Staying in power

Geoffrey Hawthorn

  • Mrs Thatcher’s Revolution: The Ending of the Socialist Era by Peter Jenkins
    Cape, 411 pp, £12.95, November 1988, ISBN 0 224 02516 3
  • De-Industrialisation and Foreign Trade by R.E. Rowthorn and J.R. Wells
    Cambridge, 422 pp, £40.00, November 1988, ISBN 0 521 26360 3

In November, Norman Tebbit spoke to the Financial Times of a ‘long revolution’, lasting perhaps twenty years. Nevertheless, he said, ‘when you’ve run through health and education, and had another hard look at the structure of welfare benefits, then it’s difficult to see where the revolution could go on from there.’ Indeed, the Conservatives could then perhaps ‘go back to being the party of saying everything is going reasonably well.’ Some of his colleagues are already saying it. Looking almost smooth – the Prime Minister, Peter Jenkins reports, has had occasion to tell him to ‘get a haircut’ – Nigel Lawson reassured his audience at the Mansion House in the autumn that revenues were high and the Public Sector Borrowing Requirement could soon be reduced to about a billion a year. Ten billion, he announced, can now be put aside for future ‘contingencies’.

There seem to be three Conservative claims. The first is that the economy has been stabilised against inflation and is now expanding. The second is that what have become unaffordable levels of spending on welfare will soon be brought down and provision pointed at those really in need. (‘The only essential,’ Tebbit said in the same conversation, ‘is that patients receive treatment even if they can’t pay for it’ – real reform, he added, will have to wait until unemployment and poverty have been brought down too.) The third is that in the course of this, we have at last been taught to stand on our own two feet. (‘It isn’t that I set out on economic policies,’ Mrs Thatcher explained in 1981, ‘I set out really to change the approach.’) In the Community Charge, the less well-off are to be brought face to face with the implications of continuing to pay for what has to be public. The Conservatives hope that, as a result, we have all been led to see that socialism is not now an option. Indeed, Tebbit said, barring a recession, he could not see Labour being returned again.

In that, he may be right. As Peter Jenkins explains, the Labour Party may only be able now to hope for about 35 per cent of the vote. There are fewer trade-unionists and council-house tenants, and the proportion of public-sector employees is not increasing. In 1983, Labour went to the country with a Manifesto that was described as ‘the longest suicide note in history’ and shot itself with Foot. Then, it got just 28 per cent. But even in 1987, with party political videos to remind the nation that Young Upwardly-Mobile Kinnocks – ‘Yuk-kies’, Jenkins can’t resist suggesting – had displaced the wild-eyed patricians, it got only 32. Neil Kinnock had said that to ‘lose badly’ was to come in with less than 250 seats. The Party won just 229. The Conservatives did shed some votes in the middle classes. But they are picking up support among the working members of the working class. Skilled workers, in particular, have now crossed over in large numbers. In 1974, Labour had 49 per cent of their votes, the Conservatives 31; in 1979, each had 45 per cent; by 1987, Labour had 34, the Conservatives 43. Notwithstanding the new blue suits and roses, it is increasingly clear, as Austin Mitchell wrote in July, that Labour is ‘being relegated to the peripheries of British life, because our structures, ethos and attitudes tie us to a world that is dying’. In Britain, as elsewhere, we may be seeing, in Jenkins’s own subtitle, ‘the ending of the socialist era’.

1979 was certainly the end of what, in recollection of 1688, Jenkins calls the ‘post-war Settlement’. As he says, this was never a ‘consensus’. The two parties disagreed for thirty years about economic policy and the nature and extent of public provision and how to finance it. They accepted only that the interwar class war had been in no one’s interest, that high unemployment was intolerable, and that health, education and social security had to be improved. But the economy could not sustain this settlement; governments could not meet the expectations it raised. The later Sixties and Seventies saw the politics of its decline. Jenkins stops short of a final judgment on the Conservatives’ revolution against it. It has so far, he suspects, been a partial revolution: a revolution largely in opinion, and in one part of the country. Nevertheless, 1979 may come to stand with 1906 and 1945 as one of the three great moments of the century.

This cannot be the case in foreign affairs. Edward Heath is the only prime minister to have questioned Churchill’s belief that Britain was where three circles met, the Atlantic, Europe and the Commonwealth, and had unique authority in the West. Margaret Thatcher has been unsophisticated in these matters and unusually atavistic. She sees that Reagan has ‘nothing between the ears, poor dear’, but has consistently given him unnecessary support. She has refused to accept the implications of Europe. And she has treated the Commonwealth as though we still ran it. At preposterous cost, the flag flies still in the Falklands, that ‘pimple’, General Haig exclaimed when shown the red dot on the map, ‘on their arse’; she will not talk constructively to the United Nations or to Alfonsin.

What is peculiar about the decline at home is not that it happened at all, or even that it happened for the reasons it did, but that everyone was so transfixed by it. Hence the delay, and then on the left me farce, on the right the force, of the eventual reaction. The story is indeed awful, but compelling. It has all one could want in extremes of luck and skill and Jenkins tells it well. It lacks only instances of vision. Behind the preaching and the easy sneers, it is striking how empty the Conservatives have been. And also how unconstructive.

Decline has been most evident in manufacturing and the provision of welfare. Thirty years ago, Rowthorn and Wells explain, industry employed more people than all the services. ‘Never before, nor since, in any capitalist country at any time has industrial employment been significantly more important than it was in Britain in 1955.’ (At 48 per cent of the total, it was about the same as that in the two or three other of the most industrialised economies at their respective peaks: Belgium in 1957, Switzerland in 1963, Germany in 1970.) A fall in that employment was bound to come. Sixty per cent of it, they argue, would have occurred through technical change. A further 30 per cent would have come with our success in non-manufacturing trade. In that, almost alone among the industrial countries, we are now in surplus; we have needed to export fewer manufactures to pay for non-manufactured imports. The net effects on employment of the trade in oil since 1950 have been very small. The effect of oil on prices after 1973, however, may have been the single most important cause of later difficulties, and done more than anything else to reduce employment overall. Only 10 per cent of the decline in industrial employment has been due to our coming to fall so far behind in growth of industrial output, industrial productivity and industrial profitability.

Beveridge assumed in 1942 that there would be low unemployment, that insurance contributions would pay for everything, and that there would at any time be only about a million people needing supplementary help. But by the middle of the Eighties, unemployment was high, half the cost of benefits was having to be met from borrowing or from taxes – into whose net more of those in need had themselves been drawn – and there were eight million on or below the poverty line. It may be a distinctively British fact that ‘the interface’, as Jenkins puts it, ‘between this benevolent apparatus of the state and the indigent public had become the bullet-proof glass which it had been necessary to install in many benefit offices.’ But the Think Tank’s warning to the Government in 1982, that the universal provision of these benefits and other kinds of welfare just couldn’t continue, was well-founded, and has been repeated in other countries.

Once in power, however, the Conservatives over-reacted to the immediate difficulties. World oil prices rose again in 1979. To contain inflation, already high and likely to rise further, the Treasury imposed fierce monetary controls. The pound and interest rates rose dramatically. (The control of the money supply from the Mid-Term Financial Strategy in 1980 to its abandonment in 1986 was always rhetorical. The mystifying M3, M1, PSL2, Mo and then again M3 succeeded each other at speed and gave few grounds for the ‘rational expectations’ they were supposed to induce. Milton Friedman complained that his doctrine was invoked ‘to cover anything that Mrs Thatcher at any time expressed as a desirable object of policy’. Or, as Jenkins puts it, ‘behind the altar’ the Treasury was as usual doing what its ministers wanted through the rate of exchange.) Much industry was too weak to adjust. Even the strongest firms were suddenly making a loss. In two years, production fell by 15 per cent. Unemployment nearly tripled.

Meanwhile, Thatcher could not persuade Cabinets to do what she had said she would to cut public spending. Few eyes could be seen to ‘light up at the sight of her’ on a Thursday morning, as Keith Joseph said his did – ‘while she’s hitting me about the head’, he added. She never relied on Cabinets again. (Then and since, she has suffered more defeats in Cabinet than any of her post-war predecessors.) By the autumn of 1981, she was also trailing badly in the country, the least popular prime minister since polls on the matter began. Yet with that ‘single-mindedness, blinkered determination and lack of proportion’, as Jenkins puts it, which we have come to know so well, and her Machiavellian gift for seizing the occasione, she faced down the fastidious but unfocused opponents in her own party, and tried to persuade a nation which knew that the Seventies had been a road to nowhere that there was now ‘no alternative’ to her own. For a country in deep fatigue, it was a clever move: a political promise to return it from politics to a reviving state of nature.

But in an inversion of the usual rule, Jenkins suggests, it was the Opposition, both parts of it, which lost the next election. Thatcher did not win it. (By then, he is perhaps right to say, the effect of the Falklands had faded.) Labour could not. The Alliance, which in 1981 had seemed to many to be a good idea – it promised the old Settlement and, like her, less politics – was already showing its strains. But it was Thatcher who was sensing the social changes; she who saw that although embourgeoisement might have been a false hope in the Sixties – for Labour, a false fear – now it was not.

Yet the economy was still stubborn, and the real political difficulties increased. The middle classes were beginning to resist the Government’s ever more desperate efforts to bring public spending down. The hapless Joseph, who sincerely believed that spending ministers should not ask the Treasury for money, alarmed the newly unruly large majority of Tory MPs by suggesting that parents should pay university fees. There was also the complicated comedy of local government finance. A proper review of the functions and finance of local authorities might well have led to pressure, not least from conservative Tories, to consolidate local powers. So the Government improvised. Block grants, expenditure targets, penalties, more severe penalties, rate-capping and ‘incentives’ were introduced to get spending down. None of these had much effect. A Green Paper in 1986 conceded an at best ‘modest success’. It proposed the Community Charge, which a White Paper in 1983 had declared ‘unworkable’. But by then, many local authorities were having to account creatively and borrow from abroad. To the Government’s delight, that reduced what they needed from the Treasury in 1986-87 by more than a billion. And as ministers had hoped, the delays gave a few Labour authorities time to make fools of themselves.

Much more seriously for Thatcher herself, there was Westland. As Jenkins says, that drew everyone’s attention ‘to her style of governing, to the absence of the Cabinet as a stabilising force and to the politicisation of the Civil Service, especially at Number 10’. She knew she’d known what she said she hadn’t when she shouldn’t, and the morning before facing the House, agreed that she might be finished. (A colleague had dismissed Michael Heseltine as ‘the sort of chap who has to buy his own furniture’. But Heseltine has money. And his hair. On his angry exit through Number 10, he stopped in the lavatory to arrange it, before emerging a free and in Thatcher’s eyes dangerously attractive man.) There was Robert Armstrong, saving her from this fiasco, if not from one of her more ridiculous but sinister attempts to sustain state secrecy – but all the while murmuring that he thought Aids the greatest challenge to any government in his lifetime. And then as the election approached there was Tebbit, what John Biffen called the ‘Raucous Tendency’ – ‘Dracula’, as he was more affectionately known in the Party – making a mess at Central Office and daring to hint at his coming succession.

By the end of her second term, so often a risky time for a government, things had not been going very well at all. Fortune intervened. The Alliance was coming ever more openly unstuck, not least over defence. For Labour, one of Kinnock’s staff had explained, ‘change of image is what there is and all there is going to be.’ Quite so. Moreover Kinnock, like the wilder Liberals, did not seem able to understand the point of deterrence, both to deter and to negotiate, and to a delighted designer of posters gave the impression on a David Frost programme that if he were running the country, only Dad’s Army would stand between us and the Warsaw forces. Had it not been for defence, one old hand in the Party thought, the Tories might even have lost. But once more, helped by the continuing changes in the electorate, she was back.

But to do what? Privatisation and popular share ownership are turning sour. British Telecom is much disliked. British Airways is not yet secure. BP was very nearly a flop. The Channel Tunnel is scarcely sold out. It would not be wise to buy British Steel. Electricity is clouded by Cecil Parkinson’s case for a rise in its prices. (More than most of her unappetising assortment of favourites, he manages to look dishonest even when he may be telling the truth – although on this issue it’s possible that he isn’t.) And share prices may yet fall again.

Although the Government may be willing to play on the great British phobia of the state and, selectively, to suspend both its anxiety about price-led inflation and its enthusiasm for competition in every quarter, Thatcher has no intention whatsoever, as many have noticed, of relaxing her more directly political control. On the contrary. She is now clear that after the jury’s verdict in the Clive Ponting case, Section Two of the Official Secrets Act is not the best instrument with which to impose silence on those involved in official decisions. Hence her decision now to extend the law of confidentiality. Despite the fact that she has been advised against this – advised, for instance, not to force a confrontation at GCHQ, and advised by the security services themselves that it would be better to have an inquiry into what MI5 was and was not trying to do to Harold Wilson’s government, and despite her own connivance at the device of the leak – in the Westland affair, and earlier, in abandoning Francis Pym – she is determined to insulate everything she can from scrutiny. One only hopes that in spite of the meek support for this that she seems to have from most judges, it will drive not only journalists but civil servants and politicians, too, to further indiscretion. We need to know more about how this ‘elective dictatorship’, as Lord Hailsham called it, actually works. A flood of revelations could only be to the public good.

But knowledge, for these purposes or its own, is not, in the Conservatives’ lexicon, a good. This no doubt is why Thatcher remains unaware that no historian can be found to endorse her view of ‘the Victorians’. Her philistine ends and moralistic means, her inability – it may just be refusal – to see that much of education is a good in inself, with inherently indeterminate consequences, would have appalled the great 19th-century reformers. This way of thinking is certainly absent in the United States, which she seems so much to admire, let alone in France or elsewhere in Europe. Yet it is stamped across each of the Government’s policies. Twenty years ago, research showed as conclusively as such research ever can that the best correlate of childrens’ success in school was the amount that local education authorities had to spend. But the new Education Bill avoids the obvious. It insists instead on removing as much discretion as possible from those who know about education and who, on pitiful salaries in often dreadful conditions, manage in general – as the HMIs said of Brent – to sustain it. In alliance with understandably anxious but generally ignorant parents, what the Bill proposes is to revive the ancient sport of social selection.

The Education Bill also bears on the economics of the revolution. It is true that by 1987, as Jenkins says, ‘the Government which had spurned an industrial policy, or a regional policy, or a science policy, had given Britain for the first time in her history’ – in Lord Young’s various schemes – some bits of ‘a manpower strategy’. But there is still no sign of the other policies with which to support that or the stated enthusiasm in the Bill for new technology. Yet despite the rise in domestic demand, investment in manufacturing here is in real terms 13 per cent less than it was in 1979. Rates of return are half those of our competitors. Manufacturing output per head, the National Institute has recently reported, continues to lag. It is 37 per cent of that in the USA, 48 per cent of that in Germany, 56 per cent of that in France and Japan, 64 per cent of that in Italy. Manufacturing output itself in these economies is higher than it was in the good year of 1973 – in Japan and the USA by more than 40 per cent, in Germany and Italy by between 15 and 20 per cent. Here, it is still 2 or 3 per cent less.

The Conservatives will certainly not pursue either of the two extreme policies which, to clear the mind, Rowthorn and Wells set out at the end of their book. They will not turn Green, put the creation of the necessary six million jobs by 2025 above everything else, reduce working hours, save on energy and labour-saving technology, make do with 1 per cent of growth a year, and hold the living standards of those now in work at their present level. But nor will they do what the CBI suggested in 1985 and direct increased employment with very fast growth. For this – if it is to have sufficient effect on output and employment in the competition we now face – would require ‘the diversion of scarce resources from other potential uses, such as private or public consumption, or investment in housing, hospitals and the like’. It would mean coherent political planning.

At best, the Government might let our current account now go into deficit and borrow. Thatcher is proud that we have paid off our foreign debts. Bankers now want to lend. If she let Lawson borrow, he could reverse her decision to let research and development run down. (She rejected the invitation to join Eureka, the French plan for civilian R and D in Europe. That continues without us. She has been happy merely to sign an agreement with the French to co-operate on nuclear weapons.) Lawson could, if allowed, prevent the more successful firms going to the wall. And he could assist the recovery – which now depends on corporations from abroad like Nissan taking advantage of some of Europe’s cheapest labour – of the devastated North.

Meanwhile, the six million council tenants are now mostly those who are too poor to buy their homes. Only 35 per cent of the heads of these households are in work. One million of them are retired. A further two million are on Supplementary Benefit. There are now 33 per cent more people in poverty than in 1979, 72 per cent more children. Their health continues to deteriorate. (The Government has stopped issuing figures by social class, but Edwina Currie knows, and says it’s their fault for deteriorating.) Thatcher will do all she can not to spend to improve it; Lawson is, after all, lowering the PBSR and wants to reduce taxes too. ‘Why does the Tory Party hate the North?’ John Wakeham was asked on a phone-in during the election. Wakeham, unaccustomed to such conversations, could not think what to say. ‘You’re living in another world,’ the caller continued into the silence, ‘you’ve no idea what it’s like.’ Such people, said Tebbit equably in November, ‘don’t yet see the Conservative Party in the same way as in the South’.

In desperation or perhaps just resignation, they will go on voting Labour. But this government will stay in power. Thatcher will not introduce proportional representation. That would finish Labour for good. But it would also put her at risk, and she is not the character, as Jenkins says, to cash in her chips when ahead. We shall continue to be presented with political alternatives to the Conservatives no one of which, even if plausible, can be elected to govern. We shall have a government which only a minority may want; which may continue to be lazy with its luck and what remains of ours. It is she who has broken the mould; and who may leave only a few old institutions, secrecy and the new snobberies intact, everything else in pieces. In 1906, a start was made to social reconstruction. In 1945, it was continued, with what are now unsuitable policies for a trading economy. In the Sixties and Seventies, there was drift. In the first half of the Eighties, a chance was missed. For the future, little that is promising is in place.