March 1981 saw the creation of a new British political party, the centre left Social Democratic Party (SDP). Led by a breakaway group from the Labour right, the 'Gang of Four' - Roy Jenkins, Shirley Williams, Bill Rodgers and David Owen - it swiftly concluded a pact with the Liberal Party to form the "SDP-Liberal Alliance".
At first glance, the Labour split was likely to damage the Opposition more than the Government, emphasising its divisions and the leftward lurch that had taken place under its new leader, Michael Foot. However bad things looked for the government, during the first half of 1980 there was a comforting assumption among most Conservatives that Foot was unelectable and that there was no alternative to them. But events removed this crutch. By the later part of the year the Alliance was way ahead in the polls and all the talk was of Conservative divisions. Winter 1981/82 proved a very low point for MT.
wet rebellion (1): july-october 1981
Howe's telegram to MT - Blue Chips "angry and embarrassed at being scooped" by Heath's Manchester attack
During the second half of 1981, three by-elections transformed the political scene. The SDP had been formed at the end of March; the Alliance with the Liberals emerged in June. At the Warrington by-election on 16 July, Roy Jenkins came close to winning a safe Labour seat. The mood changed very swiftly: Gow had been pleased by the state of morale in the 1922 Committee Executive when they met MT on 10 June (sounding a little surprised at the fact), but when the same team came for a drink in the Cabinet Room on 30 July, things were different. Gow's notes record MT being ritually praised for her speech in the recent confidence debate before discussion turned anxiously to the topic of the hour: "IS TIME RUNNING OUT?", "MUST CARE", "SDP now occupying centre stage".
The talk was now of a wet rebellion, and even possible Conservative defections to the SDP, of which there had only been one - so far - from the Conservative parliamentary party, Christopher Brocklebank-Fowler, immediately after the March 1981 budget. The September reshuffle cranked up speculation as to Conservative splits, supplying the rebels with an obvious leader in Gilmour, if one rather damaged by the fact that he had been sacked on principle rather than resigned on it. (The day after Gilmour's dismissal MT must have been surprised to receive a friendly and supportive letter from Lord Linlithgow, his step-brother, describing Gilmour's "pragmatic approach to politics" as "the study of how to win elections", "cynical - and a bit patronising". She read it carefully.) On 6 Oct Heath put in his oar, making a major speech to the Federation of Conservative Students in Manchester, ten of whose leading figures had left the Conservatives for the SDP during August. MT was in Australia so Howe sent her a long analysis of the situation by diplomatic telegram, explaining that he and other colleagues were making a low-key response to the speech and urging the same on her. Characteristically MT did not take this advice, responding head-on by making last minute changes to a speech she was delivering in Melbourne, with the help of telegraphed notes from Alan Walters, no admirer of Heath.
This was the moment the "Blue Chips" first came to public prominence, a group of talented, younger, leftish, Conservative MPs, some of them moneyed and 'well-born', all with high career hopes, Chris Patten their leading figure. Their anti-monetarist manifesto, Changing Gear, was published on 8 Oct, The Times reviewing it in a leader cattily entitled "The Troubled Ranks of Tuscany". Like Tony Blair many years later, the Blue Chips' holiday destination of choice apparently counted against them. The pamphlet opened with a quotation from Harold Macmillan, whose son published it, and its first words - "Conservatives should never become too entangled with a particular economic theory" - echoed Gilmour, who had a lovely house near Lucca. For Heath the Blue Chips had perhaps less regard, and his sudden attack was not welcome to them, as Howe noted: they "are angry and embarrassed at being scooped, and by such an eccentric onslaught".
The battle swiftly moved to the Conservative Party Conference at Blackpool, where Heath attacked the government from the floor in the economic debate while Gilmour and Norman St John-Stevas (whose PPS Patten had been) made speeches on the fringe, supported by some ministers, while Lawson, Tebbit and others hit back briskly. This was the year of Tebbit's speech saying of his father in the 1930s, "he didn't riot - he got on his bike and looked for work". The mood was raw. Unsurprisingly perhaps the business of writing MT's speech was more fraught than it had ever been, with Gummer again involved, a fact that played its part in Hoskyns's resignation later in the year. MT herself drafted a section on unemployment designed to show that she understood and cared, which made its way into the final text, where she wrote the word 'soft' next to it, as a reminder to deliver it that way. And she produced many pages of handwritten notes for a long section on her fundamental moral framework, a kind of credo, which was dropped (as was a similar draft in 1979). In these pages she worried away - as ever - at the relationship between individual and society, arguing that the freedom to choose good or evil is the fundamental freedom on which all virtue rests, a freedom threatened by collectivist reform to create 'systems so perfect no one needs to be good' (a quotation from a favourite poem of hers, T.S. Eliot's Choruses from The Rock). Part of her reasoning in trying to engage in this battle of ideas is revealed in the phrase: "What is wrong with modern society is not material deprivation but disorientation". Among others she quoted the new Bishop of London, Dr Graham Leonard, a hoped-for ally in this fight whose appointment she had secured earlier that year, controversially and evidently against the wishes of the Archbishop of Canterbury. A cabinet colleague, Patrick Jenkin, seems to have been among her critics on that occasion and rather surprisingly, wrote to tell her so. She replied insisting that the proper appointment procedure had been followed.
wet rebellion (2): october-november 1981
The Croydon NW by-election took place on 22 October, a Labour-Conservative marginal won easily by the Liberals. The Crosby by-election followed on 13 November, bringing the SDP its first MP elected under the label, Shirley Williams. She had overturned a Conservative majority of 19,000. These efforts rendered threadbare the existing Conservative response to the SDP - essentially, to point out what you might call the "old Labour" roots of its leaders, such as Williams's appearance on the Grunwick picket line. Hoskyns summed that up in a 4 Spt note for MT's conference speech, "SDP are the old Labour Party which Heath, McMillan [sic] etc all fought against. The new Labour Party is the new Communist Party. SDP stands for everything that got us into the present mess. Having created the mess, it then left the Labour Party which had been taken over by near Moscow sympathisers who wanted to exploit that mess".
After Crosby there are signs of a deep crisis of confidence within the machine. At Central Office the new wisdom was that the party was staring into the abyss. The author of a Research Department document named "The Way Ahead" could see none, pretty much, and declared: "This new phenomenon [the Alliance] may well end by burying the old Labour party, but the electoral and poll evidence suggests that it threatens also to sweep the Conservative party into a small minority position, worse than anything we have experienced for over one hundred years". The prospect of a split in the Conservative Parliamentary Party became ever more real. On 25 November there was a particularly ominous development when a group of 25 Conservative backbenchers signed a letter to the Chief Whip, warning that they would vote together against any economic measures in the Autumn Statement if "the effect … was to deflate aggregate demand", a Keynesian definition of dissent. They became known within MT's circle as the "Gang of 25", and of course their letter was soon on her desk.
In Roy Jenkins's excellent memoirs, A Life at the Centre (1991), there is a fascinating and credible account of his dealings with Conservative dissidents at this time. It was very much in his interest that the Tory Party should yield some recruits to the SDP, balancing those from Labour and so lending weight to his claim that the new party represented a centrist reconstruction of British politics rather than a "Labour Party Mark II" or Gaitskellite throwback, and improving his chances of emerging as its leader too. He talks of the divisive impact on the Conservative Party of the 1981 budget and the two reshuffles, then goes on:
The question was whether this would lead to a significant break from the Conservative Party towards us. My view is that this was as near as it could be to happening on a small scale, and that, had the small break occurred, the instability of the atmosphere was such that it might well have spread quite wide. … There were five or six young MPs who hovered on the brink. Two of them came individually to see me and assured me that they were definitely coming. It was only a matter of choosing the time. But the time never quite came. I am sure that they acted throughout in perfect good faith. [553-54]
The last sentence surely registers some frustration on Jenkins's part. In Anthony King and Ivor Crewe's official history of the party, SDP (1995) names are given, sourced to "leading members of the SDP" (pp114-15). According to them, those Conservative MPs actively talking to the SDP were Robin Hicks, Stephen Dorrell, Hugh Dykes and David Knox, as well as two less liberal figures who had fallen out with the party managers, Keith Stainton and John Wells, the latter apparently offering to resign his seat in Maidstone if Jenkins would promise to stand. Jenkins was very keen to get back into Parliament, in order to be in contention for the SDP leadership, so accepted the offer. But "Wells drew back", Jenkins wrote. "I think his wife had had a few forthright words with him".
There is some confirmation of this in MT's files. Hicks, Dorrell, Dykes and Knox were all members of the Gang of 25. Dorrell - a future Conservative Cabinet Minister under John Major - was a particular worry. Was he about to defect? Gow wrote to her on 20 Nov: "Despite the words in Dorrell's letter [to Jopling last week] which I drew to your attention [not found in the Thatcher files], Dorrell has given an assurance to Michael, and in the plainest terms, that he will not be joining the SDP". The handling was softly, softly: the next step a few days later was to invite him for a bridge-building drink with MT at her room in the Commons, along with Chris Patten and Tristan Garel-Jones. Two loyalists (“sound as a bell”) were added to the group, giving the home team a majority.
wet rebellion (3): december 1981
Things got worse. On 4 Dec the Chief Whip, Michael Jopling, directly minuted MT warning her that "we are facing a very serious situation", explaining that the rebellion now went significantly wider than the signatories of the letter. He named a further 20 MPs unhappy with the Autumn Statement who were possible abstainers, Heath and Stevas among them, bringing the total to 45 - no small matter for a government with a majority of 44.
Gow sent MT a covering note to this analysis, somewhat playing down Jopling's concern, but with a warning built in: "Michael, though an outstanding Chief Whip, does not share our conviction. Like the original 25, he, in his heart, favours reflation and foresees the deepest difficulty for our Party if the Budget is not reflationary. I take the opposite view. In my opinion, the gravest danger for the Party and country is if we follow our predecessors, and lose our nerve". There was discussion in this note of sending a Treasury minister to talk with the group. It is a measure of the Chancellor's impaired standing that Gow - a very close and old friend of Geoffrey Howe from Wykehamist schooldays - thought that the Chief Secretary, Leon Brittan, would be more effective in that role than Howe himself, Jopling agreeing with him.
The whips went to work and did their best to divide the rebels before the key vote on the evening of 8 December. An important article by Chris Patten in The Times that morning announced that he would give the government a last chance, laying down terms and warning that the next budget would be the decisive moment for him. The files show behind-the-scenes negotiation on issues he had raised. A speech was drafted for the Chancellor including precisely the concession Patten most sought, on benefit uprating, and a copy is in the Thatcher files, with the concession struck out. It did not figure in the speech as delivered. Perhaps MT refused to allow it. Howe's memoirs recall a very sharp argument between them about the presentation of the Autumn Statement itself in a late night meeting at No.11 and though MT came close to apologising for her tone on that occasion, as he saw it, the fact that she was sent a draft of the later speech implies that things between them had not entirely settled. Or perhaps events overtook; by making the demand public, Patten made it harder for Howe to concede the point. But one way or another, enough was done to hold the number abstaining to 14 in total - 11 of them from the Gang of 25, led by Gilmour. There were no more defections to the SDP from the Conservative Parliamentary Party, then or later. Party divisions remained, of course, but the possibility of an outright split fell away over the winter of 1981/82, as economic recovery became better established and the SDP began to falter in the polls. Then the Falklands changed everything.
Later, with hindsight, Conservatives told themselves that a split had never really been on the cards. It suited all sides to play down the might-have-been, especially those who had thought of leaving the party but stayed and prospered. It is true, of course, that the political logic of Gilmour's steering for the rocks metaphor was that the disaffected section of the crew should stay on board in the hope of seizing the tiller or claiming salvage. Despite a long and close friendship with Jenkins, he seems not to have been tempted by the SDP personally, advising others likewise in the belief that the Thatcher experiment had almost run its course and that they could shortly take the party back, a prospect certainly jeopardised by defections from the left. On this reasoning the Gang of Four had helped deliver their old party into the hands of the extreme and departing wets might achieve the same result.
But politics is not pure strategy. Jenkins was right to point to the "instability of the atmosphere" and the potential for small events to trigger larger ones. Sticking around for salvage was not a good idea if the ship seemed likely to founder with all hands: things might have got so bad that lifeboats floating by would have proved irresistible to some, particularly in circumstances like those of December 1981. Everyone was watching everyone else, wondering who might jump (or fall), what would happen next? And where Gilmour's approach was to maintain party unity, it is hard to be sure that the same was true of Heath, who openly offered to serve in a coalition cabinet as a Conservative. Indeed, according to Jenkins, one of Heath's closest political friends was among those closest to crossing over.
On 29 Dec, Gow wrote MT a remarkable letter, looking forward and back. There are hundreds of exchanges between them in the Thatcher files, but this is one of the most revealing. On the one hand, it offers strong support and encouragement. Those who are close to MT “realise that she who leads us is fighting a battle as heroic as any we have fought in the past”. “You are a giant among pygmies”. On the other, it powerfully suggests how much of a battering MT had taken during 1981, with more (probably worse) to come, and there is a note of uncertainty as to the ultimate outcome. “Whether even the iron resolve will be sufficient, we do not know”. And: “I was so pleased when you said in September that you would like me to ‘see you through to the end’” [i.e.,to remain her PPS rather than take a ministerial job]. But what end did she have in mind?