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CHAPTER FIVE Into Cabinet
ОглавлениеTHE DAY AFTER the 1987 election came the startling news that Norman Tebbit was stepping down as party chairman. Although our campaign had been criticised as inept, and rumours abounded that Norman’s relationship with the Prime Minister had deteriorated, this was still a shock. We had just won an election – albeit against an unelectable opposition – and Norman was popular in the party for his robust Conservatism and for the courage with which he had returned to front-line politics after the dreadful injuries he and his wife Margaret had suffered in the bombing of the Grand Hotel in Brighton. He and I were to have our differences in later years, but he was a loss to the government, and I was sorry to see him go. So, despite their reported disagreements, was the Prime Minister, who tried in vain to persuade him to stay.
I was asked to call on Margaret at Downing Street on the Saturday afternoon following the election. My days at Social Security were at an end. Another year, another job. But where next? A sideways move as a minister of state seemed unlikely, since a telephone call from Number 10 would have sufficed to tell me that. I considered the possibilities. I was sure that John Wakeham would be promoted to the Cabinet, leaving a vacancy as chief whip. John MacGregor, too, the Chief Secretary to the Treasury, was bound to be offered his own department. Either of those two vacancies seemed possible for me. As I drove to London, the lunchtime news listed the ministers believed to be leaving the Cabinet. It seemed the reshuffle was going to be a big one.
When I arrived at Number 10 I was shown into the small waiting room on the ground floor near the Cabinet Room. To my surprise the Transport Secretary John Moore was already waiting there, and within a few minutes we were joined by Norman Fowler, the Paymaster General Kenneth Clarke and John MacGregor. Then the Industry Secretary Paul Channon arrived.
One by one we were summoned to learn our fates. As John MacGregor preceded me, I guessed that I was to join the Cabinet as Chief Secretary to the Treasury. This proved to be right. When I was called in to see her the Prime Minister was warm and friendly. She spoke of the importance of the job, adding almost as an afterthought, ‘The Queen is expecting you at the Palace this afternoon so you can join the Privy Council.’ Although membership of the Privy Council is automatic upon joining the Cabinet it is a preferment of some significance. It is coveted more than any other recognition in the Commons, and I was delighted. As I left Number 10 with Norman Fowler (the new Employment Secretary) for the Privy Council the skies opened and the rain pelted down as we huddled under an umbrella. But nothing could have dampened our spirits that day, and the meeting of the Privy Council was a very jolly affair.
Later I learned that I had been right in my guesses about the two jobs that might have been offered to me. The Prime Minister’s original intention, backed by William Whitelaw, was for me to become chief whip; but Nigel Lawson asked for me as chief secretary, and after a tussle he gained Willie’s support and had his way. This meant that I would now join the Cabinet, whereas the chief whip attends Cabinet but is not a member of it.
It is tempting to reflect on how events might have turned out if I had become chief whip. An appointment to that post usually lasts for a whole Parliament. If that had been so in my case, I might never have been foreign secretary, chancellor or prime minister. Instead I would have been chief whip during Margaret’s leadership contest against Michael Heseltine in 1990. I have often wondered if I would have been able to obtain for her the few extra votes that would have enabled her to win on the first ballot. She would then have remained prime minister until the next general election, when the electorate as a whole would have had the chance to judge the government. I believe we would probably have lost that election – but it would have been a more fitting end for a long-serving prime minister than removal by her own colleagues. Moreover, it would never have given rise to the bitterness that has scarred the Conservative Party ever since. Nor would Europe have become such a divisive issue.
But all that lay far ahead, and I was pleased at the job I had been given. The Treasury is the most powerful department in the government, since it not only determines macro-economic policy but controls the purse strings. Macro-economic policy was the prerogative of the Chancellor, Nigel Lawson, but public spending was to be my responsibility as chief secretary.
The chief secretary has one of the lowest profiles of any Cabinet minister, but this is deceptive. For he is the most influential minister in determining the division of the total of public spending – who gets what. This gives him the power, if he wishes, to facilitate new policies or to hold them back. Thus, although the most junior member of the Cabinet, the chief secretary has an authority far greater than the casual observer ever realises. As prime minister I was always very careful who I appointed to the role, and watched very carefully what they did with it.
The Treasury had many of the best officials in Whitehall. My Private Secretary, which in Whitehall parlance means the head of my Private Office, was Jill Rutter, a Treasury high-flyer. She had an extremely sharp brain and an acid sense of humour that spared no one. She had a proper respect for ability at all levels – but none for seniority alone. Jill was fearless, and had a healthy disregard for conventional wisdom. She was a fierce protector of her turf and her minister. An added bonus for me was her love of cricket, for she was a long-standing member of Surrey County Cricket Club. Sometimes we would relax between meetings by catching up with a Test match on television or, since long hours were normal, watching the late-night highlights with other members of my Private Office before leaving the Treasury building.
The most important part of the chief secretary’s year is the public expenditure survey, which begins in the summer when each secretary of state puts in a ‘bid’ for his department’s financing for the next three years. These bids set out the ambitions of the department for the years ahead. Rather as the black widow spider dances an odd quadrille with its partner before finally mating, the public spending round has its own rituals. The bids often contain an unrealistic wish list, and are invariably padded so that the minister can be seen to make ‘concessions’ in head-to-head negotiation with the Treasury.
I arrived at the Treasury to find that the bids for the forthcoming years were very high: for the first year alone they amounted to £6 billion more than the sum previously allocated, which was quite unaffordable. In response – the first part of the ritual – I prepared a paper for Cabinet in late July that set maximum spending levels for the next three years. For the first year, over which the greatest battles are always fought, I recommended that we should hold spending to the level agreed by Cabinet the year before – although I proposed spending increases after that. The paper had three purposes: to gain the collective approval of the Cabinet for the sum total of expenditure that was affordable; to convince the markets that we had a sensible policy; and to emphasise that the Treasury was not an Aladdin’s cave to be ransacked. I was firmly backed by the Prime Minister and the Chancellor, and – as I had done some private canvassing – I received support from other ministers.
More surprising was that some of the ministers who had asked me for the largest increases for their departments were strongly supportive of restricting total expenditure: that stern monetarist Nick Ridley, for one, clearly saw scope for cuts elsewhere, whilst being confident that his own budget at Environment required a great deal more money. Nick was not alone; he was merely the colleague whose bid was most obviously at odds with his own philosophy.
Throughout August, the Treasury raked through each department’s bid, enabling me to identify the weak points to attack when I wrote to ministers challenging their assumptions and costings. All this is ritual foreplay to prepare the ground for the detailed one-to-one negotiations between the chief secretary and the spending ministers at which the expenditure levels are agreed. Every subheading of expenditure is pored over at these bilateral meetings, which drag on for many hours. Several meetings are usually necessary before a conclusion is reached. The bilaterals are revealing. They expose vividly the ability of ministers and their personal commitment to their programmes.
The process represents a sharp learning curve for the chief secretary, who has to be able to challenge not only the expenditure figures but also the policy of every department. This is gruelling, but it offers an insight into Whitehall that is unavailable to any other minister. Years later, as prime minister, the bank of knowledge I built up as chief secretary was immensely useful in giving me an understanding of what lay behind ministerial proposals. I often found that the most important point of policy-making was not what was proposed, but why.
Although my first few months as chief secretary were tough, I felt at home at the Treasury, and my two years in the job were amongst my most enjoyable in government. The amount of detail to be absorbed is formidable, but since I believe that every pound of taxpayers’ money which is spent has to be justified I did not mind that at all. I found that I was easily able to absorb and recall at will a huge amount of detail about public spending, which gave me a tremendous advantage in negotiations with ministers. Nor did I find it difficult to predict accurately how colleagues would couch their arguments: I simply put myself inside their minds and considered what I would do in their place. The volume of work meant that I did not contribute much to macro-economic policy-making, but since Nigel Lawson listened to others only as a prelude to announcing what he had intended to do anyway, this did not much matter. I had no ideological baggage on economic and financial policy, and I admired Nigel’s skills.
Nigel carried the role of chancellor with great self-assurance. He had reached the peak of his authority in government, and no trace of self-doubt ever crossed his mind. He often worked in his study at Number 11 Downing Street rather than at the Treasury, summoning officials and ministers when he needed them. When he did appear at the Treasury it was often for large meetings of all his ministers and senior officials. These he conducted like a professorial seminar. Nigel would pronounce. Comment would be invited. Nigel would adjudicate. Policy was decided. Government was made to seem very simple.
Nigel was supported by an impressive team of officials and ministers. Sir Peter Middleton, the Permanent Secretary, was a sharp Yorkshireman, level-headed and pugnacious to the extent of provoking an argument simply for the intellectual joy of having one. An intensely private man, he was a close friend of Nigel, and was very perceptive about events and people. Robin Butler, the Second Permanent Secretary in charge of public spending, had been Margaret Thatcher’s Principal Private Secretary at Number 10, and knew the Whitehall machine and all its ways. No one was surprised when he leapfrogged over more senior colleagues to become Secretary to the Cabinet and Head of the Civil Service. He was easy-going, helpful and efficient – and one of the most competitive men I have ever met, a fine sportsman who excelled at rugby and cricket. The third of the main figures was Terry Burns, the Economic Adviser. Tousle-haired, youthful, genial and without pomposity or malice, Terry was a man of passionate interests. Life was never boring to him, and he never seemed downcast (except momentarily when his beloved Queen’s Park Rangers were having a string of bad results). He had made his reputation as an economic forecaster for the London Business School.
Amongst the other ministers at the department, I had an amiable but wary relationship with Norman Lamont, the Financial Secretary to the Treasury. The Financial Secretary is number three at the Treasury, and after the election Norman must have hoped for promotion to chief secretary. If my appointment was a setback to him, he gave no outward sign of it, although our conversations were usually guarded. We did not share cheery confidences. The erudite Peter Brooke was the minister of state responsible for VAT and Europe. I had first met him in my days as parliamentary candidate for St Pancras North, and he was always ready with a good-humoured story. The final Commons minister, the Economic Secretary, was Peter Lilley. Previously Nigel’s PPS, Peter was rather shy and withdrawn for a politician, but was highly intelligent, with a fine analytical mind, and sometimes surprisingly waspish. It was a talented team, all of whom were to reach the Cabinet. In the Lords, the able Simon Glenarthur had the difficult task, which he performed admirably, of speaking for all Treasury ministers. I often wished that he too had been in the Commons to supplement the talent available there.
In early September I began the detailed bilateral discussions with ministerial colleagues. The toughest negotiator of them all was Peter Walker, the Secretary of State for Wales. Peter believed in the virtues of public spending, and was determined to use it to the full in the Principality. His general air was of a man who did not care whether he remained in the Cabinet or not, and was not remotely interested in being a team player if that meant making concessions to an economic policy he distrusted.
As a negotiating tactic this was devastating. Peter simply asserted that his bids were the minimum necessary; he could not manage with less; the Prime Minister had promised him the money when she gave him a job he had not asked for; he did not much like the Treasury, because it got in the way of good policy; and so, like it or lump it, he expected us to cough up. Since (apart from his opinion of the Treasury) much of this was true, there was not much that could be done with Peter. It was perhaps fortunate for me that most of the Welsh budget was a fixed proportion of the sums available to English departments for the same responsibilities. Peter’s bids, therefore, were only for small amounts – which made his approach even more infuriating, since in the midst of discussions for much larger sums, they were not worth the argument. He knew this, and his stubbornness was a deliberate tactic. His approach to the Treasury was best summed up by an annotation in my appointments diary which simply read: ‘3.30 Public Expenditure Settlement – Wales (Secretary of State, Dick Turpin).’ Highway robbery was his forte.
Kenneth Baker, the Education Secretary, was the polar opposite of Peter. He would bound in full of enthusiasm, with lots of new ideas, all of which, he assured me, would be hugely popular with the electorate and would guarantee yet another election victory. Ken cared a lot about education, and in Cabinet committees he handled the Prime Minister on the subject better than anyone else I ever saw. As a former Education minister herself, she enjoyed picking holes in his plans, particularly when he was devising changes to the curriculum. It was a game they both enjoyed. ‘That’s absurd,’ she would say. ‘I know which official suggested that.’ Ken would demur, deny that it was that official, make a joke of it, deflect her criticism, and gradually manoeuvre the Prime Minister into a position where he made tiny concessions to her, and she would have appeared graceless to seek more.
It was good spectator sport for the rest of the committee, and I admired the way he performed, but his technique was less effective where the issue was money and not ideas. When detailed questions on cost were put to Ken, he was often poorly briefed. His spending plans were grossly inflated, and it never took long to remove the padding. At the end of our negotiations Ken bounded out as cheerfully as he had come in, but with much less money than he had sought.
Kenneth Clarke, the Health Secretary, simply enjoyed a good argument. It was evident to me why Ken had chosen the law and then politics as a profession. Our meetings always took a long time as we argued points of detail, agreeing the facts but disagreeing about the conclusion. It was good-natured but very time-consuming. Eventually, when we had reached stalemate, I suggested we throw the officials out and do a deal between ourselves. Behind closed doors I told Ken that his bids were outrageous. Rather disarmingly he agreed, but added that if he had frankly admitted it, I would have asked for even more reductions. This, of course, was true. Having agreed that he was asking for too much and I was offering too little, we soon reached an acceptable compromise. We then sat chatting over a drink before re-admitting the officials and announcing the outcome.
The Home Secretary Douglas Hurd was a subtle negotiator who began his meeting with a rather discursive statement setting out all the desirable expenditure he had himself excluded from the bids before he submitted them. ‘All very necessary,’ he would say, ‘and we’ll have to do it one day, but’ – and here he would shake his head sadly – ‘I know there are many demands to be met.’ It was a clever technique, designed to cut off many of the Treasury’s traditional arguments. Douglas was reasonable in manner but tough on substance. He would lean back in his chair, his right ankle across his left knee and an agonised expression on his face if any reduction to his bids was suggested. All this talk of money was obviously distasteful to him. If the Treasury case was good enough he would gradually concede, but eventually he would begin jingling a large bunch of keys in an agitated fashion. The key-jingling was a sign that he had reached his bottom line. Jill Rutter once said to me that Douglas and I would never have finished a negotiation if he had left his keys at home.
The Scottish Secretary Malcolm Rifkind was always difficult, and usually threatened to resign unless he got a better settlement. I once asked him at the beginning of a meeting whether he wanted to threaten to resign now, or to wait until we had finished. ‘I think I’ll wait,’ he grinned, knowing even then he would only settle at the last moment. Scotland was well served by a series of Scottish secretaries who turned public expenditure negotiations into an art form.
The public spending survey is always hard pounding, and I found it doubly so first time round. In my favour was a growing economy and buoyant revenue; working against me was a general election manifesto that enabled ministers to claim a mandate for specific expenditure. As the survey covered the first three years of the Parliament they tried to include every election promise they could identify, and usually overestimated the expenditure necessary to cover it.
I tried to reduce or eliminate bids by challenging the case made for them by the ministers facing me, although in doing so I was always acutely aware that they had to return to their departments and defend the deal they had accepted. I always left them with what we in the Treasury called a ‘lollipop’, even if we had denied many of their cherished schemes. I had no wish to undermine their credibility or that of the government.
One tale needs scotching. John Moore, who after the election had become Secretary of State for Health and Social Security, and I were said to be rivals, and it was widely believed in some quarters that I gave him a poor settlement in order to damage his political career. John was a former Treasury minister convinced of the virtues of low spending, and rather quixotically he tried to match his policies to his philosophy. In pursuit of this admirable consistency he bid for too little money in the public expenditure settlement, rather than too much. This concern for prudent economics would cause him much difficulty – a rare and honest approach that earned him opprobrium.
Gradually the deals were reached. Some took a long time. George Younger, at Defence, conceded only after many meetings and a firm refusal on my part to meet his demands. He was a hard negotiator, and eventually accepted that if he pushed his case to an adjudication by the so-called ‘Star Chamber’ – which would determine the outcome if I could not reach an agreement with the minister concerned – he would get no more cash. George was a good defence secretary: he attacked in strength and retreated in good order.
In the 1987 spending survey all the deals were eventually reached in bilateral meetings, the first time for years that the ‘Star Chamber’ had not been called upon. The Treasury’s spending target was met too, although I had agreed an extra £1 billion for capital spending and large increases for health, law and order, defence and education. Despite this, the level of expenditure fell to the lowest proportion of national income since the early 1970s. This outcome was widely praised.
In January 1988, Willie Whitelaw retired as deputy prime minister. He had become the public face of tolerant Conservatism, a wise counsellor, and a restraint upon Margaret. He was irreplaceable. I was given some of his responsibilities. One of them, ‘helping with the presentation of public policy’, simply amounted to ensuring that Bernard Ingham, the Prime Minister’s pugnacious Press Secretary, was briefed on Cabinet discussions. I was also given the job of adjudicating in disputes between departments when they were in conflict. In practice I was rarely called upon, unless the dispute involved money. Nevertheless, these rather imprecise new responsibilities were widely publicised and speculated upon, and my profile began to rise.
The public finances were buoyant when Treasury ministers and senior officials met in January at Chevening, the foreign secretary’s official country residence, lent for the occasion of the annual weekend discussion on the budget options. It was to prove a dramatic budget. Nigel was determined to take advantage of the excellent fiscal position to make deep cuts in income tax. He reduced the highest rate from 60 per cent to 40 per cent, the basic rate to the 25p target Geoffrey Howe had set years earlier, and increased personal tax allowances by twice the rate of inflation.
The 1988 budget would cast a long shadow. Against all tradition there were angry interruptions in the Commons when Nigel made his Budget Statement, and the House was suspended for a brief time. Labour – and many others – were shocked by what they perceived as the budget’s recklessness. I did not agree with them at the time. Whilst Nigel had cut taxes – and therefore the government’s income – the public expenditure survey had also cut spending as a proportion of national income. Like Nigel, I saw the tax cuts as a taxpayer’s dividend earned by the growth of the economy and the restraint in public spending. Moreover, despite the income tax cuts, Nigel had delivered a balanced budget, and one that had been warmly received by the Prime Minister and the Cabinet that morning when he had set out his measures for them. Our backbenchers too were ecstatic.
But there was a shark in the water. The official Treasury statistics were wrong, and badly misled the forecasters into seriously underestimating the growth in the economy. These dangers became apparent within months of the budget when a boom began, and inflation started to climb. To curb it Nigel raised interest rates to 12 per cent, then 13 per cent, 14 per cent, and eventually 15 per cent, the level I was to inherit as Chancellor. As the boom grew – and with it spending power boosted by wage increases, overtime and tax cuts – the housing market went crazy. Prices rocketed as people scrambled to become home-owners. It seemed a one-way bet, and purchasers concerned themselves only with whether they could meet their mortgage repayments; it was taken for granted that the value of their houses would go on rising. When the economy fell off the cliff and boom turned to recession, made worse by an adverse world economy, the housing market stagnated, prices tumbled, and millions found themselves burdened with negative equity, owing more on their homes than they were worth. This problem was to paralyse the economy in the early nineties, when the public would yearn for a return to the boom years, with no recognition that it was the boom itself which had led to many of their problems.
Despite the role of the 1988 budget in feeding the boom-soon-to-be-recession, the tax changes Nigel introduced were right. They ended the unjustifiably high taxation of income that had hampered investment. Nigel saw that long-term advantage very clearly, but he did not foresee the short-term problems. I had no premonition of what lay ahead either, and I defended the budget with conviction. By the time the malign combination of inflation, high interest rates, rising unemployment and a collapse in growth was fully apparent, Nigel and Margaret were no longer in government.
As chief secretary I was conscripted onto a new committee chaired by the Prime Minister to consider the future of the National Health Service and how to finance it. Nigel Lawson, John Moore and Tony Newton were also members (Ken Clarke and David Mellor would replace the latter two after reshuffles). The case for reform of the NHS was strong. Despite increased funding year upon year, there were perennial dramas with health authorities running out of funds in the last few weeks of the financial year, and 1988 was no exception. Nigel and John Moore were both keen to be brave and do something to solve the problem, and after initial reluctance Margaret agreed. In his memoirs Nigel would reveal that he persuaded the Prime Minister of the need to review hospital services immediately after having briefed her on the large tax cuts he was planning in his 1988 budget. This was a typical Lawson tactic: offer the PM something she would be pleased about, and then seek approval for an action he favoured.
The review was long and detailed and recommended fundamental changes that I continue to believe were worthwhile, though they were widely attacked. To ensure that NHS facilities were used effectively and patients treated more speedily, we devised a system to enable money to follow the patient – often outside the immediate health area. We also proposed two areas of devolution: hospitals were permitted to become self-governing, and large GP practices were enabled to control their own budgets.
Although these schemes were permissive – no one would be forced to be part of them – the debate that followed, as so often with the NHS, was based more on emotion than logic. Some of the criticisms were ludicrous. Labour, on political auto-pilot, said we were trying to ‘privatise’ the health service – although this had never been discussed for a moment throughout all our detailed deliberations. They also attacked the ‘internal market’ we created, claiming that we were putting money before patients. Here they were wrong too: we were in fact putting patients first, by ensuring that money was allocated more efficiently to increase the sum total of health care. In due course we legislated to bring our reforms into operation, and they were effective until they were partly reversed by the Labour government after the 1997 election.
When the 1988 public expenditure survey began, bids were once again far too high, although a number of ministers had strong claims to extra funding. Douglas Hurd had a compelling case for increased police expenditure and capital for an enhanced prison-building programme. Kenneth Clarke, now at Health, had an irresistible case for preparing for the NHS reforms – which, since I had helped to negotiate them, diminished my arguments against his bids. Paul Channon, now at Transport, submitted a strong case for more investment in roads and nationalised industries. Others, too, argued their case forcefully – notably Nick Ridley, George Younger and, of course, Peter Walker.
By this time Jill Rutter, my Private Secretary, had been promoted. Her replacement, Carys Evans, had a different style but was just as effective. When Peter Walker played the ‘Welsh’ card yet again, I dictated him a note, and Carys translated it into Welsh before we dispatched it. We hoped there was a Welsh-speaker in Peter’s office.
As usual, the public spending negotiations were protracted. In many cases they continued throughout the Party Conference at Brighton in October. I sat in my hotel bedroom as ministers trooped in and out, but decamped to a different hotel for especially long discussions with George Younger, who as ever fought politely but determinedly for every penny. Slowly I persuaded him that I could not meet his bids, but he ceded ground only after heavy bombardment.
Negotiations with Nick Ridley, the Environment Secretary, were strained. I thought Nick a clever but erratic man of much ability and an admirable contempt for presentational niceties. In some quarters he was widely liked and admired. His junior ministers and officials – even those who loathed his often uncompromising views – nearly always spoke warmly of him. Like many in the Commons I had been astonished when Nick was appointed to the Cabinet, but he had an original mind and was wonderfully politically incorrect. Face to face, I respected him, but I did not like what he said behind my back. I found this apparent animosity from someone who did not know me well puzzling.
Whenever we met for negotiations Nick took off his jacket, and even his red braces looked pugnacious. We tried to get on, but even where we agreed our reasons differed, and neither of us felt at ease with the other. Only rarely in my life have I utterly failed to form a relationship with someone, but Nick and I were doomed. I don’t apportion blame for this, I simply note it. Later, when I was appointed chancellor, I understood Nick’s frustration: he clearly wanted the job himself, and must have thought himself better qualified. He was certainly closer to the Prime Minister than I was. He suffered, and his private frustrations were reported to me.
Nick and I only rarely clashed in Cabinet or in committees. But one exchange in Cabinet committee did not endear us to each other. It also gave an interesting insight into the Prime Minister’s occasionally rather engaging innocence. David Mellor, then the Minister of Health, had rather conversationally raised the issue of single mothers. Nick suggested gruffly that they should be housed together in hostels so that they could be ‘cared for’ (and, the subliminal agenda went, watched). I thought this patrician approach to be so careless of people’s individual circumstances that I said ironically, ‘Why don’t we put red lights outside the hostels too?’ Nick grasped what I was on about and flushed with anger, but the Prime Minister, not understanding at all, warmly supported my ‘proposal’. ‘They’ll know where to go, Nick,’ she enthused. Irony was not Margaret’s strong suit.
Not that Nick’s hostility was directed solely at me. It extended to Cecil Parkinson (at that time the Energy Secretary) as well. In 1988 Nick and I reached a stand-off in pre-budget discussions, and I told him that I intended to refer his settlement to the Star Chamber. Since this was chaired by Cecil the prospect was not at all to Nick’s taste, and he quickly settled his budget at Environment in a brief meeting with Nigel Lawson – as I had suspected he would. His dislike of Cecil probably cost his department quite a lot of money.
Cecil was not called into action, as for the second year running all the spending agreements were reached without resort to the Star Chamber. The plans I agreed included an extra £2.25 billion for capital spending in the first year and large increases for health, law and order, defence, roads and local authority spending. These increases were possible because of the falling burden of interest payments on government debt and savings on social security payments as unemployment fell. The books balanced without any increase in overall spending for the first year of the survey, and only modest increases for the following two years.
As 1988 ended I could look back on two successful public expenditure rounds. My satisfaction was soured only by the increasing signs of economic problems to come. During those two years I had been so preoccupied with Treasury responsibilities that I had turned down a number of opportunities to deliver the sort of philosophical lectures that identify politicians with a particular credo. At the time I had no hesitation in refusing them. I was busy, and believed there would be many future invitations and ample time ahead to set out my ideas. Had I realised how my career was about to accelerate I might have acted differently. As it was, I delivered only one speech, to the Audit Commission in mid-1989, in which I tried to indicate that at least one Conservative felt that the public services performed a valuable role. This was a slightly dissenting voice to come from the Treasury, and was a trailer for the public service reforms that I was later to introduce.
As chief secretary to the Treasury, I came to know Margaret Thatcher much better. Since my role was to restrain public spending we were generally on the same side in most arguments. But we did have one fierce row. Short’s Brothers, a large aerospace company in Northern Ireland, was an important local employer in an area of massive unemployment. It had huge debts, and Tom King, the Northern Ireland Secretary, and I were keen to sell it to Bombardier, a Canadian aerospace company, in order to save jobs. They would not buy it without a substantial dowry, but to my astonishment Margaret objected to the terms of the deal I proposed. She summoned me to Downing Street, where in front of her Principal Private Secretary Andrew Turnbull we had a two-hour confrontation that began coolly, turned frosty, and ended in fierce rowing. I felt her attacks on me were unjust. I had concluded the two most successful public spending rounds for years, and was now accused of not being concerned about taxpayers’ money. Neither of us gave any ground, and I returned to the Treasury determined to resign if I was overruled. The next day, Margaret asked for further figures to justify my case, and then accepted it. But it had been a close call.
Yet again, a reshuffle was about to show that Margaret did not bear grudges over fierce arguments.