s politics of ‘the transitional demand’ – the habit of making impractical demands for more spending, higher wages and so on, so that when the capitalist lackeys refuse them, you can push on to the next stage, leading to collapse and then revolution. In Liverpool where they were building thousands of new council houses, this meant setting an illegal council budget and cheerfully bankrupting the city. Sending out the redundancy notices to the council’s entire staff was supposed to show Thatcher they would not back down, or shrink from the chaos ahead. Like Scargill, Militant’s leaders thought they could destroy the Tories on the streets.

Kinnock had thought of taking them on a year earlier but had decided the miners’ strike made that politically impossible. The Liverpool mayhem gave him his chance. So in the middle of his speech at Bournemouth, up to then a fairly conventional Labour leader’s address, attacking the other parties and cheering up the hall, Kinnock struck. It was time, he suddenly said, for Labour to show the public that it was serious. Implausible promises would not win political victory.

I’ll tell you what happens with impossible promises. You start with far-fetched resolutions. They are then pickled into a rigid dogma, a code, and you go through the years sticking to that, outdated, misplaced, irrelevant to the real needs, and you end in the grotesque chaos of a Labour council – a Labour council – hiring taxis to scuttle round a city handing out redundancy notices to its own workers.

By now he had whipped himself into real anger, shouting yet also – just – in control. The best speeches are made on the lip of the curve of the track, an inch away from crashing into incoherence. Kinnock’s enemies were in front of him. All the pent-up frustrations of the past year were being released. The hall came alive. Militant leaders like Derek Hatton, a man with the looks of a recently retired footballer, stood up and yelled back. Boos came from left-wingers. Uncertain applause came from the loyalists. The pompous left-wing MP Eric Heffer (who had once begun a speech in the Commons with the immortal words, ‘I, like Jesus Christ, am the son of a carpenter’) stood up and stomped from the hall, followed by camera crews and journalists. This was drama of a kind even Labour conferences were unused to. Kinnock went on:

‘I’m telling you, and you’ll listen, you can’t play politics with people’s jobs and with people’s services, or with their homes.’

There was another huge outburst, now both of cheers and of boos. Kinnock insisted that the voice of people with real needs was louder than all the booing that could be assembled: ‘The people will not, cannot, abide posturing. They cannot respect the gesture-generals or the tendency tacticians.’

Alliteration, then eruption. Most of those interviewed said it was one of the most important and courageous speeches they had ever heard, though the hard left was venomously hostile. The newspapers, used to kicking Kinnock, were almost delirious with praise. David Blunkett, the blind socialist leader of Sheffield city council, who would later serve in the Blair cabinets, organized a climb-down on a Militant-sponsored motion, much to Kinnock’s annoyance. But the speech was a genuine turning point. By the end of the following month Liverpool District Labour Party, from which Militant drew its power, was suspended and an inquiry had been set up. By the spring of 1986 leaders of Militant had been identified and charged with behaving in a way incompatible with Labour membership. The process of expelling them was noisy, legally fraught and time-consuming, though more than a hundred were eventually expelled. As important, there was a strong tide towards Kinnock across the rest of the party, with many left-wingers cutting their ties to the revolutionaries. There were many battles with the hard left to come, and several pro-Militant MPs were elected to the Commons. Newspaper stories about ‘loony left’ councils allegedly banning black bin bags on the grounds of racism and ordering teachers to stop using nursery rhymes for the same reason, would continue to be used to taunt Labour. Yet by standing up openly to the Trotskyist menace, as Wilson, Callaghan and Foot had not, Kinnock gave his party a new start. It began to draw away from the SDP-Liberal Alliance in the polls and do much better in local elections too. It was the moment when New Labour became possible.

Yet neither this, nor the new fashion for better-controlled, slicker and sharper management that Kinnock brought it, would do the party much good against Thatcher in the election that followed. Whatever glossy pamphlets, well-made adulatory films and carefully planned photo-opportunities could do, was done. Mandelson, a former student leader and television producer whose grandfather had been Herbert Morrison, became the best-known of the modernizers. Prince Charles greeted him as ‘the red rose man’ for his role in ditching the old red banner as Labour’s symbol and substituting a long-stemmed rose. Mandelson was certainly a single-minded and devoted reformer, cajoling and bullying a generally anti-Labour press. But he was not the only one. The red rose had been suggested by others, a copy of European socialist party imagery. Yet symbolism could not mask the fact that in its policies, Labour was still behind the public mood. Despite mass unemployment Thatcher’s market optimism was filtering through. Labour might have ditched the red flag but it was still committed to renationalization, planning, a National Investment Bank and unilateral nuclear disarmament, a personal cause for both Kinnock and his wife Glenys over the previous twenty years.

The mid-eighties were a time when, after ferocious arguments about disarmament and the Russian invasion of Afghanistan, then a spate of espionage cases, the Cold War was finally thawing. In the White House President Reagan, scourge of the ‘evil empire’, was set on creating ‘Star Wars’, the orbiting satellite and anti-missile system intended to make the United States invulnerable to Russian attack. Yet he was ready to talk too, as the famous summit with Gorbachev at Reykjavik showed. There the Russians agreed to big missile reductions and the Americans declined to scrap ‘Star Wars’. It was not a time for the old certainties. Yet for Kinnock, support for unilateral nuclear disarmament was fundamental to his political personality. It was the reflex response to those who accused him of selling out his socialism. It was a source of some of his best rhetoric. He therefore stuck with the policy, even as he came to realize just how damaging it was to Labour’s image among swing voters.

He was clear about it. Under Labour all the British and American nuclear bases would be closed, the Trident nuclear submarine force cancelled, all existing missiles scrapped and Britain would no longer expect any nuclear protection from the United States in time of war. Instead more money would be spent on tanks and conventional warships. Kinnock was forceful and detailed about all this, and the more he spoke, the more Labour’s ratings went down. He set off gamely trying to sell the CND line as no kind of surrender when in Russia; and something wholly compatible with Nato membership while in Washington, where on his third visit Reagan’s team humiliated him with a twenty-minute meeting, followed by a coldly hostile briefing. All of this did him a lot of good among many traditional Labour supporters; Glenys turned up at the women’s protest camp at Greenham Common. But it was derided in the press, helped the SDP and was unpopular with just the floating-voter, middle England people Labour desperately needed to win back. In the 1987 general election campaign Kinnock’s explanation about why Britain would not simply have to surrender if threatened by a Soviet nuclear attack sounded as if he was advocating some kind of Dad’s Army guerrilla campaign once the Russians had got here. With policies like these, he was not putting Thatcher under the kind of pressure which, perhaps, she needed.

A Revolution’s Mid-Life Crisis

There had been some bad moments for the second Thatcher government. Most obviously, she had nearly been assassinated. The IRA bomb which demolished a chunk of the Grand Hotel at Brighton during the 1984 Conservative conference was intended as a response to Mrs Thatcher’s hard line at the time of the 1981 hunger strike. The plot had been to murder the British cabinet and Prime Minister and plunge the country into political chaos, resulting in withdrawal from all Ireland. As for her, when it went off at 2.50 she was still working on an official paper about Liverpool’s garden festival, having finished writing her speech ten minutes earlier so she was not even woken up. The blast scattered broken glass on her bedroom carpet and filled her mouth with dust. She then decamped to lie fully clothed in the bedroom of a nearby police college, pausing only to kneel and pray with her personal assistant Cynthia Crawford, or ‘Crawfie’, when they heard that the bomb had killed the wife of the cabinet minister John Wakeham and nearly killed him; killed the Tory MP Anthony Berry; had badly injured Norman Tebbit, and paralysed his wife.

After less than an hour’s fitful sleep and with her cabinet hurriedly dressed in clothes from a nearby branch of Marks & Spencer, their dresses and suits still being in the half-wrecked hotel, she rewrote her speech and told the still stunned conference that they had witnessed an attempt to cripple the government. ‘And the fact that we are gathered here now, shocked but composed and determined, is a sign not only that this attack has failed, but that all attempts to destroy democracy by terrorism will fail.’ The final death toll from Brighton was five dead and several more seriously injured but its consequences for British politics, which could have been momentous, turned out to be minimal.

If the IRA could not shake her, could anything else? There had been internal rows, not only over Westland but more ominously for the future, about economic policy. Her Chancellor, Nigel Lawson, had wanted to replace the old and rather wobbly system of controlling the money supply through targets, the Medium Term Financial Strategy, with a new stratagem – tying the pound to the German mark in the European Exchange Rate system, or ERM. This was an admission of failure; the older system of measuring money was useless in the world of global fast money described earlier. Using Germanic bondage was an alternative. In effect, Britain would have subcontracted her anti-inflationary policy to the more successful and harder-faced disciplinarians of the West German Central Bank. Lawson was keen. She was not; if anyone was to play dominatrix round here, it would be her. At the time, little of this debate bubbled from the specialist financial world into general political life.

Other rows did. There was the Westland affair itself but also a botched sale of British Leyland and the highly unpopular use of British airbases for President Reagan’s attack on Libya in 1986. After her hugely successful fight to claw back some of Britain’s overpayment to the European Community budget in her first term, these were years of Thatcherite drift over Europe, which would so fatally damage her at the end. Jacques Delors, later her great enemy, had been appointed President of the European Commission and begun his grand plan for the next stages of union. The Single European Act, which smashed down thousands of national laws preventing free trade inside the EC, promising free movement of goods, capital, services and people, and presaging the single currency, was passed with her urgent approval. She pooh-poohed the idea that when the continentals talked of economic and political union, they really meant it. She would regret all this later.

At home a wider dilemma was emerging right across domestic policy, from the inner cities to hospitals, schools to police forces. It was one which would puzzle both her successor governments, John Major’s and Tony Blair’s. It was simply this: how does a modern government get things done? In the economy, she had an answer. Government sets the rules, delivers sound money and then stands back letting other people get on with it. In practice she often behaved differently, always more pragmatic and interventionist than her image suggested. At least, however, the principle was clear. But when it came to the public services there was no similar principle. Where were the staunch, independent-spirited movers and shakers in the hospitals, town halls or the school system, the equivalent for public life of the entrepreneurs and risk takers she admired in business? If government stood back and just let go of schools, hospitals, inner cities, who would be waiting to catch them?

Before the Thatcher revolution the Conservatives had been seen as, on balance, defenders of local democracy. They were very strongly represented in councils across the country and had been on the receiving end of some of the most thuggish threats from Labour governments intent, for instance, on abolishing grammar schools. Conservatives had seen local representatives on hospital boards and education authorities as bulwarks against socialist Whitehall. Margaret Thatcher herself had good reason to recall the days of sturdy local independents, doing the public’s work on unpaid committees for her father, Alderman Roberts, had been one of them. In the seventies, Tory think tanks regularly produced reports calling for stronger localism, the building of a rich ‘civil society’ in which independent institutions – churches, schools, charities, clubs and the rest – would spread autonomy and freedom. It was the theme of the most influential conservative philosopher of post-war Britain, Michael Oakeshott. The Tory vision emphatically included elected local government. In 1978, two right-wing Conservative politicians, for instance, wrote a passionate pamphlet complaining that ‘local government is being deprived of more and more of the functions it used to be thought capable of fulfilling.’24

Yet in power, Thatcher and her ministers could not trust local government, or any elected and therefore independent bodies at all. Between 1979 and 1994, an astonishing 150 Acts of Parliament were passed removing powers from local authorities, and £24 billion a year, at 1994 prices, had been switched from them to unelected and mostly secretive gatherings. The first two Thatcher governments transferred power and discretion away from people who had stood openly for election, and towards the subservient agents of Whitehall, often paid-up party members and well-meaning stooges. Ministers, whether ‘wet’ or ‘dry’, competed to show her their zeal by taking the initiative away from organizations on the ground. Michael Heseltine attacked local government with new auditing arrangements, curbs on how much tax they could raise, and then spending caps as well. Nicholas Ridley, an Environment Secretary, forced them to put out a wide range of services to tender for private companies, telling local councils in the harshest terms that no dissent was permissable: ‘we might have to force them to expose their activities to competition if they did not choose to do that themselves.’²⁵

So there was no public service equivalent of privatization. In hospitals and schools Thatcher had eventually rejected the radical alternatives of fees, private management, selection and independence when offered them by the CPRS (Central Policy Review Staff). Stirred by the idea, she was too cautious to follow where it led. If neither new private nor old public, then what? The answer turned out to be expensive bureaucratic central activity which made ministers feel important. In the health service, early attempts to decentralize were rapidly reversed and a vast top-down system of targets and measurements was put in place, driven by a new planning organization. It cost more and the service seemed to get worse. Similar centralist power-grabs took place in urban regeneration, one of the most visible and immediate areas of government action, where unelected corporations, UDCs, rather than elected councils, got the money to pour into rundown cities. The biggest city councils, notably the Greater London Council, were simply abolished. Its powers were distributed, including to an unelected organization controlled by Whitehall. As one critic, Simon Jenkins, pointed out, by 1990 ‘there were some 12,000 laymen and women running London on an appointed basis against just 1,900 elected borough councillors.’ Even in housing, the gap left by the sale of council homes was met by the rise of the Housing Corporation, disbursing 90 per cent of the money used by housing associations to build new cheap homes. In the Thatcher years its staff grew sevenfold and its budget, twentyfold.

Back in the mid-eighties she did, to be fair, have other things on her mind. Personal relationships matter as much in modern diplomacy as they did in the Renaissance, and the Thatcher–Gorbachev courtship engaged her imagination and human interest. She was becoming the closest ally Ronald Reagan had, in another international relationship which was of huge emotional and political significance to her. In these years she had become an international diva of conservative politics, feted by crowds from Russia and China to New York. Her wardrobe, coded depending on where an outfit had first been worn, told its own story: ‘Paris Opera, Washington Pink, Reagan Navy, Toronto Turquoise, Tokyo Blue, Kremlin Silver, Peking Black’.26 Meanwhile she was negotiating the hard detail of Hong Kong’s transitional status before it was handed over to Communist China in 1997. She got a torrid time at Commonwealth conferences for her opposition to sanctions against the apartheid regime in South Africa – and where she gave as good as she got. At home, the problem of persistently high unemployment was nagging away, though it started to fall from the summer of 1986, while Tory strategists still seemed to lack a clear idea about how to deal with the unfamiliar threat of the ‘two Davids’ and the Liberal-SDP Alliance. And electorally, the multiple failures and political threats turned out to matter not at all.

1987: The Revolution Confirmed

When the 1987 election campaign began, Thatcher had a clear idea about what her third administration would do. Just like Tony Blair later, she wanted more choice for the users of state services. There would be independent state schools outside the control of local councillors, called grant-maintained schools. In the health service, though it was barely mentioned in the manifesto, she wanted money to follow the patient. Tenants would be given more rights. The basic rate of income tax would be cut. She would finally sort out local government, ending the rates and bringing in a tax with bite. On paper the programme seemed coherent, which was more than could be said for the management of the Tory campaign itself. Just as Kinnock’s Labour team had achieved a rare harmony and discipline, Conservative Central Office was racked by hissy fits and screaming cat-fights between politicians and ad-men. The Leaderene began to snap at her former favourite, the carnivorous ‘Chingford Skinhead’, Norman Tebbit, now party chairman.

At one point in the campaign when the Labour leader seemed to have closed the gap to just four points and when Mrs Thatcher herself was performing badly, hit by agonizing toothache, the Tories had a real panic, ‘Wobbly Thursday’. That dreadful Kinnock, it seemed, was having a better campaign than she was. He sailed around, surrounded by admiring crowds, young people, nurses, waving and smiling and little worried by the press while she was having a horrid time. What was going on? In the event, the Conservatives need not have worried at all. Despite a last-minute BBC prediction of a hung Parliament, and a late surge of Labour self-belief, they romped home. The Tories had an overall majority of 101 seats, almost exactly the share of the vote (42 per cent) they had enjoyed after the Labour catastrophe of 1983. Labour had made just twenty net gains. At home in his Welsh constituency, despairing, Kinnock punched the wall. His police protection officer, who had been much moved by some of the great Kinnock speeches he had witnessed in the past three weeks, offered words of comfort. ‘Don’t worry, sir, it could have been worse.’ Kinnock is said to have swivelled round towards him, eyes narrowed, looking suddenly dangerous. ‘Worse? Could have been worse? Just tell me, how could it have been worse?’ The police officer blandly replied: ‘Well sir, in the old days, they’d have chopped your head off.’

Afterwards, surveying the wreckage of their hopes, Kinnock and his team won plaudits from the press for the brilliance, verve and professionalism of their campaign. It had been transformed from the shambles of only four years earlier. At the same time the Conservatives had been flat-footed and unsure of themselves compared to their previous two elections, which only goes to show that the detail of electioneering, which obsesses Westminster politicians, is perhaps less important than they think. And what of the SDP-Liberal Alliance, the big new idea of eighties politics? They were out of puff. They had been floundering in the polls for some time, caught between Kinnock’s modest Labour revival and Thatcher’s continuing popularity with a large and solid minority of voters. Their gamble was that Labour was dying, and it had failed. The public had enjoyed robust media mockery of the competing David Steel/David Owen dual leadership as much as the leadership itself. Though Owen was popularly seen as the dominant partner his Social Democrats had a woeful election, seeing their eight MPs reduced to five and losing Roy Jenkins in the process, a tribulation Owen bore with fortitude. The SDP would soon begin to fall apart, though an Owenite rump party limped on for a while after the rest merged with the Liberals. Good PR, good labelling, goodwill; none of it had been good enough. In 1987 Thatcher had not created the country she dreamed of, but she could argue that she had won a third consecutive victory on the back of ideas, not on the back of envelopes.

The Year of Hubris, 1988 – and Why We Still Live There

For true believers the story of Margaret Thatcher’s third and last administration can be summed up in the single word, betrayal. Her hopes of a free-market Europe were betrayed by the continentals, abetted by her own treacherous Foreign Office. Her achievements in bringing down inflation were betrayed by her Chancellor, Nigel Lawson. Finally she was betrayed directly – ‘treachery with a smile on its face’ – when her cabinet ministers turned on her and forced her to resign on 20 November 1990. The British revolution was sold out by faint-hearts, its great leader exiled to an executive home in south London, and glory departed from the earth. But there is another word that sums up the story better – not betrayal, but hubris. In the late eighties the Thatcher revolution overreached itself. The inflationary boom happened because of the expansion of credit and a belief among ministers that, somehow, the old laws of economics had been abolished; Britain was now in a virtuous, endless upward spiral of increasing prosperity. Across the Welfare State swaggering, highhanded centralism continued on steroids, ever grander. Near the end, Thatcher’s fall was triggered by a disastrous policy for local taxation whose blatant unfairness was never properly considered by ministers, as if it did not really matter. And by the end, her own brutal rudeness to those around her left her almost friendless. She had been in power too long.

The year after the election, 1988, was the real year of hubris. The Thatcher government began laying about it with a frenzy unmatched before or since, flaying independent institutions and bullying the professions as if it was a short-tempered teacher and they were uppity children. England’s senior judges came under tighter new political control. They would hit back. University lecturers lost the academic tenure they had enjoyed since the days when students arrived by ox-cart, making jokes in Latin. In Kenneth Baker’s Great Education Reform Bill, or ‘Gerbil’ of that year, Whitehall grabbed direct control over the running of school curriculums, creating a vast new state bureaucracy to dictate what should be taught, when and how, and then to monitor the results. Teachers could do nothing. The cabinet debated the detail of maths courses; Mrs Thatcher spent much of her own time worrying about the teaching of history. It happened at a time when education ministers were complaining bitterly in private about the appalling quality of talent, not among teachers, but civil servants, the very people they were handing more power to.

A former and penitent Education Secretary from the age of comprehensives, Thatcher believed schooling was now a national disgrace. She wanted to scupper trendy-lefty teachers by giving parents, generally traditionalist, more choice about which school to choose. That meant establishing Whitehall-controlled independent state schools specializing in technical subjects, City Technology Colleges. It also meant persuading other schools to opt out of local authority control to become grant-maintained, rewarded with a small bribe. Neither idea worked. Only a small number of highly costly CTCs ever opened and the few schools who opted out found they had opted in – to tight Treasury and Department of Education control. Later under John Major’s government, the inevitable extension of central financial control would produce yet another Whitehall-style organization (though, in fact, based in York), the Funding Agency for Schools. It was meant to be able to close schools, open schools, expand them, change their character and cut their scale, all without reference to local wishes. It was described by a right-wing think tank as having ‘an extraordinary range of dictatorial powers’ giving the Education Secretary ‘authority similar to Henry VIII’s dissolution commissioners’.27

It was the same pattern in health. In 1988 too, the new Health Secretary, Kenneth Clarke, pressed ahead with the system of ‘money following the patient’, a Monopoly-board version of the market in which hospitals ‘sold’ their services, and local doctors, on behalf of the ill, ‘bought’ them. The market was not real, of course, because the hospitals could not go out of business and the doctors, with a limited range of hospitals to choose from, could hardly withhold their money and refuse to buy their patients a heart bypass or hip replacement. The initial theory was perfectly intelligent. It was an attempt to bring private sector-like behaviour into the health service, a new regime of efficiency and tight budgeting. It looked enough like a real market to cause a huge and lengthy revolt by doctors and patients’ groups. They were worrying about the wrong problem.

Because the government did not really trust local people to work together to improve the health service, the Treasury seized control of budgets and contracts. And to administer the system nearly 500 National Health Service trusts were formed, apparently autonomous but staffed by failed party candidates, ex-councillors and party donors. Any involvement by elected local representatives was brutally terminated. Mrs Thatcher later wrote: ‘As with our education reforms, we wanted all hospitals to have greater responsibility for their affairs . . . [and] the self-governing hospitals to be virtually independent.’ But as with her education reforms, the real effect was to create a new bureaucracy overseeing a regiment of quangos. Every detail of the ‘internal market’ contracts was set down from the centre, from pay to borrowing to staffing. The rhetoric of choice in practice, meant an incompetent dictatorship of bills, contracts and instructions. Those who could voted with their chequebooks. Between 1980 and 1990, the number of people covered by the private health insurance company Bupa nearly doubled, from 3.5 million to a little under 7 million. It wasn’t only salaried, professional people with health insurance written into their contracts who paid for private medicine: by the late eighties private hospitals had queues of tattooed men in jeans waiting to be seen, cash in hand.

Hubris about what the State can and cannot do was found everywhere. Training may be unglamorous but it is crucial to any modern economy. Here too a web of unelected bodies was spun, disbursing Treasury money according to Whitehall rules. The same happened in housing, which Thatcher said was more serious a matter even than health and education at the time, and which in 1988 saw the establishment of unelected Housing Action Trusts to take over the old responsibility of local authorities for providing cheap homes. Nearly twenty years after most of these bodies began work, there is still a puzzle here.

Mrs Thatcher said she was trying to pull the State off people’s backs. In the end, that was the point of her. She thought so, too. In her memoirs she wrote of her third government, ‘the root cause of our contemporary social problems . . . was that the state had been doing too much.’ So why did she let it bustle around doing more and more? Simon Jenkins concluded that ‘Her most potent legacy was potency itself.’28 The more a leader is self-certain, the more there is in the world around her that she wants to change and the fewer other people she can trust. That means taking more powers. Letting other institutions and smaller-scale leaders find their own way through a busy world goes for a Burton. The institutions most hurt were local councils. Under our constitution, local government is defenceless against a Prime Minister with a secure parliamentary majority and a loyal cabinet. So it has been hacked away. It is time to address the moment when this programme of crushing alternative centres of power came so badly unstuck it destroyed the Lady Lenin of the free market herself.

Enter the Peasants, with Billhooks

Margaret Thatcher would say the poll tax was actually an attempt to save local government. Like schools, hospitals and housing, councils had been subject to a grisly torture chamberful of pincers, bits, whips and flails as ministers tried to stop them spending money, or raising it, except as Whitehall wished. Since the war local government had been spending more but the amount of money it raised independently came from a relatively narrow base of people, some 14 million property-owners. Thatcher had been prodded by Edward Heath into promising to replace this tax, the ‘rates’, as early as 1974 but nobody had come up with a plausible and popular-sounding alternative. She intensely disliked rates, regarding them as a tax on self-improvement and inherently un-Conservative. Yet in government, the problem nagged away at her.

There was a malign dynamic at work. The more powers government took away from local councils, the less councils mattered and the more local elections were used merely as giant referendums on central government, a cost-free protest vote. Once, local elections were not national news; they were about who was best to run towns and counties. In the late sixties and seventies they became national news, a regular referendum in which the Prime Minister was applauded or slapped. It was generally the latter. Under Margaret Thatcher the Tories lost swathes of local councils in bloody electoral defeats, again and again. The result was more socialist councils, mistrusted even more by central government, which therefore, as we have seen, took still more powers away from them, which made the elections even less relevant, and fuelled more protest voting and so on. If this was not bad enough, then it was clear to Thatcher and her ministers that socialist councils were pursuing expensive hard-left policies partly because so few of the local voters were ratepayers. Too many could vote for high-spending councils without feeling any personal pinch.

One way of cutting the knot would to be to make all those who voted for local councils pay towards their cost. This was the origin of the poll tax, or community charge as it was officially known, a single flat tax for everyone. It would mean lower bills for many homeowners and it would make local councils more responsive to their voters. On the other hand, it would mean a new tax for approximately 20 million people which would be regressive. The poorest in the land would pay as much as the richest. This broke a principle which stretched much further back that the ‘post-war consensus’. The idea had been knocking around for some years before it was picked up by the government and subjected to a long and intense internal debate, which we will skip, except to note that not everyone thought it was a good idea. The poll tax was sold to Mrs Thatcher by her Environment Secretary, Kenneth Baker, at a seminar at Chequers in 1985, along with the nationalization of the business rate. Nigel Lawson tried very hard to argue the Prime Minister out of it, telling her it would be ‘completely unworkable and politically catastrophic’.

He was outgunned by a stream of lady-pleasers keen to prove him wrong, and indeed the tax was being discussed at the very same cabinet meeting Heseltine stalked out of during the Westland affair. It might have been less of a disaster – it might even have been successful – had it been brought in very slowly, over ten years as first mooted, or four as was then planned. But at the 1987 Tory conference there was a collective rush of blood to the head. Intoxicated by the bold simplicity of the thing, party members urged Thatcher to bring it in at once. Idiotically, she agreed. There was, to be fair, a reason for hurry. Rates, like the modern council tax, depended on the relative value of houses across Britain, which changed with fashion and home improvement. Every so often, therefore, there had to be a general revaluation to keep the tax working. Yet each revaluation meant higher rates bills for millions of homeowners and businesses, and governments tended to try to put them off. In Scotland a crisper law did not allow this. There, a rates revaluation had finally happened and caused political mayhem. It gave English ministers a nasty glimpse of what was in store for them too eventually. Scottish ministers begged Thatcher to be allowed the poll tax first. They were given their head.

Exemptions were to be made for the unemployed and low paid but an attempt by wisely nervous Tory MPs to divide the tax into three bands so that it bore some relation to people’s ability to pay, was brushed aside despite a huge parliamentary rebellion. When the tax was duly introduced in Scotland, as we shall see later, it caused chaos and widespread protest. In England, the likely price of the average poll tax kept rising. Panicking ministers produced expensive schemes to cap it, and to create more generous exemptions, undermining the whole point. Capping the tax would remove local accountability; and the more exemptions, the less pressure on councils from their voters. Yet even Thatcher began to grow alarmed, as she was told that well over 80 per cent of people would be paying more. On 31 March 1990, the day before the poll tax was due to take effect in England and Wales, there was a massive demonstration against it which ended with a riot in Trafalgar Square. Scaffolding was ripped apart and used to throw at mounted police, cars were set on fire, shops smashed. More than 300 people were arrested and 400 policemen hurt. Thatcher dismissed it as mere wickedness. More than a riot, though, it was the growing swell of protest by middle-class, normally law-abiding voters who insisted they simply would not pay it, that shook her cabinet. As the Conservatives’ ratings slumped in the country, Tory MPs who had opposed the tax, including Michael Heseltine’s key organizer, Michael Mates, began to ask their colleagues whether it was not now time that she was removed from power.

The Final Curtain

The killing of Margaret Thatcher’s political career has a dark lustre about it, like something from a book of old stories. She had conducted her premiership with a sense of vivid and immediate self-dramatization, the heroine of peace and war, fighting pitched battles in coalfields and on the streets, word-punching her way through triumphal conferences, haranguing rival leaders, always with a sense that history was being freshly minted, day by day. This is why so many insults levelled at her tended to twist into unintended compliments – the Iron Lady, La Pasionara of Privilege, She Who Must Be Obeyed, the Leaderene, the Blessed Margaret, even the Great She-Elephant. Reflected in her bloodied breastplate the eighties glowed more luridly than any other modern decade, flashing gold with the City’s new wealth, sunny as the Soviets collapsed, livid in its confrontations and cruelty nearer to home. She had no sense of her own limits. The world was made anew. Her fall lived up in every way to her record. When a great leader topples, poetry requires that her personal failings bring her down. The story insists it must be more than a trip on the carpet, weariness or age. And this story’s ending lives up to its earlier scenes.

There were several powder-trails that led towards the final explosion. One was the poll tax. Another was economic policy, and Europe, which had become almost the same thing. We have seen how Lawson wanted to tie the pound to the anti-inflationary expertise and reputation of the West German Central Bank, ‘shadowing’ the Deutschmark in the European exchange rate mechanism. In effect, he was looking for somewhere firm to plant down policy in the queasy morass of the new global financial free-for-all. Thatcher disagreed. She thought currencies should float freely, Ariel to his Caliban. She also knew that the ERM was intended one day to lead to a single European currency, part of the European Commission President Jacques Delors’s plan for a freshly buttressed European federal state. Lawson, dogged, bull-like, ignored her and shadowed the German currency anyway, a fact somehow both denied yet generally known. Thatcher read about it in the newspapers. When the cost of Lawson’s policy became excessive she finally ordered him to stop. He grumpily agreed but the two of them stopped talking.

Bruges in Belgium is a pretty town. Thanks to the channel tunnel and cheap flights, British people flock there for romance, beer, art and chocolate. When Margaret Thatcher rode into town in 1988, year of hubris, none of these things was on her agenda. She had come to make her definitive speech against the federalism now openly advancing towards her. The Foreign Office had tried to soften her message. She had promptly pulled out her pen and written the barbs and thorns back in again. She had not, she informed her audience, ‘successfully rolled back the frontiers of the state in Britain’ (a claim already anatomized) ‘only to see them reimposed at a European level, with a European super-state exercising a new level of dominance from Brussels.’ There was much else besides. Her bluntness much offended continental politicians and the Foreign Secretary, Sir Geoffrey Howe. Next, she reappointed as her economic adviser a lugubrious and outspoken monetarist academic, Sir Alan Walters, who was contemptuous of Lawson’s exchange rate policy and said so, repeatedly. Thus she was taking on Howe and Lawson, the two Chancellors of her revolutionary years, together. A dangerous split was becoming evident at the top of government. She seemed not to care, biffing Howe about as carelessly as she always had. Nor was anyone much convinced when she told the world she ‘fully, gladly, joyfully, unequivocally, generously . . . fully, fully, fully, fully’ supported Lawson as her Chancellor. People said she had no sense of humour. They were wrong. It was just a slightly strange one.

Then Jacques Delors, the wry and determined French socialist, re-entered the story, with his fleshed-out plan for economic and monetary union, which would end with the single currency, the euro. To get there, all EU members would start by putting their national currencies into the ERM, which would draw them increasingly tightly together – just what Lawson and Howe wanted and just what Thatcher did not. Howe and Lawson, Pinky and Perky, ganged up. They told her she must announce that Britain would soon join the ERM, even if she left the single currency itself to one side, for the time. She wriggled, then fought back. On the eve of a summit in Madrid where Britain had to announce her view the two of them visited her in private, had a blazing row and threatened to resign together if she did not give way. Truculently she did, and the crisis passed. But she was merely waiting. Four weeks after the summit, in July 1989, Thatcher hit back. She unleashed a major cabinet reshuffle, compared at the time to Macmillan’s ‘night of the long knives’ in 1962. Howe was demoted to being Leader of the Commons. She reluctantly allowed him the face-saving title of Deputy Prime Minister, a concession rather diminished when her press officer, Bernard Ingham, instantly told journalists it was a bit of a non-job. Howe was replaced by the relatively unknown John Major, the former chief secretary. Lawson survived only because the economy was weakening and to lose him was thought too dangerous just then.

So the drama advanced. The atmosphere in the Commons was a combustible mix of sulphur and adrenalin. Lawson was having a bad time on all sides, including from the Labour shadow chancellor John Smith. When Thatcher’s adviser Walters had another pop at his ERM policy, he decided enough was enough and resigned on 26 October, telling the Prime Minister she should treat her ministers better. She pretended to have no idea what he was on about. Lawson was replaced by the still relatively unknown John Major, who was having an interesting autumn. Around them all, the world was changing. A few days after these events, East Germany announced the opening of the border to the West and joyous Berliners began hacking their wall to pieces. Then the communists fell in Czechoslovakia. Then the Romanian dictator Ceaus¸escu was dragged from power. A few weeks after that, in February 1990, Nelson Mandela, a man she had once denounced as a terrorist, was released to global acclaim. In the middle of all this the Commons had witnessed an event which seemed the opposite of historic. Thatcher had been challenged as leader of the Conservative Party by Sir Anthony Meyer, an obscure, elderly pro-European backbencher much mocked as ‘the stalking donkey’. It was a little like Ronnie Corbett challenging Mike Tyson to a punch-up. Yet, ominously for Thatcher, when the vote was held sixty Tory MPs either voted donkey or abstained. In the shadows, prowling through Conservative associations and the corridors of Westminster was a more dangerous creature. Michael Heseltine, no donkey, self-expelled from the Thatcher cabinet four years earlier, was looking uncommonly chipper. Tory MPs whimpered to him about the trouble they were in with the poll tax. He sympathized, trying neither to lick his lips nor sharpen his claws too obviously.

One by one, the inner core of true Thatcherites fell back. Her bone-dry Environment Secretary, Nicholas Ridley, had to resign after being rude about the Germans in a magazine interview – given, piquantly, to Lawson’s son Dominic. John Major turned out to be worryingly pro-European after all. Ian Gow, one of her closest associates, though no longer in the government, was murdered by an IRA bomb at his home. Abroad, great world events continued to stalk the last days of Margaret Thatcher’s premiership. Saddam Hussein invaded Kuwait and she urged President George Bush the elder towards what would become the first Gulf War – ‘Don’t wobble, George.’ There was another summit in Rome and further pressure on the Delors plan. Again, Thatcher felt herself being pushed and dragged towards a federal scheme. She vented her contempt and anger in the Commons, shredding the proposals with the words, ‘No . . . No . . . No!’ And at this point the one person who could never have been expected to finish her off, did so.

For years Geoffrey Howe had absorbed her slights, her impatience, her mockery, her snarls. He had taken it all, with the rubbery fatalism of the battered husband who will never leave. Now, observing her flaming anti-Brussels crusade, he decided he had had enough. She probably tipped him over the edge by turning on him savagely and unfairly over some legislation that was not ready, but he had decided to go. On 13 November 1990 he stood up rather lugubriously in the House of Commons and did her in. His resignation statement was designed to answer the story put around by Number Ten that he had gone over nothing much at all. To a packed chamber he revealed that Lawson and he had threatened to resign together the previous year and accused her of sending her ministers to negotiate in Brussels like a cricket team going to the crease, having first broken their bats in the changing room. She was wrong over Europe, he insisted; and then threw the door open to the further leadership challenge that was now inevitable: ‘The time has come for others to consider their own response to the tragic conflict of loyalties with which I myself have wrestled for perhaps too long.’ Television cameras had just been allowed into the Commons. Across the country people could watch Howe, with Nigel Lawson nodding behind him, could see Heseltine’s studied, icy calm, and observe the white-faced reaction of the Prime Minister herself. The next day Heseltine announced he would stand against her as leader. She told The Times that he was a socialist at heart, someone whose philosophy at its extreme end had just been defeated in the Soviet Union. She would see him off, of course.

The balloting system for Tory MPs required her to beat Heseltine by winning both a clear majority of the parliamentary party and being 15 per cent ahead of him in votes cast. At a summit in Paris, surrounded by many old enemies, she heard that she had missed the second hurdle by four votes. There would be a second ballot. As one of the few people in public life who could swarm all by herself, she swarmed out of the summit, somehow found a BBC microphone and announced that though disappointed, she would fight on. Then she returned with heroic sangfroid to sit through a ballet with the other leaders, who were pleasant enough to her face. While she watched the ballet, Tory MPs were dancing through Westminster in anger or delight. It was a night of softening support and hardening hearts. Many key Thatcherites believed she was finished and feared that if she fought again, Heseltine would beat her. This would tear the party in two. It would be better for her to withdraw and let someone else assassinate the assassin.

Even then, had she been in London throughout the crisis and summoned her cabinet together to back her, she might have pulled it off. But by the time she was back and taking advice from her whips the news was bleak. In what was probably a tactical mistake, she decided to see her cabinet one by one in her Commons office. Douglas Hurd and John Major had already given her their reluctant agreement to nominate her for the next round of voting but the message from most of the rest of her ministers was strangely uniform. They would personally back her if she was determined to fight but, frankly, she would lose. That would mean Heseltine. Better, Prime Minister, to stand aside and free Major and Hurd from their promises of support. Later, she was wryly amusing about the process. It looked very much as if most of them had agreed the line beforehand. The whips concurred. The cabinet were going through the motions of supporting her if she insisted, but they did not mean it, or mean her to believe it. She had lost them. Only a few ultras, mostly outside the cabinet, were sincerely urging her to continue the struggle. One was that wicked diarist and right-wing maverick Alan Clark, who told her to fight on at all costs: ‘Unfortunately he went on to argue that I should fight on even though I was bound to lose because it was better to go down in a blaze of glorious defeat than to go gentle into that good night. Since I had no particular fondness for Wagnerian endings, this lifted my spirits only briefly.’29

So it was over. In their various ways, her cabinet were too tired to support her any longer and her MPs were too scared of the electoral vengeance to be wreaked after the poll tax. She returned to Downing Street, conferred with Denis, slept on it, and then announced to her cabinet secretary at 7.30 the next morning that she had decided to resign. She held an uncomfortable cabinet meeting with those she believed had betrayed her, saw the Queen, phoned other world leaders and then finished with one final splendid Commons performance – ‘I’m enjoying this!’ – vigorously defending her record. Come back, cried one emotional Tory MP. When Margaret Thatcher left Downing Street for the last time in tears, she already knew that she had successfully completed a final political campaign, which was to ensure that she was replaced as Prime Minister by John Major, rather than Michael Heseltine. She had rallied support for him by phone among her closest supporters. They felt he had not been quite supportive enough. She also harboured private doubts. So ended the most extraordinary and nation-changing premiership of modern British history.

 

Part Five

NIPPY METRO PEOPLE:
BRITAIN FROM 1990

 

Thatcher’s children? By the time she left office, only a minority were true believers. Most would have voted her out had her cabinet ministers not beaten them to it. History is harshest to a leader just as they fall. She had been such a strident presence for so long that many who had first welcomed her as a gust of fresh air now felt harried. Those who wanted a quieter leader were about to get one. Yet most people had in the end done well under her, not just the Yuppies and Essex boys, but also her snidest middle-class critics. Britons were on average much wealthier than they had been at the end of seventies. The country was enjoying bigger cars, a far wider range of holidays, better food, a wider choice of television channels, home videos, and the first slew of gadgets from the computer age. Yet this was not quite the Britain of today.

More people smoked. The idea of smoke-free public areas, or smoking bans in offices and restaurants, was lampooned as a weird Californian innovation that would never come here. People seen talking to themselves with a wire dangling from one ear would have been considered worryingly disturbed. There were no Starbucks: coffee shops were still mainly locally owned places selling instant coffee, tea, fried food or cakes. Lunch had been under threat for some years in the City and the days of midday drinking were beginning to die in other professions too. The chic sandwich bar had begun to spread since the early eighties, when BLTs, avocado and blue cheese began to be regularly offered, alongside the traditional fillings of cheese, ham and egg. At a by-election outside Liverpool in 1986 a Labour activist had allegedly pointed to the mushy peas in a local chip-shop and asked for some of the ‘avocado dip’ too: it was a story, perhaps an urban myth, much re-told as symbolizing the gap between real Britain and the new metropolitan Britain of the south. The habit of urbanites carrying bottled water wherever they went had not yet taken off, though meaningless corporate language was already sullying business life. The ubiquitous PowerPoint presentation was in its infancy. Passengers, rather than ‘customers’, travelled on British Rail trains, with the double-arrow symbol which had been familiar since 1965. On the roads were plenty of flashy Ford Sierras, Austin Montegos and nippy Metros.

For a wealthy country, the mood was uneasy. An old jibe, ‘public affluence, public squalor’, was much heard. The most immediate worry was economic as the hangover effects of the Lawson boom began to throb. Inflation was rising towards double figures, interest rates were at 14 per cent and unemployment was heading towards two million. Over the next four years a serious white-collar recession was to hit Britain, particularly in the south, where house prices would fall by a quarter. An estimated 1.8 million people found that their homes were worth less than the money they had borrowed to buy them in the heady easy-credit eighties. During 1991 alone, more than 75,000 families would have their homes repossessed. With hindsight it is generally accepted that the Thatcher revolution reshaped the country’s economy and prepared Britain well for the new age of globalization waiting in the wings, but in 1990 it did not feel quite like that.

There were other changes too. The British were fewer than they are today. The population was smaller by at least three million souls. Also, the ethnic mix of the country was simpler. Of the roughly three million non-white British, the largest groups were Indian (840,000), black Caribbean (500,000) and Pakistani (476,000), pretty much what an extrapolation from the seventies would have predicted. No serious concern was expressed politically about whether Muslims could fully integrate. In the interests of keeping an eye on troublemakers, and maintaining Britain’s traditions of tolerance, a number of the most radical Islamic militants, on the run from their own countries, had been given safe haven in London. The largest white migrant group was from Ireland, which was still relatively poor. Any Poles or Russians in Britain were diplomats or refugees from communism. The term ‘bogus asylum seeker’ would have met with a puzzled frown. Looking to east or west, Britain was far less penetrated by overseas culture and people than she would soon become.

Britain was also about to go to war again as the junior partner to the Americans in the first Gulf conflict, which freed Kuwait from Saddam Hussein’s invasion and immolated the Iraqi army’s Republican Guard. Despite British forces losing lives and the use by Saddam of human shields, the war generated nothing like the controversy of the later Iraq war. It was widely seen as a necessary act of international retribution against a particularly horrible dictator. After the controversies and alarms of the Thatcher years, foreign affairs generated less heat, except for the great issue of European federalism. There was a real sense of optimism caused by the end of the Cold War, which had resulted in the deaths of up to 40 million people around the world, and involved no fewer than 150 smaller conflicts. At last, perhaps, the West could relax. Politicians and journalists talked excitedly of the coming ‘peace dividend’ and the end of the surveillance and espionage secret state that had been needed for so long. The only present threat to British security was the Provisional IRA, which would continue its attacks with ferocity and cunning for some years to come. They would hit Downing Street with a triple mortar attack on a snowy day in February 1991, coming close to killing the Prime Minister and the top team of ministers and officials directing the Gulf War.

Environmental worries were present too, though a bat-squeak compared to today’s panic. British scientists played a big role in alerting the world. Among the handful of Britons in the second half of the twentieth century who may be remembered centuries hence is James Lovelock. He is the scientist who in 1965 after studying the long-term chemical composition of the planet’s systems, and their interaction with living organisms, developed the ‘Gaia’ theory. The name, from a Greek goddess, came from the British Nobel Prize-winning novelist William Golding, a neighbour of Lovelock’s in Devon, during a country walk. ‘Gaia’ demonstrated how fragile the life-supporting atmosphere and chemistry of the planet is, an immensely complex self-regulating system keeping temperatures fit for life. Some hippies and ‘New Age’ mystics mistakenly thought Lovelock was saying the Earth was herself alive. He was using a metaphor but one with powerful implications for man-made climate change. At the same time as Lovelock was writing his most influential book, in the late seventies, far south the British Antarctic Survey was just beginning to notice a thinning of the ozone layer. It is said that when the first measurements were taken later in 1985 the readings were so low the scientists assumed their instruments were faulty and sent home for replacements. This led to an important treaty cutting ozone-depleting CFCs. British influence was important at the first world climate conference in Geneva in 1979, which had appealed to nations to do more research.

By 1990, a follow-up conference attended by 130 countries focused on the growing evidence that global warming was a real threat, but no agreement was reached about what should be done. Were any senior politicians worried? One was. Two years earlier Margaret Thatcher, science-trained, had made a speech about global warming. She had been persuaded that it was a profound issue by Britain’s outgoing ambassador to the United Nations, Sir Crispin Tickell, who had ironically enough got at her with worrying data during a long international plane flight. So in September 1988 she had told the Royal Society that she believed it possible that ‘we have unwittingly begun a massive experiment with the system of the earth itself.’ Such was the interest that no television cameras were sent to record her speech and the prime minister had to read it by the light of wax candles held over her head in an ancient hall. For most people in 1990 ‘the environment’ or green issues meant containable local problems such as the use of chemical pesticides or the problems of disposing of nuclear waste. Books about the fate of the earth concerned themselves with nuclear weapons.

Culturally, the country was as fixated by imported American television as it would continue to be: Baywatch and The Simpsons were popular new imports. And the national self-mocking strand of comedy which would be such a mark of the next fifteen years was well established, with Harry Enfield’s Wayne and Waynetta Slob joining his ‘Loadsamoney’ attacks on the big-bucks Thatcher years, Spitting Image puppetry at its most gleefully venomous, and the arrival of a new quiz show, Have I Got News For You. This heralded a time when interest in ideology and serious policy issues was being replaced by politics as entertainment, a stage on which humorists and hacks could prove themselves wittier than elected parliamentarians. Unsurprisingly, this would not result in a better-run country.

After a spate of transport disasters there was a widespread feeling that large investment was needed in the country’s infrastructure. French and British engineers celebrated in 1990 when they met under the Channel. Mobile phone use was tiny by modern standards, mainly confined to commercial business travellers’ cars and a few much-mocked City slickers carrying objects the size of a brick. The computer age was further advanced. The Thatcher years had seen a glittering waterfall of new products and applications, most of them generated in California’s new ‘silicon valley’, a hotbed of computer inventiveness recognized by name as early as 1971. The revolutionary Apple II computer had been launched in 1977, followed by Tandys, Commodores and Ataris with their floppy disks and basic games. The first IBM personal computer had arrived in 1981, using the unfamiliar MS-DOS operating system by a little known company called Microsoft. The Commodore 64 of the following year would become the best-selling computer of all time, though there were British computers: here, Sir Clive Sinclair’s ZX Spectrum computer caught most of the headlines. Then in 1983 an IBM clone arrived, the Compaq, first of countless many, and the unveiling of Microsoft Word and Windows. A year later came the first Amstrad personal computer from the British entrepreneur Alan Sugar’s electronics company and, from the US, the Apple Macintosh. A cult novelist called William Gibson introduced a new word, cyberspace.

By the end of the eighties the hot new topics were virtual reality, computer gaming – Sim City was launched in 1989 – and the exponentially increasing power of microprocessors. Computer graphics were becoming common in films, even though they were clunky and basic by modern standards. But the biggest about-to-happen event was the internet itself. The single most significant achievement by a British person in the early nineties had nothing to do with politics. Sir Tim Berners-Lee, inventor of the World Wide Web, stands alongside James Lovelock for influence above that of any politician. Today’s internet is a combination of technologies, from the satellites developing from the Soviet Sputnik success of 1957, to the US military programs to link computers, leading to the early ‘net’ systems developed by American universities, and the personal computer revolution itself. But Berners-Lee’s idea was for a worldwide hypertext – the computer-aided reading of electronic documents – to allow people to work together remotely, sharing their knowledge in a ‘web’ of documents. His creation of it would give the internet’s hardware its global voice.

Berners-Lee was an Oxford graduate who had made his first computer with a soldering iron and cut his teeth with British firms in Dorset, before moving to the European particle physics laboratory (CERN) in Switzerland in 1980. This is the world’s largest research laboratory where scientists were constantly evolving ways of communicating with one other by computer, so it is no coincidence that it was in Switzerland that Berners-Lee wrote his first program. In 1989 he proposed his hypertext revolution which arrived as ‘WorldWideWeb’ inside CERN in December 1990, and on the internet at large the following summer.

An admirably unflashy, decent man, Berners-Lee chose not to patent his creation, so that it would be free to everyone. He could have been fabulously wealthy but preferred to live the life of a moderately salaried academic, latterly in Boston, driving a second-hand car and living quietly. He was knighted in 2004 and, two years later, warned that misinformation and undemocratic forces were spreading through the web, calling for more research on its social consequences. In the immediate aftermath of the fall of Margaret Thatcher, all this was still to come. There were articles proclaiming some kind of new computer world community taking shape, but they were confusing to most people. Would this internet be basically for scientists? Was it a new kind of telephone-cum-typewriter, or an automated library system? Nobody knew for sure. In 1990 there were no ‘www’ prefixes, no dotcoms.

John Ball, More Interesting than He Looks

To guide this confusing new Britain, teetering on the edge of a new spate of globalism arrived an unlikely and very English figure, a Prime Minister whose seven years in office make him one of the longer-serving of modern times but who already gets half-overlooked. John Major was not what he seemed. He appeared to be a bland, friendly loyal Thatcherite. She thought so. So did Tory MPs, who elected him their leader because of who he was not. He was not the urbane, posh, old-school Tory Douglas Hurd and he was not the floppy-haired enchanter and lady-killer, Michael Heseltine. So who was he? Major had none of Thatcher’s certainty or harshness. It is a reasonable principle that when you probe the history of a normal, middle-of-the-road English person, you find it surprisingly exotic. That is the case with Major. He was a sensitive boy from the wrong part of town, from a mixed-up, rather rum family. His father was one of the music-hall artistes described much earlier in this book, a remarkable man who had been partly brought up in the United States, returning to Britain in Edwardian times to pursue a long stage career, then rampaging cheerfully round South America, marrying twice and producing two illegitimate children. His name was Tom Ball. The ‘Major’ was a stage name. As John Major said later he might more properly have been named John Ball, like the leader of the peasants’ revolt against the original poll tax.

Major was born late. His father was already an old man, now pursuing yet another career making garden ornaments. When an informal business deal went wrong he lost almost everything and the family moved from their comfortable suburban house to a crowded flat in Brixton, which they shared with a cat-burglar, a Jamaican later arrested for stabbing a policeman, and a trio of cheery Irish tax-dodgers. The flat turned out to be owned by Major’s (much older) secret half brother, though he never knew this at the time. Methodist Grantham this was not. Major, infuriated at being saddled with the name Major-Ball when he was sent to grammar school, was a poor pupil and left at sixteen. His early life was ragged and formless in shape. He worked as a clerk, made garden gnomes with his brother, looked after his mother and endured a ‘degrading’ time of unemployment, before eventually pursuing a career as a banker and becoming a Conservative councillor. Unlike Margaret Thatcher, his politics were formed by the inner city and he was on the anti-Powellite, moderate wing of the party. After a long search, he was finally selected as Tory candidate for the rural seat of Huntingdon and entered Parliament in 1979 as the Thatcher age began.

There he rose almost without trace, through a minor job with the Home Office, to the whips’ office which, as the internal security machine of a parliamentary party, can be a useful training ground for the ambitious, to two years at Social Security. After the 1987 election Thatcher promoted him to the cabinet as Chief Secretary to the Treasury, when he haggled with ministers about their spending plans. She liked him because he had stood up to her in argument, not because he was a stooge. There followed the abrupt further promotions to the Foreign Office where he served as Foreign Secretary for all of ninety-four days, and Treasury. As Chancellor he had promoted a short-lived alternative to monetary union, the ‘hard ecu’, which would have been a kind of voluntary euro, running alongside the old currencies. He had then won Thatcher round to membership of the ERM, though entering as it turned out at too high a rate. By the time he suddenly emerged as a possible candidate to replace her as Prime Minister, Major was known by those who knew him for being affable, reliable, hardworking, self-deprecating and, it was assumed, as her protégé, a model Thatcherite. But to everyone outside Tory politics, he was a blank canvas. He was the least known new Prime Minister in post-war Britain as well as the youngest of the century so far. At forty-seven, he was barely a public figure.

Most Conservatives had grown sick and tired of dramatics. Here was a bloke from next door with an easy smile leading them to easier times. Chris Patten, then the brightest man in the cabinet, acted as its spokesmen when he recalled the prisoners’ chorus to freedom in Beethoven’s opera Fidelio. If only they knew what was coming. Thatcher, belatedly slightly wary, promised to be a good ‘back-seat driver’. Major wanted none of her advice. He considered offering her a job, either in the cabinet or as ambassador to Washington. He decided not to. He talked of building a ‘society of opportunity’ and compassion, and for privileges once available to ‘the few’ to be spread ‘to the many’. This sounds like an early try-out for the language of New Labour: Major came to believe Blair had simply swiped many of his ideas and presented them as his own, with more verve. As we shall see there is some truth in this. But Major had little time to plan his own agenda. There were immediate crises. He was quick to kill off the poll tax and replace it with a new council tax bearing an uncommon resemblance to the old rating system. He was equally quick to meet the elder President Bush and support him through the Gulf War. Above all, he had to turn straight away to confront the great hydra-headed monster that was devouring his party, the federal agenda of Jacques Delors.

If ever a place was well chosen for debating the end of a Europe of independent nation states, it was Maastricht in Holland, an attractive cobbled town nestled so close to the German and Belgian borders it is almost nationless. Here the great showdown of winter 1991 took place. A new treaty was to be agreed and it was one which made the federal project ever more explicit. There was to be fast progress to a single currency. Much of foreign policy, defence policy and home affairs were to come under the ultimate authority of the EU. A ‘social chapter’ would oblige Britain to accept the more expensive work guarantees of the continent and surrender some of the trade union reforms brought in under Thatcher. For a country with a weak industrial base whose economy partly depended on undercutting her continental rivals, all this would be grave. For a Conservative Party which had applauded Lady Thatcher’s defiant Bruges speech, it was almost a declaration of war, in which Europe’s ‘federal’ destiny had become made explicit and imminent. Fretting and moody in exile Thatcher saw Maastricht as a recipe for national suicide. She now believed she had been removed from Downing Street because of her stand over Europe. Hearing Major declare he wanted Britain to be ‘at the heart of Europe’, a mere bromide of a phrase, she added him to the long list of traitors. Her admirers hissed. He refused to rule out a single currency for all time. They became angrier still. So did she.

Major was trying to be practical, not exciting. He decided that he had no absolutist views on the single currency. One day it would happen. It had obvious business and trading advantages. But now was too soon, partly because it would make life harder for the central European countries being freed from communism to join the EU. So he was neither a ‘never’ nor a ‘now’. Most people assumed he was glibly steering between two whirlpools, trying to keep his party united. In his memoirs, a great deal better written than most such books, he protested that he was accused of dithering, procrastination, lacking leadership and conviction. As to his true and subtle position, ‘I have given up hope that this will ever be understood.’ Yet at Maastricht he managed against all the odds during genuinely tense negotiations to slip Britain out of paying fealty to the EU on most of what was demanded. He and his Chancellor, Norman Lamont, negotiated a special British opt-out from monetary union and managed to have the social chapter excluded from the treaty altogether. Major kept haggling late and on every detail, wearing out his fellow leaders with more politeness but as much determination as Thatcher ever had. For a man with a weak hand, under fire from his own side at home, it was quite a feat. Major returned to hosannas in the newspapers and the widely reported remark of an aide that it was ‘game, set and match’ to Britain. He was briefly a hero. He described his reception by the Tory Party in the Commons as the modern equivalent of a Roman triumph, quite something for the boy from Brixton.

Soon after this, flushed with confidence, Major called the election most observers thought he must lose. The economy was so badly awry, the pain of the poll tax so fresh, the Labour Party of Neil Kinnock now so efficiently and ruthlessly organized, that the Tory years were surely ending. Things turned out differently. Lamont’s pre-election budget had helped a lot. It proposed cutting the bottom rate of income tax by five pence in the pound, which would help people on lower incomes, and badly wrong-footed Labour. Under a pugnacious Patten, now the party chairman, the Tories targeted Labour’s enthusiasm for higher taxes. It was tough stuff. Patten called himself ‘the liberal thug’. During the campaign itself, Major found himself returning to his roots in Brixton and mounting a soap-box – in fact, a plastic container – from which he addressed raucous crowds through a megaphone. This stark contrast to the careful control of the Labour campaign struck a chord with the media and he kept it up, playing the underdog to the Kinnock’s ‘government in waiting’. Right at the end, at an eve of the poll rally in Sheffield, Kinnock’s self-control finally gave way and he began punching the air with delight, crying ‘y’aw’right!’ This is often said to have finally turned middle England against him. That seems a bit neat.

On 9 April 1992 Major’s Conservatives won 14 million votes, more than any party in British political history. It was a great personal achievement, also based on people’s fear of higher Labour taxes. It was also one of the biggest percentage leads since 1945, though the vagaries of the electoral system gave Major a majority of just twenty-one seats. Kinnock was devastated and quickly left front-line politics. But never has such a famous victory produced such a rotten result for the winners. Patten lost his seat in Bath and went off to become the final governor of Hong Kong, tussling with the Chinese ahead of the long-agreed handover of Britain’s last proper colony. Despite the popular vote, the smallness of the majority meant Major’s authority was now steadily eaten away. He has not gone down in history as a great leader of this country, but under a parliamentary system greatness is generally related to parliamentary arithmetic. What kind of revolutionary would Margaret Thatcher have been had she had a majority of twenty-one in 1979 or 1983? Nor were the economics propitious. Had Labour won in 1992 it would have been quickly tarnished too. The choice of governing in that year was what rugby players call a hospital pass. For now John Major, the delighted and much-relieved victor, had the slippery ball in his hands and was acknowledging the cheers of the crowds. Meanwhile a platoon of nasty looking, bone-crushing, twenty-stone forwards were just about to jump him.

Old Labour’s Lost King

The story of modern British political life has, so far, thrown up a high proportion of nuts, or at least of unsettled people with something to prove. John Smith was not a nut. After Neil Kinnock gave up in despair following Major’s victory in 1992, he was replaced by a placid, secure, self-certain Scottish lawyer with a very boring name. Today almost everyone has an interest in writing John Smith out of the history books. For the Blairites, he was the timid, grey background for the heroic drama of modernization about to unfold. For those who loved Kinnock, he was the election-losing Shadow Chancellor. For the Tories, he was an embarrassingly good parliamentary inquisitor. In politics, predictions about what will happen a month ahead are dangerous but though Smith died of a heart attack in 1994, three years ahead of an election, it is fairly safe to suggest that, after the tarnishing years of the mid-nineties, he would have become Prime Minister. Had he done so, Britain would have had a traditionalist social democratic government, much closer to those of continental Europe, and our history would have been different.

Smith came from a family of herring fishermen on the West Coast of Scotland and, though bald as a coot himself, was the son of a bristly small town headmaster known as Hairy Smith. Labour-supporting from his earliest days, bright and self-assured, he got his real political education at Glasgow University, part of a generation of brilliant student debaters from all parties who would go on to dominate Scottish politics. Back in the early sixties, Glasgow University Labour Club was a hotbed not of radicals, but of Gaitskell-supporting moderates. It was a position Smith never wavered from, as he rose through politics as one of the brightest stars of the Scottish party, and then through government under Wilson and Callaghan as a junior minister dealing with the oil industry and devolution before entering the cabinet just in time as President of the Board of Trade, its youngest member at forty.

In Opposition, he managed to keep at arm’s length from the worst of the in-fighting (he and Tony Benn liked one another, despite their very different views, after working together at the Energy Department) and eventually became Kinnock’s shadow chancellor. He was a good lawyer and a brilliantly forensic parliamentary operator. This won him acclaim in the Westminster village even if, in Thatcher’s England, he was spotted as a tax-raising corporatist socialist of the old school. One letter he got briskly informed him: ‘You’ll not get my BT shares yet, you bald, owl-looking Scottish bastard. Go back to Scotland and let that other twit Kinnock go back to Wales.’1 Smith came from a somewhat old-fashioned Christian egalitarian background which put him naturally out of sympathy with the materialist, pleasure-orientated and aspirational culture that had grown so vigorously in Thatcherite England. Just before he became leader he told a newspaper he believed above all in education because ‘it opens the doors of the imagination, breaks down class barriers and frees people. In our family . . . money was looked down on and education was revered. I am still slightly contemptuous of money.’² This could not in all honesty be said of the man who replaced him.

Smith was never personally close to Kinnock, but scrupulously loyal. A convivial (not drunken) workaholic who ate too much, he nevertheless succeeded him by an overwhelming vote in 1992. By then he had with great good luck survived a major heart attack and taken up hill walking. The Sun, not always a good guide to the future, greeted his triumph with the eerily accurate and predictive headline: ‘He’s fat, he’s fifty-three, he’s had a heart attack and he’s taking on a stress-loaded job.’

Though Smith swiftly advanced the careers of the brightest younger stars, Tony Blair and Gordon Brown, they swiftly became depressed by his style of leadership. He did not believe Labour needed to be transformed, merely improved. He was reluctant at first to take on the party over issues such as one-person, one-vote internal democracy. He had an instantaneous dislike of the Mephistopheles of the modernizers, Peter Mandelson, which may have been tinged with Scottish Presbyterian homophobia. Blair, Brown and Mandelson thought Smith was smug and idle. He on the other hand was equally sure they were making too much fuss and that Labour could regain power with something of its traditional spirit. A little-known newspaper journalist called Alastair Campbell divided the party into two camps, the ‘frantics’, led by Brown, Blair and Jack Straw, and the ‘long-gamers’, led by Smith. At one point Blair was contemplating leaving politics, so despairing was he of Smith’s leadership. He should, he reflected, have stuck to the law, where his elder brother was doing so well. What was there in politics for him?

Smith died of a second heart attack on 12 May 1994. After the initial shock and grieving had finished, Labour moved rapidly away from his legacy. There is, however, one part of the Smith agenda which survived intact and is a big influence on the shape of Britain today. As the minister who had struggled to achieve devolution for Scotland in the dark years of 1978–9 he remained a passionate supporter of the ‘unfinished business’ of establishing a Scottish Parliament and Welsh Assembly. With his friend Donald Dewar he had committed Labour so utterly to the idea in Opposition that Blair, no particular fan of devolution, found this one part of old Labour’s agenda that stuck and had to be implemented later.

Black Wednesday and Party Suicide

The crisis that now engulfed the Conservative government was a complicated, devilish interaction of themes but in other ways very simple. The first thing that happened was that they lost their economic policy in a single day when the pound fell out of the European exchange rate mechanism. Major’s opening words in the chapter of his book that deals with this are a fair summary: ‘Black Wednesday – 16 September 1992, the day the pound toppled out of the ERM – was a political and economic calamity. It unleashed havoc in the Conservative Party and it changed the political landscape of Britain.’3 It is worth recalling just what the ERM was and why it mattered so much in the early nineties.

Europe’s old currencies, the marks, francs, lira, crowns and the rest, were supposed to move in close alignment, like a flight of mismatched aircraft in tight formation. They would stick together against outsider currencies, notably the US dollar, behaving almost as if they were one currency. Speculators would not be able to drive them apart. Eventually, they would fuse and become one, which is where the aircraft analogy falls down, because so would the aircraft. The strongest currency by far was the German Deutschmark, so the rest followed it up and down.

Like the others the pound had a narrow band of values against the mark – its own airspace, as it were – which it had to keep to, as it swept through the turbulence and storms caused by the international money markets. Once it had chosen its entry rate, the value in marks that sterling would try to maintain, the government’s only steering mechanism was interest rates – plus, at the margin, protestation. What was the point of this? Dangerously, that depended on your vantage point. For Major and his government, the point was that because the German central bank had a deserved and ferocious reputation for anti-inflationary rigour, having to follow or ‘shadow’ the mark meant Britain had purchased a respected off-the-shelf policy. Sticking to the mighty mark was a useful signal to the rest of the world that this government, after all the inflationary booms of the past, was serious about inflation. On the continent the point of the ERM, however, was entirely different. It would lead to a strong new single currency. So a policy which Mrs Thatcher had earlier agreed to, in order to bring down British inflation, became a policy Lady Thatcher abhorred, because it drew Britain towards a European superstate. Confused? So was most of the Conservative Party.

Thus the bomb was prepared. What happened to set it off was that the US dollar began to fall because interest rates there were being cut, and pulled the pound down with it. Worse, the money flowed into Deutschmarks which duly rose; so the lead aircraft was gaining altitude, just as the pound was plunging. The government raised interest rates, up to an eye-watering 10 per cent, to try to lift the pound. But this did not work. The obvious next move was for the Germans to cut their interest rates, lowering the altitude of the mark, and keeping the ERM formation intact. This would have helped not just the pound but other weak currencies such as the Italian lira. But Germany had just reunited after the downfall of communism. The huge costs of bringing the poorer East Germans into West Germany’s embrace meant a real fear of renewed inflation and all those Weimar memories. So the Germans, heedless of the pain of Britain, Italy and the rest, wanted their interest rates high. Major begged, cajoled, warned and wrote stiff letters of protest to Chancellor Kohl who would not move. He warned of the danger of the new Maastricht Treaty failing completely, for the Danes had just rejected it in a referendum and the French were now having a plebiscite of their own. None of that cut any ice either.

In public, the British government insisted the pound would stay in the ERM at all costs. The mechanism was no mere technicality. It was Major’s anti-inflation strategy. Ever since as Chancellor he had told the unemployment-hit and house-repossessed British that ‘if it isn’t hurting, it isn’t working’, his credibility had been tied to the ERM. But it was his foreign policy too. British membership of the ERM showed the country was serious about being ‘at the heart of Europe’. It was Major’s big idea for Britain’s economic and diplomatic survival. Norman Lamont, who as Chancellor was as apparently committed as Major himself, told the markets Britain would neither leave the ERM nor devalue. It was ‘at the centre of our policy’ and there should not be a ‘scintilla of doubt’. Major then went further, telling an audience in Scotland that with inflation down to 3.7 per cent and falling, it would be madness to leave the ERM. ‘The soft option, the devaluer’s option, the inflationary option, would be a betrayal of our future.’

But he could hold out for not much longer. The lira crashed out of the ERM formation. The international money traders turned their attention to the weak pound and carried on selling. They were betting Major and Lamont would not keep interest rates so high the pound could remain up there with the mark – an easy, one-way bet. For in the real world, British interest rates at 10 per cent were already painfully high. On the morning of Black Wednesday, at 11 a.m., the Bank of England raised them by another two points. This would be agonizing for home-owners and business alike. But Lamont said he would take ‘whatever measures are necessary’ to keep the pound in the system. The sense of panic mounted. The selling went on. A shaken Lamont rushed round to tell Major the interest rate rise had not worked. But sitting in Admiralty House – Number Ten was being refurbished after the IRA mortar attack – Major and his key ministers decided to stay in the poker game. The Bank announced that interest rates would go up again, by three points, to 15 per cent, which if sustained would have caused multiple bankruptcies across the country. This made no difference either. Eventually, at 4 p.m., Major phoned the Queen to tell her he was recalling Parliament. The government cracked. At 7.30 p.m., Lamont left the Treasury with his closest advisers, including David Cameron, to announce to a throng of cameramen and bystanders in Whitehall that he was ‘suspending’ the pound’s membership of the ERM and was reversing the first of the day’s interest rate rises. Major wrote out his resignation statement for broadcast. It was the most humiliating moment for British politics since the IMF crisis of September 1976, sixteen years earlier.

If Major had actually resigned Lamont would have had to go as well. The country would have lost the two senior ministers in the middle of a terrible crisis. So Major decided to stay on, though he was forever diminished by what had happened. Lamont, always a bubblier and more resilient figure, better suited perhaps to the Regency than the fag-end of the twentieth century, announced that he had been singing in the bath after the ERM debacle, and later added to the insouciant impression by quoting Edith Piaf’s song ‘Je ne regrette rien’. He decided that he was delighted as the economy began to react to lower interest rates, and the slow recovery began. While others could see only endless sleet and frozen mud of unemployment, repossession and bankruptcy, he was forever spotting the ‘green shoots’ of economic rebirth. Perhaps it was the twitcher in him; keen bird-watchers are alert to nature.

In the following months Lamont created a new unified budget system and took tough decisions to repair the public finances but as the country wearied of recession, he became an increasingly easy butt of media derision. A few trivial incidents combined to make him something of a laughing-stock. To Lamont’s complete surprise and utter shock, Major sacked him as Chancellor a little over six months after Black Wednesday. Lamont retaliated later in a Commons statement. The government listened too much to pollsters and party managers, he said: ‘We give the impression of being in office, but not in power.’ It was a well-aimed and painful blow. Major appointed Kenneth Clarke, one of the great characters of modern Toryism, a pugnacious, pro-European, beer-drinking, jazz-loving One Nation brawler, to replace Lamont. Though Lamont then moved increasingly towards full-on Euro-scepticism and never forgave Major, these three unlikely musketeers were jointly responsible for the strong economy inherited by New Labour four years later.

As to Major himself, his stony road just got flintier and steeper. In the Commons the struggle to ratify the Maastricht Treaty, hailed as such a success before the election, became a long and bloody one, conducted in late-night cabals, parliamentary bars and close votes night after night. Major’s small majority was more than wiped out by the number of anti-Maastricht rebels, egged on by Lady Thatcher and her former party chairman, Norman Tebbit, now also in the Lords. Black Wednesday emboldened those who saw the ERM and every aspect of European federalism as disastrous for Britain. As John Major later wrote, it turned ‘a quarter century of unease into a flat rejection of any wider involvement in Europe . . . emotional rivers burst their banks.’ Had not the Germans let us down again? And had lower interest rates and ‘green shoots’ of recovery not followed Britain’s self-expulsion? If the ERM had been bad, so surely was the whole federal project? Most of the newspapers which had welcomed Maastricht were now as vehemently against it. The most powerful Conservative voices in the media were hostile both to the treaty and to Major. Lady Thatcher’s new oppositionism echoed loudly through Westminster. Principle, pique and snobbery swirled together. Major’s often leaden use of English, his resolute lack of panache or cool, led many of England’s High Tories to brand him shockingly ill-educated and third-rate for a national leader. His own sensitivity to criticism and occasional exhibitions of self-pity simply made things worse. He lacked that layer of nerveless flesh leaders today require.

The story of the long progress through Parliament of the Maastricht bill during the autumn, winter and spring of 1992–3 is too convoluted to be recorded here. Suffice it to say that a constantly shifting group of around forty to sixty Tory MPs regularly worked with the Labour opposition to defeat key parts of their government’s main piece of legislation, and that Major’s day-to-day survival was always in doubt. Whenever he called a vote of confidence and threatened his rebellious MPs with an election, he won. Wherever John Smith’s Labour Party and the anti-Maastricht rebels could find some common cause, however thin, he was in danger of losing. The rebels ranged from the most fastidious and high-minded MPs who were profoundly worried about the constitutional damage European Union would do an ancient parliamentary democracy, to the mischievous and the embittered. Some backbench rebels found that they were interviewed constantly on television. Their views were sought by the papers and they became very minor national characters. This can be, as the current author witnesses, dangerously intoxicating. In the end Major got his legislation and Britain signed the Maastricht Treaty but it came at appalling personal and political cost. Talking in the general direction of an eavesdropping microphone, he spoke of three anti-European ‘bastards’ in his cabinet – a reference to Michael Portillo, Peter Lilley and John Redwood. The country watched a divided party tearing at itself and the country was unimpressed.

By the autumn of 1993 Norman Lamont was speculating aloud that Britain might have to leave the European Union altogether, and the financier Sir James Goldsmith was preparing to launch his Referendum Party to force a national plebiscite. The next row to break was over the voting system to be used when the EU expanded, a murky matter of realpolitik which directly affected each country’s leverage. Forced to choose between a deal which weakened Britain’s hand and stopping the enlargement from happening at all by vetoing it, the new Foreign Secretary, Douglas Hurd, went for a compromise. In Parliament, once again, all hell broke loose. Tory rebels began talking of a challenge to Major as leader. This subsided briefly but battle began again over the European budget, and fisheries policy. Formal membership of the Tory Party was withdrawn from eight rebels. By now Smith, who had given Major some of the worst parliamentary moments of his life, had suddenly died, and had been replaced by Tony Blair. When Major readmitted the rebels, the young Opposition leader told him: ‘I lead my party, you follow yours.’ As with Lamont’s ‘in office but not in power’ this caricatured the dreadful dilemma Major was in. But like Lamont’s remark, Blair’s struck a chord with the country.

The Age of Major

While the central story of British politics in the seven years between the fall of Thatcher and the arrival of Blair was taken up by Europe, at home the government tried to continue the British revolution. After many years of dithering, British Rail was broken up and privatized, as was the remaining coal industry. After the 1992 election it was decided that over half of the remaining coalmining jobs must go, in a closure programme of thirty-one pits to prepare the industry for privatization. This depressed or angered many Tory MPs who felt the strike-breaking effect of the Nottinghamshire-dominated Union of Democratic Mine-workers deserved a better reward, and it roused much public protest. Nevertheless, with power companies moving towards gas and oil, and the union muscle of the miners broken long since, the sale went ahead two years later. Faced with a plan by Michael Heseltine to sell off the Post Office too, Major baulked. It was a service with the stamp of Royalty on it and a long tradition. His refusal was probably good for the country. Why? Because the privatization of the railways was a catastrophe.

There has long been a problem with some politicians and railways. Perhaps it was all those Hornby models in boys’ bedrooms or attics. Perhaps it was the simple romance of an industry which has beauty and complexity, which appeals to the mathematically minded in the structuring of its timetables, and to romantics in its engineering. At any rate, fiddling with the railway system became a dangerous obsession of governments of different colours. Thatcher, not being a boy, knew that railways were also too much part of the working life of millions to be lightly broken up or sold. She is said to have told Nicholas Ridley when he was Transport Secretary, ‘Railway privatization will be the Waterloo of this government. Please never mention the railways to me again.’4 Yet just before she resigned, under pressure from a Treasury privatization unit with too little left to do, she began to soften, and rail privatization was taken up by John Major with gusto. Trains! What could be more fun? Was not old-fashioned, curled-sandwich-serving, rail accident prone British Rail a national joke? Could not any reforming government worth its salt, brimming with nostalgia for the old days of brightly painted trains run by private companies, do better than that?

The problems with selling off an elderly, loss-making railway system on which millions of people depend, are obvious. If your first aim is to raise money, then you have to accept that fares will rise briskly, and services may be cut, as the new owners try to make a profit. This will make you less popular. If, however, your aim is to increase competition, just how do you do that? Each route has only one railway line. Different train companies can hardly compete directly, racing each other up and down the same track. Do you give up on competition and sell off all of British Rail as a single unit? The Conservatives decided against that which left them essentially with two options. They could cut up BR geographically, selling off both trains and track for each region, together, so that the railway system would end up looking much as it had in the thirties. Competition would not be direct, but it would become clear that, say, the Great North Eastern operator was offering a pleasanter and more efficient service than the company running trains to Cornwall and Devon, and in due course one might lose, and the other gain, market power. Licences could be revoked, or there might be takeovers. Alternatively, the railway could be split vertically, so that the State owned the track, some companies owned the stations, and others the trains. This could be called the Complete Horlicks option.

Under Treasury pressure to produce the maximum competition and revenue, the new Transport Secretary, John MacGregor, chose it. A vastly complicated new system of subsidies, contracts, bids, pricing (of almost everything), cross-ticketing and regulation was created, topped off when late in the day, it was decided to sell off the nation’s railway tracks separately to a single private monopoly to be called Railtrack. Suddenly to get across the country could become a complicated transaction, involving two or three separate train companies. They would not, however, be left to get on with it in a new market. Trains were too important for that. A Franchise Director would be given powers over the profits and pricing, including ticket prices, of the new companies and a Rail Regulator would deal with the track. Both would end up reporting directly to the Secretary of State so that any public dissatisfaction, commercial problem, safety issue – indeed, almost everything – would be back in the lap of the politicians. If this was privatization, it was a strange and possibly pointless one, which would end up costing the taxpayer far more than old-fashioned, much-mocked British Rail. The historian of this curious tale, Christian Wolmar, dubbed it ‘the poll tax on wheels’. The writer Simon Jenkins, who had sat on the British Rail board, concluded: ‘The Treasury’s treatment of the railway in the 1990s was probably the worst instance of Whitehall industrial mismanagement since the Second World War.’5

Citizens and Hoop-jumpers

As a Brixton man who had known unemployment, and as a sensitive man quick to feel slights, Major was well prepared by upbringing and temperament to take on the arrogant and inefficient quality of much so-called public service. In his early years he himself had been the plaintive figure who found ‘telephones answered grudgingly or not at all. Booths closed while customers were kept waiting . . . Remote council offices where, after a long bus journey, there was no one available to see you who really knew about the issue . . . Anonymous voices and faces who refused to give you a contact name.’⁶ He was making a good point. Why in a country that spent so much on public services were so many of them so bad? The answer of the Thatcher revolution was that in the end only the market is properly responsive. Yet nobody in power during the eighties or nineties, including Margaret Thatcher, was prepared to take this logic to its limit and privatize the health service or schools or road system, compensating the worse off with vouchers or cash help. Nor, under the iron grip of the Treasury, was there any enthusiasm for a revival of local democracy to take charge instead.

This left a fiddly and highly bureaucratic centralism as the only option left, one which we have seen gather momentum in the Thatcher years and which would flourish most extravagantly under Blair. Under Major, the centralized Funding Agency for Schools was formed and schools in England and Wales were ranked by crude league tables, depending on how well their pupils did in exams. The university system was vastly expanded by simply allowing colleges and polytechnics to rename themselves as universities, and a futile search began for ways in which civil servants might measure academic merit and introduce league tables there. The hospital system was further centralized and given a host of new targets. The police, faced with a review of their pay and demands by the Home Secretary, Kenneth Clarke, for forces to be amalgamated, were given their own performance league tables. The Tories had spent 74 per cent more, in real terms, on law and order since 1979 yet crime was at an all-time high, as a doleful list of high-profile murders reminded the public. Clarke’s contempt for many of the police as ‘vested interests’ was not calculated to win them round to reform. Across England and Wales elected councillors were turfed off police boards and replaced by businessmen. Clarke’s hostility to local control had been confirmed by his time as Health Secretary when, according to one department insider, he showed himself as ‘a leading exponent of the Stalinist side of the Tory party. He castrated the regional health authority chairmen.’7

In 1993 Clarke defended his new police league tables in language that was eerily echoed by New Labour later: ‘The new accountability that we seek from our public services will not be achieved simply because men of good will and reasonableness wish that it to be so. The new accountability is the new radicalism.’ Accountability: once the word had implied a contest of ideas and achievements, played out in front of the voters. Now it meant something very different. Across the country, from the auditing of local government to the running of courts or the working hours of nurses, an army of civil servants, accountants, auditors and number-crunchers marched in. Once, long ago in the 1940s, Labour had been mocked for saying that the man in Whitehall knew best. Now the auditors and accountants hired by Whitehall ruled instead. Weakly, from time to time, ministers would claim that the cult of central control and measurement had been imposed by Brussels. Some had been, but this was mostly a homegrown ‘superstate’.

Major called his headline policy the Citizen’s Charter, though he himself did not like the name very much because of its ‘unconscious echoes of Revolutionary France’. Every part of government dealing with public service was ordered to come up with proposals for improvement at grass-roots level, to be pursued from the centre by inspections, questionnaires, league tables and ultimately the system of awards, Charter Marks, for organizations that did well. Throughout, Major spoke of ‘empowering’ teachers and doctors, ‘helping the customer’ and ‘devolving’. He thought his great system of regulation from the centre would not last long: it was ‘a regulatory goad to raise standards . . . over time, I anticipated formal regulation steadily withering away, as the effects of growing competition are felt.’ But how would this happen? In practice, the regulators grew more powerful, not less so. If people are paid to respond to regulators’ targets and jump through hoops, they become excellent at target-practice and hoop-jumping. This does not make them wise administrators. Despite the rhetoric, public servants were not being given real freedom to manage. Elected office-holders were being sacked. Major’s hopes for central regulation withering away echo Lenin, who hoped for a ‘withering away’ of the Soviet State, with similar success.