Archive (Walters MSS)

Alan Walters diary (1981) [whole year transcribed as a single document] [released 2013]

Document type: Declassified documents
Source: Churchill Archive Centre: Walters MSS (WTRS 3/1/1)
Editorial comments:

Transcribed by site. The original diary can be studied here.

Importance ranking: Key
Word count:
Themes: Conservatism, Employment, Energy, Monetary policy, Public spending & borrowing, Taxation, Transport, Economic policy - theory and process

Alan Walter’s Diary, 1981

Transcribed from original at Churchill Archive Centre (WTRS 3/1/1)

Monday 5th January 1981

Fly to UK

Tuesday 6th January 1981

Pesky press at airport. P [Paddie Walters, AAW’s wife] looked lovely. Saw MT at 10:00. All affable and unflappable. What should she do about Geoffrey [Sir Geoffrey Howe] ? Who could she promote. No-one. Said come and see me whenever you like. I discussed program - MBC [Monetary Base Control] was important - but I thought monetary policy had worked, if anything, too well.

Wednesday 7th January 1981

Size of rooms - I should have a bigger one! I leave bigger one for secretaries. Niehans seminar - bombshell; monetary policy has been too tight; but I had already said that in my Gilder interview in Nov. John Nott, however, very convincing. Middleton surprised. JN [John Nott] argues we should relax money base. I entirely agree but do not like his further suggestion of using direct interventions to bring Exch Rate down. Very risky - but better than ruining much of the export industry.

Thursday 8th January 1981

Told MT about JN’s [Jurg Niehans] seminar and findings. MT very defensive: NO-ONE must know about it - especially Bank of England. Frightened of calls for relaxation or sops to the wets. Am rapidly learning the political game - never admit to an error! PM says C [sic]

[9-13 January entries blank]

Wednesday 14th January 1981

Carrington approached me at chance meeting and told me that he thought I was right to advocate an easing of policy - crazy exchange rate etc.

[15 January - 1 February entries blank]

Monday 2nd February 1981

16 Monday

[In the early months of the diary Walters seems to have made entries on the wrong pages, probably as the result of writing things up after the event; later he caught up with himself and the problem does not recur.]

Tuesday 3rd February 1981

17 Tuesday

Wednesday 4th February 1981

18 Wednesday

Thursday 5th February 1981

19 Thursday

PM caves in over the Coal strike.

JH [John Hoskyns] furious and so is the NCB [National Coal Board] - got them “backs to the wall” and then she takes the wall away.

Friday 6th February 1981

20 Friday

Saturday 7th February 1981

21 Saturday

Sunday 8th February 1981

22 Sunday

Monday 9th February 1981

23 Monday - WRONG ORDER

Call from Th [Different pen used from this point] M + GH [Sir Geoffrey Howe] (with Wass [Douglas Wass] ) met on budget. M pursued MY line that we needed a rise in taxes and would agree to a 1 penny rise in Standard rate (I had said a 2 or best a 3 penny rise was right, but at least it is something). Have I had a delayed impact? I do not really believe it - nor did Tim [Tim Lankester]. He said PM told GH that he must get the PSBR down or “you are for the chop” - very unlike her. Still wait + see. Told Paddie [Paddie Walters] about it and she was also skeptical.

Tuesday 10th February 1981

24 Tuesday

GH [Sir Geoffrey Howe] is thinking about it - but all very secret.

Wednesday 11th February 1981

25 Wednesday

M + GH [Sir Geoffrey Howe] (with Douglas Wass?) met as M was packing. GH said he had thought about Budget and need to reduce PSBR towards what M wanted (i.e. about £10 Bn) and best way was No Rooker Wise [i.e., no automatic inflation uprating of personal tax allowances]. M apparently wants NO-ONE to know (i.e. not DW [David Wolfson], JH [John Hoskyns] or me). But DW discovered results of the meeting - JH, DW and I think it is stupid politically, indefensible morally and economically. [Different pen used from this point] - but at least the PSBR will be about right and we shall avoid funding, sterling crises etc.

Thursday 12th February 1981

Thursday 26th

Terry Burns wanted me to agree to -2 MLR [Minimum lending rate] change. I reiterated that the no Rooker Wise was bad - both economically and morally it was indefensible.

MT very annoyed at DW [David Wolfson] note saying that with this sort of budget in a firm the directors would be fired - didn’t finish it, tore it up.

Dinner with Ambrose Congreve and French Duchesse de Magenta, John and Rosemary Partridge etc.) [sic]

Friday 13th February 1981

Thursday 27th

Biffen reported to give big hint in Press that MLR [Minimum lending rate] was to be cut by 3% (In rest of press reports of 4% are rampant). Middleton, writing budget speech, very surprised - argument whether it should be 1% or 2%. Middleton finding it very difficult with no Rooker Wise, a [sic} PSBR estimate rising by the hour, the Governor requiring no money targets but great emphasis on exchange rate - apparently GH [SirGeoffrey Howe] did not stand up to the Govr at all well. I told Middleton that I thought still that this budget had all the seeds of disaster, but a lot had been done on the macro level. But no RW [Rooker Wise] and Bank tax were not defensible. The objection to a standard rate increase is wholly political.

Saturday 14th February 1981

28 Saturday

Sir John and Lady Tylney [sic: Tilney] - discussed M- she was still electioneering.

Sunday 15th February 1981

29 Sunday

Lunch with Ralph Harris, Alfred Sherman and Peter Bauer

Monday 16th February 1981

Anatole Kaletsky article in FT saying I favoured monetary expansion and reduction in ER [exchange rate] - travesty of my advice, but I am learning that the quality press is an ego trip.

[Different pen used from this point] - PM was furious and inveighed against me in the media meeting (according to DW [David Wolfson] ) and sent Clive [Clive Whitmore] up to give me a bollacking [sic].

[17-19 February entries blank]

Friday 20th February 1981

JH [John Hoskyns], DW [David Wolfson] and I prepare a “FACING DISASTER” manuscript about budget proposals. Est PSBR now running at £13 ¾ Bn and rising fast.

[21 February entry blank]

Sunday 22nd February 1981

MT came back from Checkers [sic: Chequers] - called me to go over Georgetown speech. Went to No. 10 about 4.45 and left at 7.00. She is very uncertain of herself. Did not want to discuss budget and said of the DW [David Wolfson], JH [John Hoskyns] + AW [Alan Walters] paper, was it about coal? Unbelievable [Different pen used from this point] - I tell Paddie [Paddie Walters] we must be ready to go.

Monday 23rd February 1981

9 Monday

Tuesday 24th February 1981

10 Tuesday

Wednesday 25th February 1981

11 Wednesday

Thursday 26th February 1981

12 Thursday

Niehans seminar - very useful discussion. No-one seriously disagreed with analysis - although Patrick Minford thought that goods and factor markets reacted much faster than JN [John Nott] had supposed. Sam Brittan hostile because he said a monetary expansion would always be interpreted in Britain as permanent - though he gave no evidence. Suspect that Sam is jealous because he did not see the points himself. Anthony Harris (not there) says he knew it all along.

Friday 27th February 1981

13 Friday

Saturday 28th February 1981

14 Saturday

Sunday 1st March 1981

15 Sunday February

Spoke to Kaletski on telephone. He had been primed by Sam Brittan - I tried to prevent his misrepresenting me - and I thought I had succeeded.

Monday 2nd March 1981

Ian Gow apologised for not stopping my talk to House Back Benches Committee on Small Business. Very annoying and probably MT’s paranoia about Press.

Am a bit annoyed.

Tuesday 3rd March 1981

JH’s [John Hoskyns] note to PM on mass resignation

agenda for meeting at CPS tomorrow

Hugh Stephenson - very good article in Times on lack of strategic planning etc.

Douglas Wass said I wanted to take out even more - another £1 Bn - I said yes!

Wednesday 4th March 1981

Hugh Thomas, DW [David Wolfson], JH [John Hoskyns] CPS meeting with Terry [Terence Burns], AS [Alfred Sherman]

What is wrong - failing to face reality - no strategic thinking. We have to persuade MT of all the disasters were avoidable [sic] - panic last minute measures in budget - Could not be discussed but Fleet Street is getting word of what is up.

Niehans rejected my advice to leave out MLR [Minimum lending rate] reform - doesn’t really matter.

Theatre Educating Rita

Thursday 5th March 1981

JH gave me [sic]

Dinner Norman Lamont, Cecil Parkinson, JH [John Hoskyns], AS [Alfred Sherman], Elizabeth Cottrell + - “shambles” of govt - junior ministers do not know and are increasingly delayed with whispering campaigns - openly hostile at times. But genuine confusion, especially Lamont, about where we were going.

Friday 6th March 1981

Founder’s Feast at Nuffield Coll [Nuffield College, Oxford] - met Peter Shore and explained about MBC [Monetary Base Control]

[7 March entry blank]

Sunday 8th March 1981

Alfred Goldstein’s for lunch

Monday 9th March 1981

Civil Servant Strike - rain soaked picket lines at 10.

Tuesday 10th March 1981

Budget speech - all hell breaks loose, the wets are up in arms - we’ll have a hot summer!

Public sector pay - sent J. Vereker my rule [equation in text] adjustment including quit rates - tried this on Whitmore at lunch - a bit dense - but looks as though it might get somewhere.

Pol EC Club in evening - Lawson defending

Griffiths thinks it is courageous [different pen from this point] but great attack by Green - - £5 Bn squeeze

Wednesday 11th March 1981

Sent Geoffrey [Sir Geoffrey Howe] a note congratulating him on a “correct” budget. He was v. pleased. JH [John Hoskyns] did also - it was very courageous politically.

Lunch with Sebags Petterbridge Union Discount

Thursday 12th March 1981

Favorable comment by Butt (Times) + McCrae (Guardian). My quit rate rule looks as though it is a runner.

Discussed budget strategy with JH [John Hoskyns] + D. [David Wolfson]. Promised to do a paper on (a) Reforms, and (b) General Stance

George Brown + Boothby + Jap Amb [Japanese Ambassador] at cocktails for G&T (Tom Griffin + Thomson) at HC [House of Commons]

Friday 13th March 1981

Letter from [Professor Frank] Hahn + Neild [sic: Sir Robert Nield] to economists. [letter by 364 economists to The Times attacking 1981 budget] [later entry? different pen]

[14-14 March entries blank]

Monday 16th March 1981

Budget leak emerging. Petrol tax revolt continues - really rather silly.

Lunch with Capel-Cure (Brokers)

Tuesday 17th March 1981

PS [Private Secretary] Lunch

Wednesday 18th March 1981

Burns + Middleton - Burns is claiming credit for the switch in budget strategy (new PSBR calculation). PM met new W Bank Chairman [World Bank President] Clausen with Chancellor - but I was not invited. Sent her a memo but too complicated and too late.

Am I in the dog house?

Burns went to great lengths to say how embarrassed they were by my press - Kaletsky

Thursday 19th March 1981


ICL discussions - Keith [Keith Joseph] got away with it

Wondering what to day [Sic]

Friday 20th March 1981

- 6.30 - saw PM - apologised for not having seen me - very tired and irate about Niehans - thought it would be used to kill GH [Sir Geoffrey Howe]

DW [David Wolfson] and I argued but she would not yield.

Saturday 21st March 1981

Went to DW [David Wolfson] for lunch; dinner + night with JH [John Hoskyns].

Discussed PM’s diary - hopeless

Niehans - what to do?

Sunday 22nd March 1981

GH [Sir Geoffrey Howe] dinner - Elspeth [Elspeth Howe] clearly peeved at me being in No. 10 and not under Geoffrey. Told her that the Treasury chaps were wonderful etc.

Monday 23rd March 1981

Quiet day - but Railway Electrification is a dreadful mess - silly assumptions.

Phone Alfred Goldstein + Christopher Foster. JH [John Hoskyns] sent GH [Sir Geoffrey Howe] a letter (personal) suggesting that Treasury officials (Ryrie) were dredging my technical points on BTelecom financing - very strong stuff - apparently upset GH.

[Different pen used from this point] Interview (non-att) [?non-attributable] with Fortune Magazine

Institute of Actuaries - Dinner - Bore

Tuesday 24th March 1981

Saw Chris Foster- very convincing arguments against mass electrification plan for BR. No warrant for this new £1 Bn programme. Ploy by Posner to bounce it through Cabinet.

Esra [Esra Bennathan] - chatted about World Bank

Wednesday 25th March 1981

Peter Tapsell lunch - Terence Beckett still all gloom and disaster - but Patrick Sargeant said shares were going up - how come?

Rob Harrison at No. 10

Dinner with Graham and Margery Hutton.

Thursday 26th March 1981

Lunch John Boreham (CSO) - rather liked

[Different pen used from this point] - Smooth character - I think I should have killed the Input-Output matrix, if Cambridge Ectrics [Econometrics] want it let ’em pay for it.

Alfred Goldstein with Elec [Electrification] Review- Many doubts

Friday 27th March 1981

BR meeting - [Different pen used from this point] Michael Posner chaired with Palmer (DOT). Little or no substantive work to support their elasticity (0.65) assumption.

- When I asked for “small network” plans, they said they were in the vaults (and locked up).

Hobart lunch

BR meeting all that I feared.

Dinner with Louise. [AAW’s daughter]

[28-29 March entries blank]

Monday 30th March 1981


[written on wrong page - AAW crossed through 6 April & substituted 30 March]

The letter from 365 [Sic: 364] economists. Very good reception.

Lunch with Norman Payne - possibility of privatising BAA

GH [SirGeoffrey Howe] and Treasury meeting on Financing BT. Cast iron argument for v. prof. [very profitable] BT investment. GH smoke screen.

Ryrie very good.

Tuesday 31st March 1981

[written on wrong page - AAW crossed through 8 April & substituted 31 March]

Carlton Club lunch John Bryze and Jerry Weis

DW [David Wolfson] and I agree that we must attack the Treasury position.

Rail papers arrive - no argument at all for electrification or trends

Nigel Lawson - drinks - rather pleased with budget and my line on it - worried about DW and latent Keynesianism. I agreed that simple Keynesianism would not do - BUT --> [sic]

Wednesday 1st April 1981

[written on wrong page - AAW crossed through 7 April & substituted 1 April]

Leak Investigators 5 mins

B/Rail DOT review - my memo for E Cttee.

DofT very nervous about leaks of my asking for low level (3,000 mile) rail plan.

Lunchtime drinks with PM and some doubtful backbenchers. PM very bossy - she would be much more effective if she was more relaxed.

Tony Durant there - forgot I wrote No More Tick

Letter to GH [Sir Geoffrey Howe] explaining why Keynes was useful now!

Saw Rothschild re. 60 year bond finance for new towns.

Thursday 2nd April 1981

[written on wrong page - AAW crossed through 9 April & substituted 2 April]

D. Energy [Department of Energy] revise again their energy prices for Electrification Review.

DT stories - fumed at views of Nigerian PM political speech at Palace

- threw away Kleenex with PM’s brace for tooth

- a snifter while waiting for the lift …

Friday 3rd April 1981

[written on wrong page - AAW crossed through 10 April & substituted 3 April]

Memo for PM on energy pricing - she is becoming Mercantalist.

David W. [David Wolfson] says PM asked him what I was doing about MBC [Monetary Base Control] - got hold of Middleton and asked him what had been done.

Selsdon Group Dinner at St James Club

Saturday 4th April 1981

[written on wrong page - AAW crossed through 11 April & substituted 4 April]

Terence Gorman came for weekend. Very exhausting. I was very tired.

Seagul [sic] - the Kilney "Irish" version at Royal court.

[5 April blank]

Monday 6th April 1981

[written on wrong page - AAW crossed through 30 March & substituted 6 April]

Railway Elec [Electrification] - I rebut arguments by Treasury and GDH’s son Humphrey Cole - a rea [sic]

Jim Prior’s defence of wages Councils - AWFUL

Tuesday 7th April 1981

[written on wrong page - AAW crossed through 31 March & substituted 7 April]

10.00 PM Armstrong etc. on Energy Pricing. PM shouts at me when I protest at subsidising big oil users. She thinks that she will solve unemployment by such devices. We disagree! But seems to be moving in right direction. 5d off DERV

coking (foundry) - 15% and SRMC [Short Run Marginal Cost] pricing on electricity.

16.45 Railway Electrification etc - thoroughly confusing.

Very good “reply” to 364 by Patrick Minford TIMES

Wednesday 8th April 1981

[written on wrong page - AAW crossed through 1 April & substituted 8 April]

Lunch - Terry Burns - soon a MLR [Minimum lending rate] cut - I agree - the economy is growing right.

[Different pen used from this point]Energy Cttee Egy - Derv reduction OK, but rest are deferred.

PM very good - talked about SRMC [Short Run Marginal Cost] pricing!

Wages councils - Jim [Jim Prior] “slowly slowly” - a very silly paper, but supported by KJ [Keith Joseph] !

Chancellor very good - wants to send ’em packing.

Rail - postponed, a strike likely?

Saw Anton [sic] Kaletsky at Reform - told him that he misrepresented me in his article.

Thursday 9th April 1981

[written on wrong page - AAW crossed through 2 April & substituted 9 April]

Paddie [Paddie Walters] gets car today.

Jimi Anderson - told him that we had got budget right and had a sporting chance for success.

Lawrence Roos - Pres of Fed St Louis

Dinner with Jeremy Bray - he tried to induce me to criticise the exchange rate

Friday 10th April 1981

[written on wrong page - AAW crossed through 3 April & substituted 10 April]

CPRS and D/Industry have tried to calculate new assumptions (fixed unemployment) for closures - but got into great difficulties! They do not want to adopt my methods. (D/I)

[Different pen used from this point] Commitment to existing size of BR - Department of Trade says PM said so in H/C on 7 Nov 79, letter to Women’s’ Inst 8 Dec 79 and in election campaign! Prepared a memo to PM which said she must regard in very conditional efficiency etc.

Selsdon Group dinner

Dinner with Rachel Haas

Saturday 11th April 1981

[written on wrong page - AAW crossed through 4 April & substituted 11 April]

Very good article on 364 in Spectator by F. Mount

Paddie’s [Paddie Walters] [word illegibile] Dance

Sunday 12th April 1981

[written on wrong page - AAW crossed through 5 April & substituted 12 April]

Reports of Brixton riots

Lunchtime - saw Caroline Keeley

Alfred’s S [Alfred Sherman] for Dinner

Monday 13th April 1981

Finished railways memo for PM. She did commit herself to present size of passenger network - quite stupidly - with no conditions. Asking to be taken for a ride.

Lunch at Lloyds - Morse - Bernard Scott there and he appears to be genuine idiot - he wanted fuel prices down because of our indigenous energy sources.

Moya + boyfriend for dinner - very tired.

Tuesday 14th April 1981

11.30 E Cttee on Railways - nothing decided except to refer it to CPRS for report - suggest to CPRS that they get Christopher Foster on to it - meeting still obsessed by impending strike

Dinner with Antony Fisher + wife and Mr Read. “What can they do?” etc. Gave us support

Wednesday 15th April 1981

Quiet day - spent it composing the Inst of Directors speech

GH [Sir Geoffrey Howe] and JH [John Hoskyns] cooking up a program to get TU reform going without Jim Prior getting upset.

Paddie [Paddie Walters] in Coventry - very worried about case coming up on Monday.

Thursday 16th April 1981

Off to Cornwall

- easy journey

[17-20 April entries blank]

Tuesday 21st April 1981

Lunch with David Wolfson + M.H. McAlpine - Chairman of CBI working party on government spending.

Paddie [Paddie Walters] very worried about job.

Wednesday 22nd April 1981

Lunch with Tim Congdon at Ovetons- he is keen on controlling interest rates.

Dinner with Antony Fisher and Mr Read. What can they [sic]

Thursday 23rd April 1981

Quiet day

Inst of Directors speech preparations

GH [Sir Geoffrey Howe] and JH [John Hoskyns] cooking up a policy to get TU [Trade Union] reform without JP [Jim Prior].

Paddie [Paddie Walters] in Coventry and concerned about case Monday next.

Friday 24th April 1981

Julias Ceaser [sic] (Janet Baker + Valerie Masterson) at ENO with Ruth Runciman

[25-26 April entries blank]

Monday 27th April 1981

10.00 Chancellor, Terry Burns + Middleton

- 11.30 MBC [Monetry Base Control] [Different pen used from this point] - GH [Sir Geoffrey Howe] still reluctant to go ahead- willing to see bands of MLR [Minimum lending rate] enforced and abolition of MLR. Burns very cautious - still puts his faith to £M3 in the hope that it will. [sic] GH attacked me for “trumpeting” the uselessness of M3 in spite of his recantation in budget etc.

He is in difficult political position.

Tuesday 28th April 1981

V. cool letter from GH’s [Sir Geoffrey Howe] Private Sec re my suggestions for Brit. Telecom financing - does not deal with the substantive points - stonewalling.

Lunch with John Flemming (B/E) [Bank of England]

Dinner with Walter Salomon

Wednesday 29th April 1981

Saw Ed Fuelner [sic: Feulner]- with DW [David Wolfson] - told us how Heritage had masterminded the reduction of public spending - 17 experts reported in 6 months and put a program together. “everyone’s ox is gored” - identified programs to be cut (eg. TVA cut is supported by Howard Baker!) - but also by a corporate spirit in cabinet.

Thursday 30th April 1981

Chartered Institute of Public Finance + A/C Dinner

[1 May entry blank]

Saturday 2nd May 1981

Amartya Sen to dinner at home

Alfred Goldstein

[3-4 May entries blank]

Tuesday 5th May 1981

Wrote memo on Chancellor’s export control paper.

- all Perm Secs up in arms about it.

- inflation assumptions to 1983/4

Lunch with JH [John Hoskyns] + [blank space in diary]

Nils Thygesen (Denmark) - good contacts

Esra [Esra Bennathan]

Dinner with Guinivere Tilney, Lord Orr Ewing and Craig of Christies

Wednesday 6th May 1981


Lunch with Sir Emmanuel Kaye- wants a devaluation a la 1931 - but I told him then there was a deflation, not a 10% inflation as today.

Rolf Luders etc. to drinks.

Thursday 7th May 1981

Private Secretary Lunch

[8-10 May entries blank]

Monday 11th May 1981

Teeth in the morning - drilling for bridge

→ DW [David Wolfson] - came to talk about gas pipeline £2 Bn - in or out of the PSBR - I suggested a leasing arrangement - owned by private corp

→ Allan Meltzer and Brian Griffiths - set up an attack on B/E [Bank of England] in Telegraph (3 weeks)

→ Arthur Burns worried about all the new monetary instruments.

Tuesday 12th May 1981

Morning meeting to discuss strategy for election and after - essential lest Pubs. Sp. [public spending] TU reform, Civil Service reform.

Lunch - with Victor Price of Massey Ferguson. He told me how right I had been over the effects of the budget - nice to hear flattery!

Paddie [Paddie Walters] very depressed about job - perjury worries!

Wednesday 13th May 1981

Wass + Ryrie [Sir William (Bill) Ryrie, second Permanent Secretary to the Treasury] were very much against the £1 Bn extra tax in the budget (according to Middleton) - thought it would be very deflationary.

Leon Brittan + GH [Sir Geoffrey Howe] + D. Wass + Ryrie all agreed that you must not put interest rates down if you had to put them back up again!!

Thursday 14th May 1981

Walter Salomon visited No. 10. JH [John Hoskyns] very impressed - bank profit tax is retrospective and immoral. JH convinced - but there is likely to be no going back on this. Walter also impressed by Norman Strauss.

Friday 15th May 1981

Dinner with Frank Taylor

[16-20 May entries blank]

Wednesday 20th May 1981

Aix en Province [Aix-en-Provence]

Dinner with Jacques Riboud - very solid character.

Thursday 21st May 1981


French economists are quite awful but Pascal [AAW seems to have forgotten his surname, simply writing a squiggle in the text; must refer to Pascal Salin, Professor at Université Paris-Dauphine, 1970-2009] (in IEA [Institute of Economic Affairs] type of thing) seems good.

Friday 22nd May 1981

Saw Dicks-Mireaux in Aix. Amiable but clearly does not really trust the strategy.

Saturday 23rd May 1981

Return from Aix

Sunday 24th May 1981

Coldham Hall

Monday 25th May 1981

Went to David Hart ’s house Coldham Hall

Tuesday 26th May 1981

Railways electrification with Christopher Foster and John Richard [sic: John Rickard] (CPRS) - they are revising everything downwards. All my conjectures were correct.

[27 May entry blank]

Thursday 28th May 1981

Civil Service College - gave lecture to a very unresponsive lot of civil servants. Martin (Bull?) there from CPRS - quite hostile to the very idea of monetary control - really wants an incomes policy.

Friday 29th May 1981


10.00 - Gathering - [Different pen used from this point] Nuffield College

Checkers [sic: ?Chequers] - argued about MBC [Monetary Base Control] - mainly that (a) it can be controlled (b) it would free our funding policy (we could sell anything to anyone and could follow a minimum cost rule)

Arthur Seldon Dinner

[30-31 May entries blank]

Monday 1st June 1981

Preparing letter to Chancellor and progress report on MBC [Monetary Base Control]

[2 June entry blank]

Wednesday 3rd June 1981

MBC [Monetary Base Control] meeting with Jilstra (of Dutch Central Bank). Great supporter - stresses quantity [word illegible/incomplete

Called to [No.10] Flat to say what to be done about £ falling - below $2.00. She is being advised that some intervention may be worthwhile. I say none. She has great ideas then

Thursday 4th June 1981

[continuation of entry from 3 June]

for using the foreign exchange reserve to buy Trident etc. She was attracted by the idea of intervention because it would reduce £M3 - but I pointed out it would only be very transitory - and she would lose her shirt.

We win - no intervention - I hope we can hold this. But she relents and gives Governor £1 Bn to “play with”. Cabinet equally divided on 7% to Civil service - looks like there will be

a leak and so the unions will be encouraged to be militant etc.

The End?

General view in BBC and rest of press is that Gvt is firm and will win

Friday 5th June 1981

9.30 meeting on Int Rate [Interest rate]

4.30 targets for moves to MBC [Monetary Base Control}

Saturday 6th June 1981

Prepared a short memo for PM for June 18th meeting of cabinet. Treasury paper is a good one - but silly about North Sea oil and sterling appreciation - tumbling down now.

Sunday 7th June 1981

[continuation of entry from 3/4 June]

a leak and so the unions will be encouraged to be militant etc.

The End?

General view in BBC and rest of press is that Gvt is firm and will win

Monday 8th June 1981

Saw PM again about fall in £.

Wrote note on interest rates and said that market had pushed them up, but still only 11% on 7 day money. New measures seem to be working well.

Saudi Int Bank for lunch. Heard about the new prudential requirements of B/E [Bank of England] - capital reserves against loans to banks far smaller than to corporations whatever their reputations.

Tuesday 9th June 1981

Gordon Pepper - he thinks we are pushing the bank as fast as is humanly possible. I suggest he writes to the PM. I need some support.

Wednesday 10th June 1981

Alfred Sherman lunch with Pierce of Telegraph. [Edward Pearce]

Paddie [Paddie Walters] very gloomy about her job.

Dinner with Louise [AAW’s daughter] - saw house she wants me to buy at 45 Arthur Road.

Thursday 11th June 1981

Paddie [Paddie Walters] very glum about buying 45 Arthur Road.

Lunch with Harold Lever, Knight (Ed. Economics) American State Department of the Economy, Editor of the Guardian and DW [Andrew Knight, Douglas Wolfson]. Lever wants to manage exchange rate as he did under Wilson and Callaghan

Knight quite sharp - asked me for economist like Fred Hirsch - who was there? I said none

Friday 12th June 1981

Nasty reference in The Economist to “a rare burst of effectiveness” on Rail Elect [Electrification]. Probably written by Mark Schreiber.

Monetary reform going ok according to Sparrow - interest rate movements were right.

PT Bauer in evening - discussed govt. spending. He clearly thinks it is quite out of control and I have no counter argument. It is. He thinks student grants and AID are prime targets.

[13 June entry blank]

Sunday 14th June 1981

Went to Brighton and South Downs

- Lovely walk over cliffs Downs.

PM tried to get hold of me + failed.

Monday 15th June 1981

Fowler accepts my (CPRS) arguments about railways. Electrification on a line by line basis. But I suspect he is preparing a fall back position - says it is what he always advocated. Goldbergers for lunch - Julian Amery

Panic preparation of speech for CBI. PM 4.30

8.30 and gave her - Denis Thatcher offered me a drink!

She asked me for a conclusion for GH’s [Sir Geoffrey Howe] memo to 12.00 midnight Cabinet of econ. strategy.

Phoned in the conclusion.

- David Hart and N. Strauss to dinner. They were up until 3.30am.

Tuesday 16th June 1981

Minford wrote very good piece on unemployment showing that higher PSBR gave only transitory relief.

PT Bauer and David Hart to lunch.

Signs of recovery in orders in all industries. Wrote a note on Richard Layard’s employment subsidies - it seems designed to promote systematic unemployment. 6m on the dole. 12m at work.

Wednesday 17th June 1981

9.30 Cabinet on economic strategy (notes). PM handled it brilliantly - all agreed on strategy, the only debate was about SHADING. Summarised brilliantly by PM. But main results in the Standard lunchtime edn

- obviously by someone who was there.

4.00 E on railway electrification - J.P. [Jim Prior] on about rate of return on level crossings and rail could not find money even with 50% return - idiot.

7.00 PM at house meeting with Alex Fletcher about his crazy idea.

8.00 concert Janet Baker Der Kindertotenlieder

Thursday 18th June 1981

PM asked me to prepare her for employment debate - ideas on what to use etc

Cabinet - PM very annoyed at leaks. Defends No. 10 staff. Pounced on Soames who suggested it might have been No. 10 staff. Guardian got a very “wet” version. Tim [Tim Lankester] thinks from Prior who met Ian Aitken. PM clearly thinks that too!

Defence - Nott gave a very confusing account to cabinet - 3% for 6 years. GH [SirGeoffrey Howe] said only 3% for two. Willie [William Whitelaw ] compromised with 4 years. And Nott got a special RPE effect!

[19-20 June entries blank]

Sunday 21st June 1981

Saw PM at 7.00 - 12.30 am on what she is to say in winding up unemployment debate. Ronnie (Miller) [Millar], John, there. She is very confused - she finds all sorts of faults especially with John + Ronnie’s idea. Likes Ken Minogue’s piece (he gave it at Athens).

Monday 22nd June 1981

MBC [Monetary Base Control] meeting with Bank of England (John Fforde etc.) and Middleton. Preparing for PM’s seminar. Looks like we will have to use M1 for interest rate based movements.

Andrew Brittain [sic: Britton] wanted to use “forecasts” of exchange rate income etc to fix base - but I countered with the experience of exchange rates in 1980! Won that point especially with Fforde and Middleton. We should base the movement only on history.

Lunch at Barclays

Worked on draft for PM’s speech: Reflation not the cure etc. John [John Hoskyns] and Ronnie [Ronald Millar] produce a draft while we produce “gobbets” - finished at 12.30am.

Tuesday 23rd June 1981

PM worried that she will not have enough. Thinks Foot may sit down early. Possible that opposition will hear her out in silence (very unlikely)

Lunch with Wyldbore Smith, King (BA) [Sir John King] and Lawson.

[Rumours about my leaving due to no progress on MBC [Monetary Base Control] in the press (Financial Weekly and Guardian) - Denied and they are certainly NOT true - making reasonable progress].

PM very rude about J and R’s [John Hoskyns and Ronald Miller] speech, which I thought was quite good. 2.30am

Wednesday 24th June 1981

Working on PM’s speech from 7.00pm in House.

PM’s reception at No. 10 but she was in the House of Commons and Lady Tylney [sic: Tilney] took over. Talked to Peter Tapsell and told him I had written about his Economist Club address to Keith [Keith Joseph] - he is a nice man.

Debate. Prior and Varley - great bores. St John Stevas found every cliché in the book. Foot, funny and stylish, but said nothing about policy except “inflate”. She slaughtered him - House v. rowdy. 10.30

Thursday 25th June 1981

Very tired after all this tension.

Saw [Sic]

Lunch with Em Kaye, Terrence Beckett + VC (CBI) + Chairman +TL [Tim Lankester]. Beckett is not very bright. Back from Ottawa where he is telling the Japs to trade fair. Kaye is now a protectionist.

2.45 Geoffrey [Sir Geoffrey Howe] saw me - wants to help me with B Leyland.

- I tell him my idea about subsidies to young who earn less than £40 a week.

Friday 26th June 1981

12.00 Nigel Lawson - says he is anxious to attack the health service spending - enlists my aid.

Lunch at IEA with Ian Gow

[27-28 June entries blank]

Monday 29th June 1981

11.00 Redvers Opie

CPS Transport Group - convinced that rail electrification was a great victory - they were on about conversions to road.

Tuesday 30th June 1981

Tax Dodgers - PM against GH’s [Sir Geoffrey Howe] proposal to chase the large and medium PAYE dodgers. She is very sympathetic to small tax dodgers - thinks it will increase unemployment. TL [Tim Lankester] very upset. I write a memo supporting GH. But why shouldn’t the Chancellor be allowed to deploy his resources.

Malabre (WSJ) interview - went well.

Lunch with Geoffrey Wood - still insisting that inflation would balloon to 15%+ in 1981/2.

Wednesday 1st July 1981

Lunch at County Bank (Natwest)

Nigel Vinson, Carlyle MP [John Carlisle]

- very vigorous - cutting expenditure and privatising but really v. keen on getting r [sic: probably AAW means interest rate] down.

Thursday 2nd July 1981

Brian Griffiths - Pember & Boyle - still predicting rapid inflation due to £M3 expansion. I said “not so”, and I guessed that by the election inflation would be about 5%. Brian clearly thought I was quite wrong (as did Geof [sic] Wood last Thursday).

Friday 3rd July 1981

Off to Nice [Different pen used from this point] and Walter Salomon’s yacht.

[4-5 July entries blank]

Monday 6th July 1981


Returned at 4.00 pm

Tuesday 7th July 1981

Spent most of day developing objections to Prior’s employment package - analyses unemployment without mentioning wages!

Lunch with French Ambassador - Sam Brittan probing

Sold $50,000 for £26,034 (Not too bad)

Dinner with Miguel Schweitzer (Chile Amb.)

Eldon Griffiths is a pompous ass. Wants to buy arms but also wants recognition

Wednesday 8th July 1981

Look in Times (David Blake) on my proposal for reuniting NIC. Finish memo on Employment (helped by Andrew). [?Andrew Duguid]

PM liked my approach to Employment much better than Jim Prior’s.

Thursday 9th July 1981

Cabinet meeting went on and extended E Committee.

Seminar on Indexed Pensions at David Hart’s.

Harold Rose under pressure because of Scott Report, defensive. Said he had too little time (3 months) and that Scott had written disastrous introduction.

Agreement on seminar on transferability, voluntary index linking

Dinner with Antony Fisher

Friday 10th July 1981

Redoing my piece on YOP [Youth Opportunities Programme] - DW [David Wolfson] liked it but wanted it packaged with early retirement (which the TUs have been after). JH [John Hoskyns] wrote a foreword - I changed it and Tim Lankester has sent it to E Committee - Prior’s ideas leaked to the press. GH [Sir Geoffrey Howe] said to be opposed.

More bloody riots - usual excuses (but none in Glasgow).

Saturday 11th July 1981

No leak on my ideas.

Bought Paddie [Paddie Walters] a hat for party.

Sunday 12th July 1981

Met Read (of MSC) Graham - he says YOP [Youth Opportunities Programme] is no good at all. MSC being sidetracked by Prior.

Amartya Sen, Sherwin Rosen, etc. all at Richard’s [?Richard Layard] lunch party.

Monday 13th July 1981

Prior on the Radio - “the Chancellor must find the money”! Meeting with GH [Sir Geoffrey Howe] and Leon Brittan. Civil servants (Dixon) anxious for cosmetic “solutions”. Brittan keen on my package. (also Robin Ibbs supported it but thought that TUs would oppose). Talk of Compulsion - recruiting youths in Liverpool etc. to clear up the city (I said it was silly and v. expensive in management and administration).

Saw Ralph Howells (MP) - splendid honest fellow - he wants to help - suggested he talk to PM about Reagan’s budget cutting measures.

Tuesday 14th July 1981

My paper leaked to GUARDIAN (Ian Aitken on back page).

E cancelled AGAIN - Long meeting with PM and Brian Griffiths. She complains about press being against her (especially David Blake the Hampstead Thinker). Agree that I write on intellectual defence of the policy SOON.

Garden Party with MPW [AAW’s wife, Margaret Patricia Walters] + Louise.

Dinner with David Hart.

Wednesday 15th July 1981

E at commons 8.15-11.00 on Prior package. All E (except JP [Jim Prior] and Walker) thought my scheme “splendid” or “brilliant” or “imaginative” etc. PM, KJ [Keith Joseph] etc. emphasised real jobs.

Biffen - YOP [Youth Opportunities Programme] not a success. Cosmetic. GH [SirGeoffrey Howe] and Leon [Leon Brittan] very much saw it as a first PESC bid. JP tried frantically to get a quick (because of a leak) £1.5 Bn - no support at all. He appealed for a U-turn on public spending. E agreed to his £90m or so for 1981-2 and £130m for 1982/3 for YOP, apprenticeships etc. But expansion to COSY [sic: possibly acronym for Comprehensive Scheme for Youth] and my scheme etc. remitted to Ministerial committee.

Thursday 16th July 1981

Some telephone calls about my scheme.

Lunch with Sarah Hogg (Economist -> Sunday Times) with J. Hoskyns at David Hart’s.

D. Wolfson - keen on early retirement - and on cosmetics of YOP [Youth Opportunities Programme] type schemes.

Friday 17th July 1981

Hon. D Litt. ceremony at Leicester

Saw Frank and Connie Cass - Gordon on holiday.

Small demonstration but I did not even see any of it - they kept it [sic]

Saw Whitmore - very tired and off to Ottawa with PM to summit.

[18 July entry blank]

Sunday 19th July 1981

Dinner with KJ [Keith Joseph] at Ian Gow’s house. Both very honest, loyal and straightforward. Anxious about SDP. KJ thinks I had great influence on outcomes, especially budget. He clearly represented my views strongly to the PM.

Monday 20th July 1981

That bloody Pipeline again - but she has said CPRS should look at it. I will drop it gently - it is merely a squabble but BGC [British Gas Corporation] should be kept out and their dreadful monopsony abolished.

Lunch at de Zoek + Bevan with M. Hughes , Scott of Shell and Alan Budd - very strange affair, not satisfactory. Anti Gvt Scott used to advise Heath and Callaghan.

John Vereker about PM’s major speech in September.

Tuesday 21st July 1981

11.15 Misc 59 chaired by Pym. Little structure in meeting. JP [Jim Prior] made impassioned speech supported by turd Dex. [Donald Derx] Said he always paid lads above the going rate in order to get the best and give ’em motivation.

Lunch with Russell Lewis + Michael Gregg of Mail.

5.00 Civil servants (Gordon Downie) meeting on employment measures. Much [sic]

Wednesday 22nd July 1981

1.30-2.45 PM meeting on employment measures (GH [Sir Geoffrey Howe] and LB [Leon Brittan] ). PM said Jim Prior thinks he is going to Northern Ireland - but not so. Keen on my scheme and mad at DHSS intransigence in saying they cannot revisit NIC for 16 and 17 year olds under £40 a week. Told GH and LB they must - got 550,000 employed etc. Cannot stand JP’s [Jim Prior] £1.5 Bn - would ruin strategy. GH and LB are thinking about £200m (TOTAL including JP’s £93m)

3.00 - Bill Poeton - attack on clearing bank lending (too short) - his advisor was pursuing a free lunch arrangement.

Party for Jim

5.00 - Department of Employment meeting (David S). Both economists old students. Chosen “cost per job” so that all about same.

Thursday 23rd July 1981

1.00 Lunch at CPS with Adam Rafael [sic: ?Raphael]

4.00 Downie’s group

6.30 Ray Witney’s group at House - suggested letter to the PM supporting my scheme and opposing Prior’s.

Friday 24th July 1981

9.40 Employment lecture - Committee adopted Walter’s scheme at £15 (PM’s suggestion) for assessment on Monday. Many other very expensive items JRS also in package. £698m in total of which £400m is new.

1.00 Lunch with Miguel Schweitzer - he wants Sergio de Castro to see Prior. I offered to help, but what?

4.00 PTB [Peter Bauer] at No. 10. We talked about AID etc

Louise and Kate to dinner.

Saturday 25th July 1981

FT article about me + Prior

Lunch with Walter Salomon.

Sunday 26th July 1981

Lunch with Goldsteins at Kent Edge + Jim Harper.

KJ [Keith Jospeh] phoned about speech - “unemployment not due to lack of demand” - I made usual arguments about 10%+ inflation - but I argued it would be ok if confined to nonunionised competitive sector.

Monday 27th July 1981

Willie Whitelaw very much approves of my measures. He said Brixton is where “Enoch is right. It is the only place”. Railton Road should be bulldozed.

1.15 Lunch with Gvnr [Governor of the Bank of England, Gordon Richardson], Orr Ewing, Bateman and Waldegrave.

3.30 Employment debate - Foot degenerated after 15 minutes into an inflationeer filled by hot air. My measure £40/£15 accepted quietly by opposition.

Tuesday 28th July 1981

Excellent reaction to my £15/40 - FT ecstatic. First genuine radical and progressive measure.

JH [John Hoskyns] very worried about PM - bad way she talks behind men’s backs etc. Thorneycroft also warned. We must tell her to mend her ways.

Prepared monetary seminar paper for PM - main problem is to give B/E [Bank of England] short term discretion but insist on item delivery on long run targets. Peter Middleton is with me all the way to MBC [Monetary Base Control] in a year or so.

Wednesday 29th July 1981

Wedding Day - Went to Palace and oggled with the crowds. Very good natured lot.

Thursday 30th July 1981

11.00 Seminar with Adelman

Howell [David Howell] accepts that depletion policy is economic nonsense, but asked how (politically) they could put it across. Says Ministers of Egy [Energy] are against it.

Friday 31st July 1981

E Nat Industry bids for £2.5 Bn.

Leon Brittan suggested £750m to be done on an individual basis, not across board. JP [Jim Prior] confused by the figures. JP “arrant nonsense” about crowding out. Leon answered him

Monetary Seminar - agreement - PM concerned with trivia (how to say MLR [Minimum Lending Rate] is no more) and very confused about interest rate bands and money supply bands.

Saturday 1st August 1981

Thorneycroft and Pym attacking Geoffrey [Sir Geoffrey Howe] - great pressure to increase spending and reduce fuel prices.

Sunday 2nd August 1981

Ralph Harris at Chequers (Enoch [Enoch Powell] also).

Monday 3rd August 1981

PM met Sadat but cancelled her meeting with me on Trade Policy. JH [John Hoskyns] thinks she wants therapy and Ronnie Miller [sic: Millar] may be best.

Advised J. Vereker on ‘norms’ for PESC we need to induce depts to shed direct labour so 0% 15% for wages and materials respectively seems about right.

Champagne for Rose’s welcome back party [AAW’s secretary at No.10].

I missed her a lot.

Tuesday 4th August 1981

“Merry go round” is critical to combat coal strike. But BR management will not train 200 soldiers to operate the trains (special trg [training] needed because of grades etc.) since this would be regarded as strike breaking.

2.30 hospital (Churchill Clinic)

Wednesday 5th August 1981

Operation - OK

[6-7 August entries blank]

Saturday 8th August

Released from hospital - but very miserable - still cannot get rid of blockage.

Sunday 9th August

V. miserable

Monday 10th August 1981

Return to hospital

[11-13 August entries blank]

Friday 14th August 1981

Saw Bill McCulloch

David Hart

Saturday 15th August 1981


Sunday 16th August 1981

John Wood’s Cottage

Monday 17th August 1981

Very restful week

Tuesday 18th August 1981

Tried a long walk - OK

[19 August entry blank]

Thursday 20th August 1981

PM phoned me at John Wood’s cottage - said I should have a good rest because she wanted me ”fit and well for the enormous job we have to do in the next few months”

[21-23 August entries blank]

Monday 24th August 1981

1st day [?first day back] after operation

10.15 Doctor’s appointment

Tuesday 25th August 1981

Heseltine’s piece on Toxteth “It took a riot” is quite dreadful. No analysis at all. Very secret but apparently leaked by Heseltine to press to get PM on his side against Treasury. JH [John Hoskyns] sent note to PM - saying OK on some issues (eg. eliminating the GLC [Greater London Council] and metrop councils [Metropolitan Councils] but very poor stuff. She agreed - but what is to be done. MH [Michael Heseltine] is a very vain man - sees Toxteth as a basis for projecting himself. Sees Merseyside as a tourist attraction.

Wednesday 26th August 1981

JH [John Hoskyns] and DW [David Wolfson] saw PM until 11.30. She was very shaken - realizes she has to change - V. tired and needed holiday.


  1. organise her time and deal with planning
  2. Bold and decisive move to fire Thorneycroft - Andrew Alexander’s attitude in Mail “Treachery” etc.
  3. Bring on the young not Eton + Gds [?Guards] etc.

Thursday 27th August 1981

Reshuffle being discussed on previous day.

JH [John Hoskyns] agrees now about Pym - Pym tells everyone what they want to hear so currying favour as“good man”. Teddy Taylor (MP for Southend) apparently spiked Pym’s guns when P said how interested he was in TT’s ideas etc. TT said “ am I the 17th you’ve said that to this week” etc.

[28-30 August entries blank]

Monday 31st August 1981

GGP [Gas Gathering Pipeline] is an awful mess - inconsistent arguments

-but main cause is the BGC [British Gas Corporation] monopsony

-we must win this one

Tuesday 1st September 1981

11.00 GGP [Gas Gathering pipeline] meeting PM (said it was like steel) and CE [Chancellor of the Exchequer? Sir Geoffrey Howe] and Hamish Grey (Egy.) and Scottish Office. [sic: Hamish Gray (Energy)] PM got cold feet - thinks it is like steel industry. Wanted me as support in meeting. The economic case was not made at all. Great incompetence on Egy.’s part. Anyone could tell that oil companies would not put their money into such a scheme. But Egy. had no contingency plan at all. Rookes (BGC) [Sir Denis Rooke, chairman of British Gas] also said that he wanted guaranteed monopsony if he had majority interest in pipeline - PM persuaded by Nigel Wicks and so am I.

5.00 Egy. people - terrible, say they know more about location of gas than oil cos. And they cannot trust the oil cos to get all profitable gas.

Wednesday 2nd September 1981

Started PM’s speech to Australia - great difficulty in finding a start.

Bank of Scotland finance for £700m for pipeline - but wanted completion guarantee and guarantee on throughput (“bankable” Gas)

Thursday 3rd September 1981

Seems that Howell must be fired - but what to do with him.

DW [David Wolfson] thinks we must get Politically Attractive alt [alternative] to GGP [Gas Gathering Pipeline].

Friday 4th September 1981

GGP [Gas Gathering Pipeline] - Egy Officials believed that Oil companies deliberately throw money away!

Many of arguments (e.g. that Multiple will ignore some profitable small pockets of gas) hinge on the fact that oil companies do not act in their own interests.

GGP ensure “ethane” - but who wants it and why would it not be built if profitable.

Robin Ibbs essentially said that GGP was not worth the risks involved so much money [sic]

Saturday 5th September 1981

“Anyone for Dennis” [sic: Denis; Denis Thatcher] - not good.

[6 September entry blank]

Monday 7th September 1981

D. Wolfson - suspects that it would be better poli, tically if David Howell were to publically change his mind.

-“New trawl of oil cos” etc.

-Present multiple derv in positive way

GGP [Gas Gathering Pipeline] meeting - much the same except Peter Middleton was back.

Tuesday 8th September 1981

Dreadful PM meeting on Trade - finding ways of “cheating” - complains about beastly French - free trade had a rough ride - hardly mentioned

Lunch with PM + DT [Denis Thatcher] and private secs

2.00pm GGP [Gas Gathering Pipeline] with PM - she’s against it strongly.

4.50 KJ [Keith Joseph] - but both , are politically naive - KJ says the argument will be elimination of monopsony of BGC [British Gas Corporation] and she says Oil Cos will not do it - neither excuse will sit well with public - who have the Oil Cos: And monopsony? Will the public regard BCG as their protection against high gas prices.

6.00-8.00 DW [, David Wolfson] and I saw David Howell at 21 Victoria Square - he started retreating on the economic arguments - more marginal etc but emphasised polit. arguments. “Stopper in the bottle” but I think it is likely to be the beginning of the flood.

Wednesday 9th September 1981

Spoke to DW [David Wolfson] and Peter Middleton - get the pol, itical act together. PM advised to see David Howell but does not seem ready to do so.

Thursday 10th September 1981

11.00 GGP [Gas Gathering Pipeline] - decision - all went well. Robin Ibbs change of mind and KJ [Keith Joseph] quite critical. Waffle from Carrington. Says BP don’t want it.

2.30 Drafting statement KJ, DH [Douglas Hurd], GH [Sir Geoffrey Howe], DW’s [David Wolfson] brilliant suggestion that Oil Cos have refused the GGP (not gvt.)

4.00 Frech Attoli [Sic: Jacques Attali] advisor to Mitterand [Sic: Mitterrand] interested in Gas to get away from Algeria or Russia.

DH saw PM and persuaded her to modify press release - only delay - but kill it off.

Friday 11th September 1981

[Entry crossed out]

Burns, Middleton, Ridley [Adam Ridley] on Ec. - Alarmed at interest rate rise - already signs of rates falling. M & B used exchange rate as main criterion. M3 shooting up due to personal sector borrowing exp. (&163;1,200 in Sept) - but I argued no effect on house prices or stock market. [end of crossed out section]

[12 September entry blank]

Sunday 13th September 1981

Jim P. [Jim Prior] let it be known he would not accept. [Northern Ireland Office]

Monday 14th September 1981

Reshuffle Day

JP [Jim Prior] has been taken to task by Whitelaw for being disloyal and holding a pistol to PM’s head. It was wrong said WW [William Whitelaw]

Lunch at “Economist” - all fairly enthusiastic for my wage cutting scheme

Finished Melbourne speech for PM (World Economy)

Made a firm commitment to free trade.

Tuesday 15th September 1981

CPRS paper on pay - not good (John Rickard’s work) proposes study of Wage Increase Tax WIT

7.00 Ian McGregor on GGP [Gas Gathering Pipeline] - He wants to sell steel from Ravenscraig. He could get Oil Cos only if there is a good price for gas.

Wednesday 16th September 1981

Norman Strauss did naughty things on TV - criticized Pym and Thorneycroft, entirely justified! But he must give up his No. 10 job, I think, since how can John [John Hoskyns] get cooperation from Pym etc.?

12.30 Lunch with Bob Bee and Adam Smith Director (Eamon [sic: Eamonn] Butler) - launching the public expenditure study.

Dreadful job trying to finish Inst of Directors speech.

Thursday 17th September 1981

10.30 Walter Salomon to see PM - I primed him on EMS [European Monetary System]

Finishing Inst of Directors Speech

Lunch at Grinlay’s Discount House - very enthusiastic about our leader - increased contrib to [Sic]

B/E [Bank of England] - WS [Walter Salomon] said Scholey would be a good man (John Baring does not want the job).

Fforde, George, Goodhart - background of interest rate rise. Very worried about Sept/Oct since £2Bn+ will be required to finance the VAT refunds. Should be OK after that - problem of convincing the markets.

Note to PM on this issue

Friday 18th September 1981

2.45-4.15 Speech for Melbourne - PM liked it v much. Did not like Nigel Lawson’s draft.

(Chancellor, Armstrong [Sir Robert Armstrong, cabinet secretary] etc. followed me in to room - but Tim [Tim Lankester] left)

Note to PM on distinction between money and credit

[19-20 September entries blank]

Monday 21st September 1981

PM’s Blackpool speech - finding it very difficult to reconcile the election promises of low taxes with present reality. Will she be prepared to go on record saying that all will be well in 1983 etc.?

Ministers Mtg [meeting] on Pay (CPRS paper) - badly organised PM very discursive - mainly about propaganda (TV John Cleese etc.) - but did reject firmly the WIT proposal - NO BLOODY CONCLUSIONS

-PM very upset about water workers - but not prepared to face a shutdown.

Tuesday 22nd September 1981

10.30 - Interview with Business Week - rather a stupid journalist.

Finishing Blackpool speech - v. difficult

-JH [John Hoskyns] thought it was not suitable, and I agree. She needs theatre e.g. Shirley Williams catching the wrong train.

Lunch with Allan Meltzer

Ke Shang Shell (Taiwan)

Unemployment at near 3mn

Wednesday 23rd September 1981

Jock Bruce Gardyne - Agitated about expansion of bank credit to personal sector - I pointed out [Different pen used from this point] that there had been no effect on house prices nor on stock market (which went into an enormous slump FT below 500 - yet Phillips and Drew gave bullish views for September!)

Derestricting indexed gilts to cover £2Bn for October. I am very much in favour - but Jock nervous about foreign buyers (OPEC) being given unfair advantage.

Thursday 24th September 1981

JH [John Hoskyns] and DW [David Wolfson] - want to know about economy. On course - but we must DO something about unemployment. I say abolish planning controls would give housing boom.

Lunch with PM - farewell to Tim [Tim Lancaster] - She had v. bad interview on Aust TV.

Telegraph rumour that PM is about to be deposed while visiting Melbourne.

Stock market crash but back again FT 487 close - Bounced back in last hours trading.

Letter to Peter Middleton about meeting with Jock Bruce Gardyne

Friday 25th September 1981

Washington 2.00

[26-27 September entries blank]

Monday 28th September 1981

Saw GH [Sir Geoffrey Howe] about monetary situation

Tuesday 29th September 1981

Saw H van de Tak [Herman van der Tak, senior official at the World Bank] - he knows about poss of my being VP - I told him that DPS should be disbanded - distribute personnel no other operating depts.

Wednesday 30th September 1981

Guy Pfefferman

Richard Webb

Paul Meo

Thursday 1st October 1981

Saw [sic]

[2-4 October entries blank]

Monday 5th October 1981

Inst of Directors Annual Dinner Address - very quiet and had to dodge a lot of pointed questions.

- Mad at interest rates rise - many bankruptcies yet public sector gets away with it.

Tuesday 6th October 1981

Heath’s speech - but obscured by Sadat assassination

Gov off a comment to PM in Melbourne - Heath speech is awful - ring fence around Europe etc.

IEA with Nigel Vinson - he is v. worried about high interest rates - wants something done about it. Same mistake as 1980 etc. - Similar view from Alfred Sherman.

Wednesday 7th October 1981

Howe tips me that Heath has letter in Tomorrow’s Times - I suggest Edward Goldberger replies.

Lunch at BBC with Fischer (head of talks etc.)

4.30 Congdon, Goldsmith and Alfred [Alfred Sherman] - worried about importing US depression due to high interest rates. I urged them to wait and see if it comes down.

Thursday 8th October 1981

Gordon Pepper - Sprinkel believes expectations determine markets - not flows of credit etc. - afraid that people will keep money on deposit and not move into stock markets.

Private secretary lunch

Explain to JH [John Hoskyns], JV [John Vereker], AD why we should NOT join EMS [European Monetary System]

The [sic]

Friday 9th October 1981

Burns, Middleton, Ridley re Econ forecasts

(a) How to get off the £M3 “targets” - they are bound to run at 15% - mostly due to new Bank competition.

(b) Interest rates - the final twist to 16%

[Different pen used from this point] Reflection - I am SURE this 16% is far too high. We are in danger of squeezing just like we did in 1980 but now there is the excuse that we do not have statistics of M3 etc. What can I say?

Saturday 10th October 1981

[entry written in pencil]

Writing new part of speech for Blackpool

- Delivered to No. 10

Bomb in Ebury St.

Sunday 11th October 1981

[entry written in pencil]

PM phoned to say she would like me to produce more to give intellectual basis for policy.

- She returned to No 10 at 8.30 or so but was too tired.

Monday 12th October 1981

9.45 PM discussed what she wanted in speech. Putting the pieces together all day.

GGP [Gas Gathering Pipeline] - We were justified by FT headline

- also good editors

3.30 PM again - have I done it!

Tuesday 13th October 1981

Blackpool - reported to PM

PM was chasing me all night to help with speech but Paddie [Paddie Walters] and I were registered at the hotel in the name of Lord and Lady Thomas!

Chaos - did not get hold of me ’till it was all over!

[14 October entry blank]

Thursday 15th October 1981

Talk to Fringe group - very well attended 200 or so.

Question time good - but called Heath’s policy 1971/2 “assinine” [sic: asinine] then withdrew. Only Havilland in Times printed it.

Dinner with Lawson, Denis T [Denis Thatcher], KJ [Keith Joseph], Hugh Thomas, Lady Nieve [sic: Neave] and Ferdy Mount. Then party ITN. Great argument with Editor of Daily Mirror and an unknown ITN man.

[Different pen used from this point] Miranda Hoskyns witnessed it and said I was devastating - whatever that means.

Friday 16th October 1981

-PM Speech [Different pen used from this point] - not a good one. Hugh Thomas thought A- but he was being polite.

[17-18 October entries blank]

Monday 19th October 1981

The Pub spending target of £113.5m implies all sorts of rosy assumptions. We will be very lucky if we get agreement to £115.0

Grieveson + Grant

Tuesday 20th October 1981

10.00 Cabinet on Public Expenditure

PM wanted to talk about Cabinet mtg - asked Jock [John Bruce-Gardyne] to do censure speech

PS [Private secretary] - conclusion that all is to be played for.

Carrington only one who took a firm line - social justice etc., and he did shut up PM - but she retracted.

Employment measures discussion with JH [John Hoskyns], AD [Andrew Duguid], DW [David Wolfson] - new figures show depressing increase in seasonally adjusted of 55,000 or so

5.00 Westminster Industrial Brief

Petteridge says City believes that there will be U turn. I tried to assure him.

10.00 News - All cabinet disc [discussion] on - in spite of “No leak” promise. Biffen presented as wet - which he was NOT

Wednesday 21st October 1981

Complete misrepresentation of Cabinet meeting in press - see my notes on meeting

PTB [Peter Bauer] lunch

Memo [word doubtful] on need for precise PSBR target even though outcome is uncertain.

7.15 for 7.30 Savoy Hotel (River) (50)

v. successful evening - M&S Chairman etc - all in favour of Mrs T.

Thursday 22nd October 1981

EMS paper finished - no entry

Exchange controls - urgent memo to PM to repeal Exchange Control Act 1947

Lunch at IEA [Institute of Economic Affairs] Wincott Foundation

Meeting on Employment measures YOP [Youth Opportunities Programme] → COSY

I have persuaded DW [David Wolfson] and JH [John Hoskyns] of essential need.

JH in evening with PTB [Peter Bauer] for wages to FALL and everything we do should have that as a FIRST Aim.

Friday 23rd October 1981

Employment meeting - again get price of labour down and increase sweatshops - remove prop for 16 year olds - YOP [Youth Opportunities Programme] /School/Work

Rapid inc. in short interest rates to high, bad ≈16%. Main problem is confidence - all believe exchange rates etc. are due to be reimposed. [sic: exchange controls?] Political problem mainly.

Finishing OK because CGBR [Central Government Borroweing Requirement] was much better than anyone expected due to firms having difficulty turning around their computers

[24 October entry blank]

Sunday 25th October 1981

Gilmour on Weekend World - argued that most of cabinet are against MT’s economic strategy.

Monday 26th October 1981

More convinced than ever about need to stop legislation to enable Bank to stop takeovers like Hong Kong Shanghai. Memo to PM.

Lunch Julian Havilland, [name illegible - ?Walter] Terry, Hugh Elsworth Jones (ST), Simon Jenkins - excellent man. He sees many ways of privatising railways - get wages down since everyone wants to drive a train.

British Leyland - what to do. JV [John Vereker] reflecting Whitehall says govt could not tolerate a closure. We must.

DW [David Wolfson] suggested to PM that she see “Changing Gear” group - she said send’em to Treasury!!!

JH [John Hoskyns] and DW thinking of putting pressure on PM - as suggested she increase CPRS - she said I had got a £50,000 advisor.

Tuesday 27th October 1981

JH [John Hoskyns] and DW [David Wolfson] are v. frustrated. - share her aim but her tactics are awful - does not know how to organise her time or to deal with meetings and colleagues.

Tuesday Club Dinner: Nield, Higgins - Keynesians all - except Pepper, Griffiths

Money is Means of Payment - not Credit - made some progress in pointing out the errors that arise in analysis. David Henderson thought it v. good. Easy to dispose of arguments.

Wednesday 28th October 1981

C/E paper on Industry Act forecasts - but imagines that whether we reduce Employee or Employer contribution makes a difference.

Lunch at Tim Congdon (Messels), Vaizey [John Vaizey], [sic]

Censure debate -PM’s performance B- - [i.e., Beta minus minus] Shopping list approved - but brilliant speech by Powell - on lines of the Melbourne speech and v. convincing. Foot. γ [i.e., gamma]

BL [British Leyland] marches on to a strike - Gvt will not relent - it would be disastrous for supporters if they did.

Thursday 29th October 1981

Great secrecy pledged on E’s TU discussion - but all out in the Press. Times said leak was through IOD - but probably mischief making.

Lunch in Lords with Danniel [name doubtful] YQUEM Agence France.

E Committee on Bank Takeovers - not reached - TU law reform - Hailsham and Prior argued that now persons can be sued and union pays fine - but martyrs and v. different if union is in the dock is sticking point. Hailsham, Prior, Walker do not want to move at all - unless they can be sure that no govt (Labour) will not overturn it - “permanent” etc.

Tebbitt [sic] v. good and fair - Law would do good if it prised loose the workers from the unions. Shy of the union only contract because of diff of enforcing at 1319 sites.

We need to start new steps on monetary control.

- Write memo to PM saying we should go towards M1 or M0 control for interest rates.

Middle Temple Dinner with Roskill

Friday 30th October 1981

PM working on speech opening Parliament - cannot see her at all next week.

Reflecting on monetary reform - I think I can persuade everyone to go on to an M1 or M0 target now. Burns and Middleton have moved - So has Patrick Minford and Pepper.

Discovered electricity bill of £400 for quarter.

Dinner with Chilean Ambassador. Eldon Griffiths.

Saturday 31st October 1981

Charpentier’s “Louise” at Coliseum - very long and tedious - typical left wing opera.

[1 November entry blank]

Monday 2nd November 1981

E committee on Local Authority - Referendum vs reelection for misbehaving - but M.H.’s proposals caught TORY Councils where are not overspenders. CAUTION preached by WW [William Whitelaw], FP [Francis Pym] and Janet Young.

New training limitations by Tebbit - COSY got through but LAYARD plans dropped - Treasury support.

Lunch - D. English (Mail), Douglas Home (Times). Marc Schreiber, Vivyan WHITE (Granada) at CPS. - Leyland - I said I would be pleased if they rejected offer.

3.00 PM caught me for speechwriting chaos - I told her that speech in commons was shopping list - she was surprised.

8.30 Return to No 10 to continue speechwriting - s [Sic]

1.00 am Damned tired

Tuesday 3rd November 1981

DW [David Wolfson] and JH [John Hoskyns] against YOP [Youth Opportunities Programme] and COSY - much prefer to extend my scheme to all school leavers and young - give ’em £ 20 a week and you will get real job and output.

DW says YOP cost is about £40-45 a week but some YOPPEPS [Those on the Youth Opportunities Programme] cost £4,000 a year - on carpentry courses. Cannot possibly expand real training at the rate implied.

Wednesday 4th November 1981

10.30 to 1200 Ed Goldberger - mainly concerned with putting across the message.

PM agrees to monetary reform - but says “Ted was on M1 in 1971”

Opening of Parliament - PM’s speech very good - she used most of my material.

Pol Ec Club - Fleming [sic: John Flemming] on interest rates - nothing new except Brian Redding [sic: Brian Reading] thinks inflation will fall to 2.3% in a year or two.

Thursday 5th November 1981

Princess of Wales pregnant!

E on local authority rates - Heseltine wants referendum if formula is exceeded - says he expects 40 or less

Cecil [Cecil Parkinson] very worried since he sees Good Tory councils caught.

Drys [sic: Dries] pro MH [Michael Heseltine]. Wets (WW [William Whitelaw] hates referendum) Pym (defeatist won’t go through House). M. Jopling said “difficult” but thought it would go through, then changed his mind under Pym’s coaxing and said it would not - but PM supported MH.

Lunch with PM and Private Secretaries: Still against EMS [European Monetary System]. Very pragmatic on N. Ireland - would cheerfully give it to Fitzgerald if only he would take it. She would save £1 - 1½ Bn or so. Repatriate Irish!

-meeting reported in FT and Guardian now cancelled.

Papers all said PM’s speech was best she had delivered.

- FT headlined my expected growth and inexorable timing. DW [David Wolfson] is frightened of implications in 6 months time if things do not look rosy.

JH [John Hoskyns] very nervous about commitment to turn it around in one year’s time - did Gummer add that sentence - I did not.

Friday 6th November 1981

Sam Brittan for lunch - MTFS [Medium Term Financial Strategy] - he agreed to get off M3 and give the ER [exchange rate] some role.

Layard and Thomas to dinner - arguments about nuclear deterrence. Thomas hawkish as I am.

Layard says Jenkins is a splendid chairman of SDP council - when he speaks it means next item.

[7-8 November entries blank]

Monday 9th November 1981

Spies all morning [meaning obscure]

1200 Saw PM on speech for Lord Mayor’s Banquet

Draft of first 8 pages into her box one Nation →one world.

Ian Gow very upset about prospect of deunionisation of N. Ireland.

Tuesday 10th November 1981

Clive [Clive Whitmore] thinks PM likes the draft but must check the history with Hugh Thomas. Alfred S [Alfred Sherman] working on it also.

E on TU reform: Agreed to section 14 Immunities - only just. On JH’s [John Hoskyns] count it was 8 to 7. Even Whitelaw was against it.

Battling on with draft of L. Mayor’s Banquet Speech

JH and DW [David Wolfson] made no impression on PM. Employment measures and SDP - cowards ratted on party, no idea about looming threat of SDP. - JH resign on Jan 1st? DW later? I suspect this will focus her mind.

Wednesday 11th November 1981

Brief 15 mins with PM on speech.

Gordon Pepper says monetary policy was much better than anyone imagines.

Lunch with PM in flat - she wants to do contrast with 1950’s - very wild and inconclusive.

Middleton + Burns - we agreed on mainly M1 for target and nominal GNP for aggregate targets, but agree to talk to Jock [John Bruce-Gardyne] and Nick [Nick Ridley] - need to convert them.

Canada Club Dinner - Carrington v. gloomy - being told by Earl of Airlie (Schroder Wagg) that things are very good - except for unemployment.

Thursday 12th November 1981

Only Ryrie of HF was in favour of the Chancellor’s Bank Merger legislation - all the others against it.

Working on speech - she liked my draft. Lunch in flat.

Reception at No. 10 - Morecombe and Wise, Harry Ferns, Bill Poeton etc. very funny conversation with M&W.

Dinner at CPS with Norman Fowler and Gerald Vaughan.

CSD [Civil Service Department] abolition bombshell.

Friday 13th November 1981

Lunch in PM’s flat - still working on speech.

She is getting more and more scattered.

6.00 cocktails with Norman Lamont - he is worried about unemployment.

Carrington has been talking about resigning - will not allow aid to be touched at all. More budget cuts to be borne by Norman Fowler.

Damned Irish troubles - murdered Ulster MP. [Reverend Roy Bradford]

Saturday 14th November 1981

PM been reading Peel - found he was against the corn laws only at the end.

Snyder’s “Lion enmeshed [reference to Rubens and Snyder painting of the fable of the Lion and the mouse at Chequers] ” Churchill painted mouse gnawing away at ropes

Denis [Denis Thatcher] at lunch very anti free trade with Japs, too much total commitment to production laser beams etc.

Sunday 15th November 1981

Writing speech at Chequers for Guildhall.

PM very tired and irate - esp. with me for opposing the view that because all countries were putting into action policies like ours we should not follow them blindly.

Bacon and eggs working supper.

LATER returned to my desk and found “gems” there.

Gummer said let’s leave it till tomorrow. [interleaved with the diary is a cutting from Letter’s page of The Times, 15 Nov 1981, letters from Bancroft and Hebecq and Peter Jay on “Disbanding the Civil Service Department”, above which Walters wrote: “Jay seems to go slightly over the top on Kellner!”]

Monday 16th November 1981

10.30 - 3.00 Finished speech with PM and lunch in flat. She accepted my arguments and said flattering things, which were not quite true i.e. that I was always right in predicting slumps. Complained about my sending [sic]

To Leeds: sat next to Fenton chairman of Special Measures Committee of W. Yorks - very anti YOP [Youth Opportunities Programme] - they want jobs.

Gowrie gave a speech - not good - but I met a LOT of protectionists.

Tuesday 17th November 1981

Speech went well

B/E big boot - 14½ 14⅝ offer down to 13 - opened disc [discount] window at 15

GH [Sir Geoffrey Howe] - said £M3 has still primacy, but not very much

- warmer towards M3 and to EMS [European Monetary System] than he should

- Mansion House speech - did not mention M3.

Tommy Thomson’s Lunch - talked about causes of unemployment. Halstead chairman of Beechams good chap and solid Thatcherite - some more protectionists.

8.00 Bill Poeton’s for dinner with the Sowers

Very tired.

Wednesday 18th November 1981

Bills at 14/14½

If on M1 or exchange rate (some tightening needed)

Base rates hung up a bit - will come down

Uncovered differential = + gave from -3

Expecting Base Rates to come down.

Lunch with Yeua (Taiwan) at Bucks - oysters - talked about the MFA [Multi-Fibre Arrangement] - Taiwan, Hong Kong and Korea are being squeezed to increase India and poor countries. He said they auction quotas in Taiwan.

Dinner with S de la Cuadra, Miguel Kast at 21 VS [Victoria Street]

W. Goldsmith and JH [John Hoskyns] there - fascinated by labour laws.

Keith [Keith Joseph] had supply debate in H/C

Thursday 19th November 1981

Fall in M1 shows responsiveness to rates of interest. M3 expands very fast > PSL2 structured changes and extending of Bank competition.

PM has asked for ALL people who have seen my memo on NIS - getting neurotic about the budget - but NIS memo of GH [Geoffrey Howe] was only secret and not Budget secret - so I am guiltless - but she did not confirm this in memo of Scholar! [Michael Scholar]

E(NI) meeting - mainly push ahead with CPRS.

Keith J. [Keith Joseph] concerned with low standards at British Universities - wants to get some outside assessors (Herbeler, Fellner)

Friday 20th November 1981

Not feeling very well today

[21-22 November entries blank]

Monday 23rd November 1981

Came in at 9.00 but feeling very poorly. Saw Keith [Keith Joseph] briefly.

Tuesday 24th November 1981

Ill all day

E committee on Banking Mergers and T/os [takeovers] - went my way - no legislation.

Asked to dine at Chequers on Sunday with JH [John Hoskyns] (and Miranda [Miranda Hoskyns] ), KJ [Keith Joseph]

Wednesday 25th November 1981

Alan Bailey

Burns vs CPRS - great confusion over MTFS [Medium Term Financial Strategy] and whether our policy is to “nip the recovery in the bud

I prepared a paper showing that MTFS does no such thing. Burns seemed to regard inflation rate as exogenous and therefore any squeeze applies to real output - and so lays himself open to this charge by William Keagan [sicWilliam Keegan] of Observer.

Bernard Ingham very worried about what to say!

Ian Gow says I must stay longer than 2 years.

Thursday 26th November 1981

9.30 Cabinet on Public Expenditure

Ill all day after v. sick night.

Public spending held to £114.9 Bn - not too bad.

Friday 27th November 1981

SDP victory in Crosby - though not so large as predicted

PM [sic]

Saturday 28th November 1981

Dinner at Chequers PM, DT [Denis Thatcher], KJ [Keith Joseph] and JH [John Hoskyns] (and Miranda [Miranda Hoskyns] )

PM shows signs of seeing that strategy for SDP is needed. KJ splendid in bringing her back to this central point. PM sanctioned Task Force (but do not call it that). KJ said that we were right in getting the 1981 budget tightened - credit due to AW [Alan Walters] and JH [John Hoskyns].

Sunday 29th November 1981

DT [Denis Thatcher] fell asleep - PM said Denis “Are you asleep” - no reply “ah let him snooze” [reference to 28 November?]

Told PM that all HF (except Ryrie) were against the ban on Bank T/Os [Takeovers]. She waved poker and said why did GH [Sir Geoffrey Howe] allow himself to be dragooned by Gxxx [word illegible: ?Gvnr = Governor of the Bank of England?]

JH → Guinevere and John Tilney to dinner at 21

Monday 30th November 1981

CPRS Rickard about reducing benefits by 10% = 150,000 off register.

- pushing them up to 250,000 - 500,000 so that its consistent with Minford’s figure.

DW [David Wolfson] worried about PM’s response to interest rate questions (said she wanted £ at 2.00, and too much borrowing etc.). M3 is the excuse of B/E [Bank of England] - frightened of PM’s wrath when M3 appears.

[New York Times (Rattner) interview - young brash man] [Steve Rattner]

Memo to PM - should NOT target £M3 but look at M1, M0 etc.

instead agree with Peter M [Peter Middleton] that interest rates should be allowed to fall today.

Dinner with Christopher Bailey (Bristol Channel Ship Repairs) and JH [John Hoskyns]

Tuesday 1st December 1981

JH [John Hoskyns] saw PM and she thinks he has accepted to stay on. Who is to do strategy etc. were questions she was asking. But JH did not agree.

PM agreed to give JH budget papers but said (and KJ [Keith Joseph] agreed) DW [David Wolfson] could not see them since he was POLITICAL and not a civil servant.

PM saw my memo on interest rates - but wants to wait until GH [Sir Geoffrey Howe] returns tomorrow. Memo from FST [Jock Bruce-Gardyne] urges decrease in r [sic: interest rate] and do not overfund.

Michael SANDBERG from Hong Kong Shanghai - suggested he gets onto Banking correspondents and tell them what is going to hit them! Thought that 9% cost of current accounts was very high

Dinner Ferdinand MOUNT, David Hart, Peter Bauer and Shirley LETWIN.

Wednesday 2nd December 1981

Memo to PM on why work syndrome and effect on real wages

1.00 Lunch at Finance Houses Association - gave short talk - they complained about PRESENTATION

2.30 Treasury, GH [Sir Geoffrey Howe] and all on EMS [European Monetary System] - GH being edged towards it but most officials in Treasury still against it. Suspect that GH will not reduce interest rates - too wary? While they were discussing it, Natwest reduced Base Rate.

6.00 Cocktails at US Amb Residence

PM spent ½ hour looking out dolls for [sic: sentence incomplete]

Thursday 3rd December 1981

JH [John Hoskyns] clear that PM is not really interested in strategy.

Lunch with FHA [error? see entry for previous day]

Sent PM a note on the Why work syndrome - explain difference between 50’s and 70’s

FT article by Sam [Brittan] - bully for Walker’s subsidies.

Friday 4th December 1981

JH [John Hoskyns] and DW [David Wolfson] both very fed up with her.

Interest Rates - Why was I not invited to C/E [Chancellor of the Exchequer] mtg. PM says I should have been there.

MS [Michael Scholar] concerned about her saying she wants $2 pound.

Lunch with Francis Williams of Times - quite good

(Note on Monday)

Economist - bully for Walter’s subsidies → PM

Saturday 5th December 1981


I presented need for interest rate fall as a precursor to election.

Sunday 6th December 1981


PM phoned about my interest rate paper and Gordon Pepper’s letter - very annoyed at thought of Bank holding up rates - but leave GH [Sir Geoffrey Howe] to get on with his speech.

Monday 7th December 1981

Saw PM at 10.00 - 1200 on interest rates. She got Terry [Terence Burns] and Peter M [Peter Middleton] to come in at 11.30.

She wanted me to help GH [Geoffrey Howe] do his speech for debate.

Gordon Pepper for Court of Bank - PM’s suggestion.

Note to PM on dangers of $2.00 - any effect on RPM is dissipated by the return to PPP.

Analysis of Clare Group Proposals.

Talked to JH [John Hoskyns] and DW [David Wolfson] about my being next Governor of B/E.

BBC mang Ian McIntyre upset at leftie Alasdair Milne getting DG of BBC [Director General of the BBC]

D. Wolfson to approach WW [William Whitelaw] about DG [Director General] of BBC and warn that MILNE has announced that he is a middle ground man.

Dinner with Anna Schwartz

Tuesday 8th December 1981

JH [John Hoskyns] told by KJ [Keith Joseph] that no PM’s Dept. and offered CPRS - but JH needs a free hand to use CPRS for strategy (a la Rothschild)

Alfred Sherman complained about Governor’s bad mouthing HKSBC in press - threatening to “not cooperate” with Press (Times Bernard Donahue) [sic: Donoughue]

I suggested he should see the PM and tell her

Lunch with Barclay [word illegible]

Wednesday 9th December 1981

Stupid MTFS draft by Burns showing £M3 as primary target.

Nissan - PM and PJ [Patrick Jenkin] want 80% British content

But this is a QUOTA restriction and BAD

Lunch with PM for Michael Alexander - great argument about expenditure by Foreign Office on Paris and Washington embassies – defence was weak

5.50 GH [Sir Geoffrey Howe] lambasted by PM about interest rates and indexed gilts. GH still does not want to issue indexed gilts.

Thursday 10th December 1981

Dreadful meeting with Chancellor et al on MTFS [Medium Term Financial Strategy]. Very confused about money GDP guidelines

MTFS meeting - Nick Ridley and Jock [John Bruce-Gardyne] wanted to politicise it all - no targets etc. - shambles - Terry [Terence Burns] presented my case of GNP (money) trend rates. GH on about getting off £M3.

Jock very wary of bank lending money on sideline - but Terry is going towards Ex. Rate target with IMF. [Different pen used from this point] - again M1 better than M3

Friday 11th December 1981

Smithers - wanted to set up Nat Mortgage Group which would buy L.A. [Local Authority] mortgages

Monkton (Christopher) [sic: Monckton] - reduce front-loading of conventional mortgages.

[12-13 December entries blank]

Monday 14th December 1981

PM stupid - wants to suppress the article by David Howard (Fed) showing M3 is better than M1 [sic: see 15 December entry] - I begin memo.

David W’s [David Wolfson] on son of YOP [Youth Opportunities Programme] - in context of revolt of the £16 payment.

Only ½ of the YOP’s are on trg [training] yet average cost is £50 pw.

Lunch Edmund Goldberger, Julian Amery etc.

Nice old buffer JA - hopelessly romantic but also very shrewd.

Dinner Simon Jenkins, Posner, and BR - clearly designed to mend fences - “could I see any case for subsidy”. Jenkins said he wanted to split up BR [British Rail] - sell off Southern Line.

Tuesday 15th December 1981

Memo pointing out that we cannot suppress the reports of the bad performance of M3.

“We have nothing to fear from the truth”

Will I be fired?

Lunch Peter Tapsell - pompous man and quite unable to stand up to my arguments that PSBR in 1980/81 was expansionary (13½Bn) yet economy collapsed whereas PSBR in 1981/82 was 10½ yet economy recovered.

Dinner Aaron and Sue Gellman

Wednesday 16th December 1981

Middleton - says £ stronger and interest rates moving down - he agrees to write memo to C/E [Chancellor of the Exchequer] recommending that they engineer a ½% by Christmas

Sebag lunch and Michael Boyd Carpenter rather depressed by election chances.

Wass and B/E (George, McMahon) - Bank want to stop auction system - argue that it depresses the prices - Wass seemed persuaded but we offered one more auction.

Graham Hutton for dinner

Thursday 17th December 1981

Notes on MTFS [Medium Term Financial Strategy] sent to Burns + Middleton plug for M1 guide (with M0 and retail M1) and £M3 as subsid - 3 year growth

Peter Utley + Matthew Simons (New ec ed D Tel)

- a bit wet - especially on AID

- said SDP were against WIT Meade and Incomes policy

- John Horam says econ pol is same as Thatcher

Party at No. 10 [different pen used from this point] Late night cabinet on Ian MacGregor’s crazy idea for buying Kaiser . PM had great rows with him.

David Hart’s for dinner - he had his book accepted by Anthony Blondin, David Portillo (ex Energy). [sic: Michael Portillo]

Friday 18th December 1981

Note for PM on redundancy payments in Universities

£200m vs £100m if they do it as an offer.

I suggest freezing incomes for 3 years!

1.00 Lunch with Alfred [Alfred Sherman]

4.00 Bank Fforde v. worried about PM putting pressure on to reduce interest rates. They are OK operationally 86>ER>92 [sic]

6.15pm - Nick Ridley and Jock [John Bruce-Gardyne] complain that GH [Sir Geoffrey Howe] has to approve of everything. GH no good at all at speech making - “no structure”. Prepare an agenda for meeting.

Julie and Brian to dinner.

Saturday 19th December 1981

MTFS [Medium Term Financial Strategy]

Indexed Gilts

PM very annoyed that Bank is trying to sell indexed gilts by tender.

PM now convinced that M3 is no good.

Sunday 20th December 1981

Objection to Howard article is that opposition will beat him with it (as Shore did with the Budd confession!)

PM muses she should have asked [Roy] Jenkins to be C/E [Chancellor of the Exchequer].

SDP Horam said Ec. Pol. the same.

Monday 21st December 1981


[22 December - 2 January entries blank; 3 Jan 1982 entry ‘Return’]

Sunday 3rd January 1982

Return [no further material in volume]