Andrew Gamble Mrs Thatcher's Bunker: the reshuffle and its consequences THE RESHUFFLE Relative failure September 14 will long be remembered in British politics. A The failure of the Government on both these counts was illustrated in beleaguered Prime Minister half way through her term of office, her the 1981 budget. The inability to achieve real cuts in the total level of popularity and that of her party at record low levels, her economic public expenditure meant that taxes had to be raised, making taxes strategy in disarray, her party critics vocal in urging a moderation of actually higher than when the Tories came into office. Despite its her policies, with unemployment at three million and the cities still election pledges, its economic strategy, and its ideological principles, smouldering after the recent riots, did not choose the safe option of the Thatcher government after two years in office had managed to changing her policy. Instead she changed her cabinet. She reaffirmed increase both public expenditure and taxation. The most telling sign in unmistakeable terms her commitment to the strategy she has of the Government's failure was its own index, which it had always favoured. She brushed aside all the pressures on her to change introduced to give a better guide to the cost of living because it course. Sir Ian Gilmour, one of the chief victims of her purge, might included tax changes, jumped ahead of the retail price index after the well have quoted one of his own favourite epigrams as he stood on the Budget. On the trade unions the legislation enacted was extremely steps of Downing Street: 'The Government has turned its back on the modest and apart from the steel strike the Government backed away people and now has the effrontery to claim that it has the people at its from confrontation with organised labour. The most significant back.' climbdown was when the miners threatened to strike. The episode tells us much about Thatcher and Thatcherism and The reason for the reverses was partly the practical difficulties of about the new Tory Party that is struggling to be born. There is a long managing the recession and preventing it from turning into an established interpretation of British politics that governments pursue uncontrollable slump, but an important factor as well was radical policies in their first two years of office and are then forced undoubtedly the opposition within the Government to the full partly by electoral pressures and partly by the practical problems of implementation of the social market strategy. The spending ministers governing to move towards consensus policies. The Thatcher foughi very hard to limit the size of the cuts the Treasury ministers government appeared to be following this pattern. Beginning in a were demanding, and they scored some notable victories, particularly blaze of rhetoric and ideological fervour it launched a series of radical during the second round of cuts in 1980. At the Department of policy initiatives inspired by New Right doctrine and the social market Employment, Prior resisted every attempt to toughen anti-union strategy which had been fashioned in opposition. But the execution legislation. The cabinet 'wets' were not so ineffectual as their label was much less impressive than the rhetoric. The Government chose to suggests. Thatcher suffered some major defeats in cabinet. The ignore those who favoured a lightning strike against union power and response of the Treasury team which contained some of the Prime the public sector. Instead the Government was soon locked in a Minister's staunches! supporters was to push through a second lengthy war of position for which many ministers clearly had no deflationary budget in 1981 in order to maintain their financial stomach. In its first two years the only part of the Government's strategy intact. The detail of budgets are not discussed in cabinets so strategy which was reasonably successful was the financial strategy for the opponents of the monetarists had either to acquiesce or to resign. reducing inflation. Everything else was sacrificed to it. The pursuit of They did not resign, partly no doubt because they must have believed fixed monetary targets necessitated repeated deflation of the their position to have been strengthening all the time. In the months economy, so intensifying the recession. Mass unemployment helped following the budget unemployment reached almost three million on the Government to outflank the unions. It reduced militancy over pay the official register alone, industrial output, having dropped 17% in and allowed managements in many industries to change working two years, showed signs of ceasing to fall further, but the prospects of conditions and drastically reduce manning levels. But these gains a sustained recovery looked small, while inflation was still in double were not matched by corresponding progress on improving the figures — higher than the level the Government had inherited. In July conditions for future capital accumulation. For the social market at the Warrington by-election the Conservative share of the vote strategy the pursuit of monetarist policies to control inflation needed dropped by a record amount, and the cities erupted in the worst riots to be backed by a massive roll back of the state to restore the role of the seen in mainland Britain since the war. market throughout the economy, both to increase efficiency and to There was therefore a general expectation that some moderation in make it possible for direct taxation to be substantially reduced. the Government's stance was inevitable. Yet it had been supposed Similarly trade union law reform was regarded as necessary to make that after the cabinet reverses she had suffered at the end of 1980 the gains won by high unemployment permanent by weakening trade over public expenditure, Thatcher would be forced into a softening union power and preventing the re-emergence of militancy once of her policies in 1981. It would not be called a U turn but it would economic recovery began. involve making the reduction of unemployment rather than the Marxism Today November 1981 7 control of inflation the central focus of the government's efforts. Thatcher, however, had other ideas. Her appointment of a prominent something clearly snapped inside Mrs monetarist, Alan Walters, as her special adviser was a sign that she did not wish to hear alternative advice. The budget with its massive Thatcher's head. She has moved increases in taxation to reduce the level of government borrowing resolutely to silence her critics confirmed this. recruits will inject a new ideological sharpness into cabinet Expectation of moderation discussions. With their rise and the promotion of Fowler and Young The budget made the critics of her policies become more outspoken. the group in Cabinet strongly committed to Thatcher's economic Ian Gilmour and Peter Walker made major speeches critical of the policies has risen to eleven. Of the eleven remaining members of the deflationary bias of government policy. The Treasury ministers were cabinet the wets have been reduced to two — Jim Prior and Peter not abashed. They calculated that in order to fulfil the Government's Walker, and Prior has been sidelined. The other significant group in pledges to cut taxes before the end of the Parliament, new cuts in Cabinet which has given the wets intermittent support is the old Tory public expenditure of more than £5 billion would be necessary. The establishment. It includes Whitelaw, Hailsham, Pym, Carrington, Treasury produced a paper outlining the need for cuts of that Atkin, and (less certainly) Heseltine and Jenkin. Thatcher has magnitude for the financial year 1982/83. It was discussed in cabinet not moved against this group. Only Thorneycroft who did not have a on July 23. This was only two weeks after the riots, one week after seat in the cabinet has been axed, in favour of a Thatcherite, Cecil Warrington, and the response in cabinet was very hostile. Only Parkinson. The outcome is that Thatcher now has a cabinet more Thatcher, Brittan, Joseph, and Fowler supported Howe. Lord loyal, as well as sounder ideologically, than at any previous time. Carrington was reported as saying: 'I went through this last year and I went through it the year before and I'm not going through it all again.' Still divided Ten days later at the weekend following the end of the Yet although she may suffer fewer reverses in cabinet it is still a parliamentary session two of the most senior figures in the party, divided cabinet. Most of the senior figures in the party either do not Thorney croft, the party chairman, and Pym, the Leader of the House share or actively mistrust the strategy on which she has embarked and of Commons, delivered speeches which explicitly attacked the the doctrines in which she believes. The critics she has removed are Chancellor's confident assertions that the recession was over and the the least substantial politically. Those who have most obstructed her recovery had begun. Thorneycroft announced that very few of his in the past two and a half years — Prior, Walker, Pym, Carrington, friends in industry or the City believed the recession was over, and he and Jenkin — are all still in place. So despite the reshuffle the advised Thatcher to avoid a reshuffle and plan a boost to the divisions will persist. Thatcher has managed to sideline the critics and economy. Francis Pym declared: 'The British people will not in my the sceptics. The conduct of economic policy has been entrusted judgement be prepared to tolerate the worst effects of recession if almost exclusively to those who have displayed monetarist zeal. But there is not a clear sign that the sacrifice will have been worthwhile.' she has not yet broken free from the old Tory leadership.