Friday 13 Feb 1981
... [At] 2.30 we assembled in the study for pre-briefing (self, AW [Alan Walters], DW [David Wolfson], Tim [Lankester], Clive [Whitmore] ). to find that she hadn’t even read our v. short (2 1/3 page) note on the Budget, stressing need to err on side of fiscal tightness in order to aim off for any possible further PSBR/PE overshoot. ... She, as we expected, just didn’t want to think about a really draconian Budget. Then the three of us argued fairly forcibly with her, GH [Sir Geoffrey Howe] and Douglas [Wass], Terry Burns staying v. much as a neutral adviser. Geoffrey kept saying he agreed with our analysis and our forecast risk of crisis, but what could we do? We said put up income tax, grasp the nettle now. They said that such a tough Budget was simply not on politically. Then, to our astonishment, she and Geoffrey argued that if there was a crisis in November, that wouldn’t matter because that would make it possible to do all the things which were necessary (even though it would in our view be too late for them to work). She was constantly plunging into irrelevant detail and we ended up about 4.20. Back in my office, we agreed to put in a final attempt to change the approach next Friday. Alan [Walters] and I chatted on and I was pleased to find that Alan had been wondering whether he ought to leave, whether the whole thing wasn’t a waste of time.