Markets and Liberty: Inside Thatcher's Treasury

Helen Goodman MP was a Treasury civil servant during the Thatcher years. Comparing her own experiences with the tributes of Conservative MPs, she wonders what lies behind the impulse to rewrite history.

 

I was a student when Mrs Thatcher was elected Prime Minister. I had voted Labour, but I do remember watching her arrive at No 10 on the telly and feeling a surge of hope – that at last we had a woman and some good must come of this.

Within two months my Dad who was working on a public sector construction was unemployed, an early victim of the cuts. He never worked again.

I was in my final year and had been offered a job at the Bank of England. Just after my finals I received a phone call – the job offer was being withdrawn! I will never forget the look on my father’s face when I told him. One family, two job losses in three months.

The reason my job was taken from me was that one of the government’s first moves was the lfting of Exchange Controls – the first of the big financial deregulations, which the Tories were praising in Parliament yesterday. The Bank had had 600 working on this. I quickly learned that with unemployment came stigma. I found myself living in a hostel for homeless women behind Victoria Station, being openly challenged – surely a job offer hadn’t been withdrawn – I had failed to get a job.

Later I learned that the Bank had withdrawn my job offer, but they’d kept on the other new graduate they’d recruited – a man. That hurt.

Well Mrs Thatcher certainly radicalised me – I joined the Labour Party and went to work for a Labour MP. This was the days before IPSA and allowances – all he could afford to pay me was £30 a week. So it was a short-term opportunity – but life changing. I retook the civil service exams and astonishingly was offered the Treasury.

When I arrived there in September 1980, officials were still reminiscing over Denis Healey and highly sceptical about Mrs Thatcher’s ideals. One afternoon, everyone working on public spending, about a quarter of the department, was called into the large marble columned meeting room overlooking Parliament Street – all wood panelling and busts of Charles James Fox. Mrs Thatcher had decided to introduce cash limits. This was the first time I was really aware of her as a force of nature. The senior official in charge had come straight from No 10. He told us he’d raised all the problems and difficulties but received this riposte “I know it’d difficult Mr L.... but don’t wallow in it.”

I was plunged in at the sharp end – my first job was on social security and I remember we had to take through emergency legislation raiding the National Insurance fund, set up by Lloyd George. My second posting was to the overseas aid desk.

Mrs Thatcher had skilfully managed to condense her philosophy into two key organising principles – markets and liberty. For officials – even the most junior like me – this was tremendously powerful, because you knew that if you pursued these two ideas you were doing the right thing. It was a clear framework and within it there was scope for initiative and flexibility. There was no need to constantly refer up for detailed instructions.

Of course, what it also did was to over-simplify every problem and ignore the costs and downsides of policy. For example in the 1970s a series of international commodity agreements covering crops and metals had been used to stabilise these markets. This had helped the producer countries to predict and stabilise their export earnings. It was difficult to know whether prices were always aligned with long-term value so Mrs Thatcher and Ronald Reagan swept them away. So now we have traders speculating in food stuffs and multi-national corporations suing the poorest countries on earth. I would submit that this is not an improvement.

I can clearly recall her on the TV arguing with the Archbishop of York, John Habgood. “You should be providing moral certainty”, she said. “But have you thought”, he politely inquired, “that moral certainty might be a sin?”.

In the 1980s the Treasury was reorganised. The nationalised industry division was closed down and we started to privatise everything.  This brought us into close proximity with the City. They were riding high on the Big Bang. I was shocked – for doing exactly the same work young men in the City were being paid five times my salary and they were allowed to speculate on the shares being sold. I recall there was some strategic leaking about this – I can’t imagine how that happened.

Listening to the tributes of Tory MPs yesterday two things struck me – first their emotions; a mixture of terror and admiration. This was authentic. I only met her once at a large meeting after midnight when we had to secure an agreement to an urgent tax change. The power had gone so we were lit by candles. She swept in – all whisky and jewels – like a latter-day Empress Catherine II all the clever young men seemed to crumple before her. Only Eddie George – Steady Eddie – whom she later made Governor of the Bank of England could tell her what was needed.

The second thing that struck me was their desire to present her now as a figure behind whom the nation could unite. When the first draft of her 1984 part conference speech was circulated the phrase “the enemy within” was meant to refer to the miners. She delivered it after the Brighton bombing – which gave it a very different interpretation. Quite apart from her political opponents the government she led was one of the most divided in history – far more divided than the famous Blair/Brown splits. In 1987 I was moved to the foreign exchange desk. Here I discovered that the Treasury was engaged in a full scale exercise in deceiving No 10 over the management of the pound, a central part of any government’s economic policy. Mrs Thatcher and her advisers wanted to let the pound float freely, but Nigel Lawson’s Treasury was pursuing a policy of shadowing the deutschmark. Ever week we were buying and selling hundreds of millions to stabilise the pound. It was my task to write a daily markets report for No 10 – this had to explain our intervention in the forex markets without revealing our policy objective. When I suggested that instead of this duplicitous approach, the Chancellor simply raise the matter at Cabinet – he would certainly have had Geoffrey Howe’s support – I was told that if I ever mentioned this again I would be sacked!

Perhaps some of the younger Tories simply don’t know what happened (by the time David Cameron turned up in the Treasury I didn’t even bother to get to know him I was so bored with this endless stream of self-assured young men) but it does seem that this attempt to re-write what happened has more to do with current desperation rather than historical accuracy.

Mrs Thatcher herself certainly had difficulty in adjusting to her loss of power. Sir Michael Richardson, her personal financial adviser told me that he had a big lunch for her when the Queen created her a Baroness. “Margaret, this must be your proudest day” he said. She replied “What is one day of pleasure in a life of gloom?”.

Margaret Thatcher and Geoffrey Howe in 1980. Photograph: Getty Images

Helen Goodman is Labour MP for Bishop Auckland and shadow media minister

Getty
Show Hide image

The constituencies where the Liberal Democrats can take on the Tories

There are nine seats where Liberal Democrats are within striking distance of victory in an election fought on Brexit issues.  

"Comeback is a good word, man," said actor Mickey Rourke when he was catapulted back into Hollywood stardom after a long stint in the wilderness. Tim Farron is no Rourke but at the rapidly approaching general election he too is betting on a comeback.

Liberal Democrats have a score to settle. Two years ago, the traditional third party in British politics were a mere 25,000 votes away from losing all of their seats in Westminster. But the vote for Brexit has given Farron and his party a lifeline. With Labour divided, the party has taken an opportunity to pitch to disillusioned Remainers. And they have made some inroads. Local by-election victories for Liberal Democrats are now commonplace, while the parliamentary by-election in Richmond Park provided further evidence of a comeback.

Now, Farron eyes a snap "Brexit election" as an opportunity for a full-scale comeback, claiming that Prime Minister May is "playing on the Liberal Democrats ground". But could his party really give the Conservatives a bloody nose by winning back some of the seats that were lost in 2015, and possibly more?

Let’s start with the current state of play. In 2015, the Liberal Democrats were reduced to a rump of only eight MPs, with the Richmond Park victory increasing this to nine. Today, Liberal Democrats are the main opposition in 62 seats, in third place in a further 36 seats, and fourth place in 338. The good news for Farron is that in 16 seats Liberal Democrats' vote is within 10 per cent of the incumbent. Ten of these seats are held by Conservatives, and all are in the south or south west England. A further three are held by Labour and three by the Scottish National Party. There is also an "outer ring", where Liberal Democrats are between 10 per cent and 20 per cent behind the incumbent. Of these more distant prospects, 15 are held by Conservatives, four by Labour and five by the SNP.

Then there's the Liberal Democrat MPs themselves. Of the nine MPs, five have a majority of less than five percentage points, with the incumbent in the most marginal seat (Southport) not seeking re-election.

What happens from here? One longstanding problem for Liberal Democrats has been to translate votes into seats. In the past, targeted campaigns helped but did not resolve the disparity between the party’s share of the vote and its number of MPs. One reason was the so-called "credibility gap" – where voters are reluctant to vote for a party they believe has little chance of winning. Historically, Liberal Democrats tried to offset this through strong, local campaigns. This campaigning, which two years ago saved Liberal Democrats from complete annihilation, could be more important in 2017 given the shorter election period. In 2015, the Conservatives' "decapitation strategy" across southern England relied on a ruthlessly efficient "joined-up" campaign, driven by Conservative headquarters in co-operation with local parties. Huge sums were thrown at key south and south-west battlegrounds for nine months or more. The thinly-resourced Liberals were out-gunned.

But this time, with less than 50 days until polling day, the Conservatives are unable to replicate this sustained ferocity. This may give Liberal Democrats more of a fighting chance.

The shorter campaign could help them in other ways. Since the vote for Brexit, the Lib Dems have prepared for a snap election and selected candidates in seats that were lost in 2015, as well as others on a long range target list. This could be a double-edged sword. Familiar faces like Vince Cable, Ed Davey, Simon Hughes and Jo Swinson will remove credibility problems, but such faces might also remind voters of the party’s role in the post-2010 coalition. Nonetheless, all remain within striking distance. Cable and Davey require a direct swing from the Conservatives to Liberal Democrat of less than 2.4 per cent while Jo Swinson requires a direct swing from the SNP of 2 per cent. If their local popularity remains, the changed climate since 2015 may mean that such seats are more attainable than they would be with new candidates.

But the bigger and more popular argument is that Liberal Democrats will be boosted by the "Brexit election" whereby Remainers will flock to the orange banner. But our evidence suggests that while there is potential, the party faces an uphill task.

Under most scenarios, Conservative losses will be minor. The figure below shows the Remain vote by the Liberal Democrat margin (the difference between the 2015 vote for the Liberal Democrats and the vote for the winning party). And we have focused on the 40 most marginal Liberal Democrat target seats in 2017.

This reveals a cluster of nine seats where Liberal Democrats are within striking distance of victory, within 10 percentage points of the winner, if indeed the Remain vote switches over en masse. Four of these seats are held by Conservatives (Bath, Twickenham, Kingston and Surbiton, Lewes) and two by Labour (Cambridge, and Bermondsey and Old Southwark). Worryingly for Farron, the remaining three are held by the similarly anti-Brexit SNP.

There is also second cluster of 11 seats where the Remain vote surpassed the 50 per cent mark and in some cases was much higher, but where Liberal Democrats are up to 20 points behind the winning party. Once again, the task facing Farron is hard – six are held by the SNP. Of the remaining five, three are Conservative (Cheadle, Cheltenham and Oxford West and Abingdon) and two Labour (Cardiff Central, and Hornsey and Wood Green).

% Constituency Remain Vote by 2015 Liberal Democrat Margin (%)

*Key: Blue = Conservative held; Red = Labour held; Yellow = SNP Held

A third cluster is more interesting. There is a distinct grouping of seats that were around or just below the average Remain vote and where Liberal Democrats are between 3-18 per cent behind the incumbent. In most cases the swing required for them to win is not excessive.

Worryingly for Prime Minister May, these are predominantly Conservative-held seats that turned blue in 2015 –seats like like Thornbury and Yate, Colchester, and Sutton and Cheam. Here, as elsewhere, turnout will be key. If –and it is a big if- the Liberals can sweep up Remainers and get them to turnout they could easily break the 20 seat mark and put a dent in May’s majority (see Table 1). Of course, it is not all one way. At the same time, of the nine Liberal Democrat MPs, Norman Lamb in Norfolk North (where 58 per cent voted for Brexit) looks vulnerable to a Conservative challenge if this post-Brexit realignment plays out.

A ‘Brexit Election’ Scenario: Liberal Democrat Possible Gains

Cluster 1 Cluster 2

Cluster 3: 45 per cent+ Remain

Low Leave Turnout

Conservative Held Conservative Held Conservative Held
Bath Cheadle** Thornbury & Yate
Twickenham** Cheltenham** Colchester
Kingston & Surbiton** Oxford West & Abingdon Sutton and Cheam
Lewes     Labour Held Portsmouth South
Labour Held Cardiff Central Brecon & Radnorshire**
Cambridge** Hornsey & Wood Green St Ives
Bermondsey & Old Southwark** SNP Held Hazel Grove
SNP Held Caithness, Sutherland & Easter Ross Wells**
East Dunbartonshire** Ross, Skye & Lochaber St Austell and Newquay
Edinburgh West     Gordon Eastleigh**
North East Fife Argyll and Bute Chippenham
  Berwickshire, Roxburgh & Selkirk  
  Inverness, Nairn, Badenoch & Strathspey      

*Note: other possibilities include Berwick upon Tweed, and Eastbourne. The latter is extremely marginal but the leave vote was substantial. Other marginal seats such as Torbay and Yeovil would be unlikely to go back to the Liberal Democrats under a Brexit election scenario (although they come in play if not). It should be noted there may be anomalies like St Albans, which voted Remain, where the party has and continues to poll well. But in previous elections the strong local platform has not translated into voting Liberal Democrat in the general election. Maidstone & the Weald is a long term target but a strong Brexit vote there rules it out under this scenario. **Previous Liberal Democrat incumbent confirmed as standing again.  

Turning to the Conservative-Liberal Democrat battlegrounds, Farron and his party will do better where they have past success and an activist base. The party is positioning itself against the Conservatives and will target seats that are marginal and have a healthy Remain vote. But, as we have seen, the gains are limited given the scale of the party’s collapse in 2015. So are there long term targets where we could see a swing to the Liberal Democrats?

If the Liberal Democrats get a poll bounce during the campaign and hit the heights of 16-17 per cent then there are seats that could come into play in the shadow of the election. The next figure shows the Remain vote by 2015 Liberal Democrat margin in seats currently held by the Conservatives but which used to be held by Liberal Democrats in the recent past.

Conservative Held Seats (Previously won by the Liberal Democrats only) - % Constituency Remain Vote by 2015 Liberal Democrat Margin (%)

There is a cluster of pro-Remain seats with a Liberal Democrat heritage where Farron will find a receptive audience – Winchester, Guildford, Harrogate and Knaresborough, and Romsey and Southampton North. But these would require goliath swings – Liberal Democrat candidates are 30-40 points behind. This also reveals how the Conservatives have a buffer, even in areas where historically the Liberal Democrats have been strong, as in Cornwall and Devon. There are 16 seats in the south-west that used to be held by the Liberal Democrats but which recorded below average Remain votes at the referendum. So if this does become a Brexit election then to win these seats back Farron will need to do a lot more than simply bang on about the perils of hard Brexit. In these seats Liberal Democrat gains in 2017 seem unlikely.

Another factor that could easily work against the Liberal Democrats is the Ukip vote. Ukip is already finding it difficult to retain its 2015 vote and how this vote splits could be crucial. Theresa May and her team are doing everything in their power to tempt back Ukip voters. If this happens on a broad basis it could have worrying implications for Liberal Democrats.

In 75 per cent of the Conservative-Liberal Democrat seats shown above Ukip polled more than 10 per cent of the vote in 2015. Crucially, Ukip obtained more than 10 per cent of the vote in all but one of the Conservative-Liberal Democrat battleground seats that polled a lower Remain vote than average. Ukip also achieved this feat in 15 of the 16 seats in the south west which had a higher than average Leave vote. What does this mean? The Brexit election could backfire on Farron. If Lynton Crosby, who knows these seats well, guns after Leave voters they may vote tactically to keep out the Liberal Democrats in order to get what they really want –Brexit.

Turning back to the most enticing prospects for Liberal Democrats in Cluster 1, only the Conservative-held Lewes had a Ukip vote of more than 10 per cent, reaffirming how these seats represent the best hope for Farron. In sharp contrast, all of the seats in Cluster 3 have substantial Ukip votes which the Conservatives will look to mobilize as a firewall against Liberal Democrat gains. In conclusion, therefore, May’s gamble of "playing on the Liberal Democrats ground" is not without risk but seems a safe bet. She has a good chance of holding onto many "traditional liberal" heartland seats that her party captured in 2015. The Liberal Democrats may stage a comeback of sorts, but this may be less impressive than many currently expect.

Matthew Goodwin is Professor of Political Science at the University of Kent and author of Brexit: Why Britain Voted to Leave the EU. He tweets @GoodwinMJ. David Cutts is Professor of Political Science at the University of Birmingham.

0800 7318496