John Major: The Autobiography

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.

CHAPTER SIX ‘What’s the Capital of Colombia?’ (#ulink_f7b1e440-bfa6-5df5-8abd-e715d9b99ecc)

I HAD BEEN WIDELY TIPPED for a move from the Treasury to my own department, but the promotion I was given surprised everyone – except me; the whips’ mafia had worked with its customary effectiveness. Three days before the reshuffle I had been warned by Tristan Garel-Jones that the Prime Minister intended to appoint me foreign secretary. I scoffed, and told him to lie down with an aspirin until he felt better. But I was not confident he was wrong. It was the sort of thing the whips would know, and he seemed very certain. I spent an uncomfortable weekend brooding on the prospect.

Norma was horrified. Of all the jobs in government the Foreign Office was the one she least wanted me to have, and the one for which I was least prepared. Moreover, I enjoyed being chief secretary. I had been in the job for two years, and felt thoroughly on top of it. It was flattering to be tipped for promotion, but I would have preferred to consolidate my position at the Treasury. I knew also that such a dramatic promotion would explode for good the contemporary wisdom that I had no enemies in politics. I knew that success could breed resentment, and that I would also be a sitting duck for the fire any commentator, colleague or opponent might henceforth care to direct at me.

The reshuffle began on Monday, 24 July 1989. Whitehall is a veritable grapevine on such days, and I kept in touch with colleagues by phone. Peter Brooke was followed into Number 10 by Ken Baker – self-evidently a change of party chairman. John Gummer, Cecil Parkinson and Nick Ridley were followed by Chris Patten. Others were said to have gone in privately, through the Cabinet Office. It was a substantial reshuffle but appeared to be without a pattern. Something was wrong, but I did not know what. I sat in the Treasury wondering and waiting.

Since I had been promoted in three of the past four years, I was an aficionado of reshuffles. I knew they began with the most senior Cabinet appointments, which were usually finished by lunchtime. So I expected to hear in the morning if I was to be moved. Lunchtime came – and went. Geoffrey Howe hadn’t been moved, and I hadn’t been summoned. Two o’clock. Three o’clock. I had put a bottle of champagne in the fridge in the hope of remaining in the Treasury. As 3 o’clock passed I asked Carys Evans, my Private Secretary, to fetch it with some glasses. As it was opened, the phone rang.

Carys looked up. ‘It’s Charles Powell,’ she said. ‘Would you please go and see the PM?’

Mrs Thatcher was in her study with Andrew Turnbull, her Principal Private Secretary. She looked fresh, and there was a bloom on her cheeks that I had often seen before. It meant she was relaxed, not on guard, in company with which she was comfortable – and about to bestow a favour. Charles had been smiling too when he showed me upstairs. My heart sank.

‘John,’ she said, ‘hold on to your seatbelt. You are the centrepiece of my changes. Geoffrey has moved on, and I want you to be foreign secretary.’

If I had not been prepared, I am not sure how I would have reacted. As it was, I demurred – for my sake and hers. I believed I owed it to her.

‘Prime Minister, I’m very flattered. But is this a good idea?’

‘I’m very sure it’s a good idea. Why shouldn’t it be?’ She made some disparaging noises about the Foreign Office – not just in connection with its attitude towards Europe. ‘I want someone there who thinks as I do.’

‘Aren’t there others better qualified?’ I said. ‘Douglas Hurd? Nigel Lawson?’

She waved a hand dismissively. No words were necessary.

I persisted. ‘I’m not sure it’s a good idea from your point of view. People will assume I’m there just to carry out your bidding. That won’t be good for either of us. I won’t be offended if you think again.’

She wasn’t having it – and if I’d said no it would have seemed like funk. And how could one possibly turn down such a glittering prize so happily offered? It would certainly have been ungracious. She would have been embarrassed, disappointed and, I think, hurt. My resistance to the appointment melted. Clearly the matter was decided, and there was no alternative Cabinet job left. I remembered the old adage: You don’t negotiate with prime ministers, you say ‘yes’ or you say ‘no’ and take the consequences. I thanked her. We chatted. And I left the room as foreign secretary.

In the corridor I met Charles. He was grinning. ‘What’s the capital of Colombia?’

‘Bogotá,’ I said. ‘Bogotá, Charles. I’ve been there. Years ago.’

I returned to my office at the Treasury to find that the Whitehall bush telegraph had excelled itself. My Private Office and advisers had gathered and a globe of the world had been sellotaped to the top of a bottle of champagne.

The Treasury was agog with excitement, but the atmosphere in my office was part celebration and part wake. Nigel Lawson did not join us, and as I sipped my champagne my mind kept turning to him. How was he feeling? He and Geoffrey had confronted Margaret before Madrid, and Geoffrey had now been moved. And Nigel, who had been chancellor for six years – what would be his next move? The office of foreign secretary, which surely he might have coveted, had been denied him and given to one of his junior ministers.

I had little time to reflect on this. Soon Stephen Wall, who was to be my Principal Private Secretary at the Foreign Office, and Andrew Burns, the Chief Press Officer, came to see me to discuss the preliminary press handling of my appointment.

Afterwards, I returned to the Commons. I knew my appointment would be controversial. As I walked across New Palace Yard I met Norman Fowler, my old boss at the DHSS, and now a close friend.

‘Well, what did you get?’ he asked.

‘Umm … foreign secretary,’ I said. ‘I’m a bit concerned about it.’

‘Crikey,’ said Norman, pushing his glasses up his nose. “Crik-ey!’

The following morning I left Durand Gardens at 7.30 as usual and arrived at the Foreign Office at 8 a.m. I hadn’t told anyone I would arrive so early, and no one was there to meet me except a posse of press photographers. I posed for the inevitable first-day photographs until Sir Patrick Wright, the Permanent Secretary, appeared. He greeted me warmly, a little embarrassed at not having been there when I arrived, and in we went.

Cecil Parkinson said later that ‘there was a feeling Margaret had overdone it’ in appointing me foreign secretary. He was right. But what were her reasons? She’d already said to Willie Whitelaw that in the next generation I would be her successor. Was she now anticipating that day by putting me into a job from which I would be well placed to win any forthcoming leadership election? I cannot know what was really going on in her mind. Nevertheless, it was an extravagant gesture of support.