1982-83: conservative politics after the falklands
An election won & records broken
The triumphant conclusion of the Falklands War in June 1982 left MT in a position of great political strength, but some way short of dominance within government or party, the issue ultimately depending on the outcome of the next election. The government’s prospects for return were obviously good – polling in mid-February suggested a majority between 115 and 197 – but the Parliament of 1979 still had as long as two years to run, leaving many opportunities for things to go wrong.
There was uncertainty as to how MT would approach the calling of an election, one of the few big decisions she had yet to have the making of. Some who knew her well thought that “going early” would be out of character, even ‘opportunistic’, as revealed by Ian Gow’s note of a meeting of junior ministers in February 1983, where the debate was mainly between an election in June or October, with opinion more or less evenly divided, a few even urging delay till 1984. The head of the Civil Service, Robert Armstrong, and the head of the Treasury, Douglas Wass, both showed their hand on this point, in favour of an early election.
MT herself showed understandable wariness about being boxed in by expressing any kind of preference, privately leaning towards October. She was frustrated by election talk in the press after her January 1983 visit to the Falklands, Alan Walters recording in his diary: “she says she is not even thinking about an election – why do they speculate so?” (14 Jan 1983). She publicly ruled out an election before the end of the fourth year of the Parliament.
In the period between the war and the election, MT decided against any significant reshuffle, perhaps for fear of fomenting election talk, although she had at best only qualified satisfaction with the composition of the Cabinet or government as a whole. Among the papers we are releasing is a note Ian Gow wrote her in August 1982 which helpfully lists friends and enemies in Cabinet (ticks and crosses), breaking 12 to 10 in her favour, which Gow considered the best ratio yet achieved though surely not the limit of ambition, a sign of how constrained her position still was. It is striking that John Nott gets a cross - he was once reckoned solidly in the other camp - along with Janet Young, her first, and last, female appointee to the cabinet.
One shuffle did take place, in early January when Nott left the government to be replaced by Heseltine; John Major got his first job at this point, as an assistant whip. At this point Nott sent her an extraordinary farewell letter, revealing as to him but also interesting as to the way he thought she was reshaping politics. (It was first published in his memoir, Here Today, Gone Tomorrow, where he notes that she made no reply.) MT annotated almost every document she ever read, including her Methodist Catechism, where she queried the duty of obedience. This one she left completely unmarked:
It is inexcusable to say so nowadays but I actually admire you as a woman - your good lucks, charm and bearing have always attracted me, as a man. I'm sorry, but what is wrong with that! I think your emotional, instinctive and unpragmatic approach to most issues - so very unmasculine - is the secret of your success in the male-dominated world of politics.
Today there is no way that a methodical, rational and consensus approach to the nation's problems can overcome them. Until you gained the leadership we were a "Whips Party"; I am glad that we are now a gut "instincts party" [sic].
On Nott’s side the breaking point between them came in 1981, it seems, over the Defence Review forced on him by the Treasury (and No.10):
I lost my 'spark' after those awful PESC [public expenditure] negotiations in 1981.
Perhaps unreasonably I came to harbour a resentment that the Lords of the Treasury could not see the immensity and long-term nature of the problems I was trying to tackle in the MOD - and in Geoffrey's case, the overriding importance and the nature of the Defence dilemma.
But this was a much happier ending than the one that played out between MT and her Foreign Secretary, Francis Pym. We now see him as politically doomed, but at the time he was widely thought too strong to be ditched and owed something for having stepped into the breach when Carrington resigned over the Falklands. The 1983 papers show evidence of their conflict. MT had appointed Britain’s former Ambassador at the UN, Sir Anthony Parsons, her personal adviser on foreign policy, an innovation unwelcome to the Foreign Secretary who of course laid claim to that role. In the files Parsons admits to “neuralgic points” with his old Department, causing him to tread warily. He left No.10 after eighteen months. And the Principal Private Secretary at No.10, Robin Butler, warned Walters not to meet a Chilean politician friend at No.10 because the FCO was “looking for a casus belli ... Pym gets very upset” (diary, 9 Feb 1983). There was a kickback though: briefing reached The Times from “Westminster sources” on 4 April 1983 to the effect that there hung the “Shadow of the axe over Whitelaw and Pym”. During the campaign Pym candidly admitted in front of the cameras that he did not think landslides made for good government. Since MT was rather obviously about to win one, she was far from pleased. In the inevitable post-election reshuffle Pym paid the price.
1983 jan-jun: the city & sterling trigger an early election
The most significant revelation from the files about the timing of the election comes from the Walters diary, which of course focuses on economic policy.
The gist is that the first months of 1983 saw heavy downward pressure on sterling and bitter arguments between No.10, the Treasury and the Bank about how to respond. Fears for the economy inclined MT towards an early election. She thought the Bank and the Treasury far too prone to raise interest rates, partly at the behest of the clearing banks whose profits were boosted by higher rates. Her deep mistrust of the Bank of England and the clearing banks - its clients, as she saw them - is an important theme throughout her first government.
One of her “neuralgic points” was mortgage rates, never more so than in the run-up to a General Election. Accordingly she favoured “letting the exchange rate take the strain”, in fact letting it go, in Walters’ words (Thursday 13 Jan 1983).
PM meeting - mad at Barclays - after profits and Gvr [Governor of the Bank of England, Gordon Richardson] in cahoots. C/E said Gvr & I had personal difficulties and he would like to see her alone. She agreed - all on interest rates and let ER go - requiring great nerve - 75 even 70! [These numbers refer to sterling’s value against a basket of leading currencies, known as the ERI, then bobbing around 80 – policy “took it into account” without formally targeting a particular rate.] She said OK - Chile experience.
On 15 January Walters added a postscript putting it all more pithily: “Gvr got a bollocking on Thursday”.
During the election campaign, Denis Thatcher frankly told Walters “the critical thing in calling the early election was the City & stg [sterling]” (diary, 24 May 1983). The implication, of course, is that she doubted that she would beat the banks - that she feared being caught in a very nasty place, between a falling pound and higher interest/mortgage rates.
If Howe retained any illusions that he would be staying at the Treasury after the General Election, they will have taken a knock when he received an extraordinary minute from MT on Mortgage Interest Relief, 28 Feb 1983, beginning “I couldn't disagree more with your paper on this subject”, spelling out why at painful length. At issue was raising the relief ceiling from £25,000 where the Treasury wanted it to stay (and wither). “GH caved in at £30,000”, Walters wrote disapprovingly on 3 Mar 1983. “She is delighted with herself”. Richardson had already paid the price, refused a third term as Governor, replaced by the chairman of NatWest, Robin Leigh-Pemberton. Walters diary, 4 Jan 1983:
[Richardson] Upset too about Leigh-Pemberton appointment, he stupidly said he was a good Tory. Press stories of splits. Richardson mollified when Scholar [MT’s Economics Private Secretary] planted story via Ingham that MT admired Richardson etc.
Alan Walters' 1983 diary [please note - 200MB file, may take some time to download]