Back from the Brink: The Inside Story of the Tory Resurrection

Some noticed that while Cameron admired the Prime Minister as much as the others, he did not see everything in black and white ultra-Thatcherite terms. ‘I remember conversations with him when I would say that we should scrap child benefit, and he said, “You can’t just take away people’s benefits, because it creates huge problems,”’ recalls one of his closest friends from the time, Rachel Whetstone. ‘He was much more thoughtful about things than I was.’ Indeed, within a year of meeting him she felt that although Cameron could be ‘unbelievably pompous’, he had what it took to go a long way in politics. ‘People used to say, “What’s your dream job?” And I said, “It is to be Political Secretary to the Prime Minister, who will be David Cameron.” It wasn’t because he had a burning ambition,’ she adds, ‘it was because he had a charisma which was quite compelling.’¹⁶

As the new CRD recruits fawned over their seemingly invincible leader, senior ministers became increasingly worried about the direction of her government. Foreign Secretary Geoffrey Howe had been at her side from the beginning. Thoughtful and patient, he was one of her most loyal allies. Yet Howe’s pro-European views, which were shared by many Tories of his generation, were at odds with the Prime Minister’s deepening scepticism. He was deeply dismayed with the way in which she had seized control of foreign policy. According to Nigel Lawson, she treated Howe as ‘a cross between a doormat and a punchbag’.¹⁷

Matters came to a head when Howe and Lawson confronted the Prime Minister on the eve of an important EC summit in Madrid in June 1989. They urged her to make a commitment to join the ERM by the end of 1992 as the best way of influencing the future direction of the EC. Their advice, once again, was met with resistance. In what she regarded as an ‘ambush’, Howe threatened to resign if she refused to accede to their demands. ‘You should know, Prime Minister, that if Geoffrey goes, I must go too,’ Lawson warned her.¹⁸ In July she retaliated by demoting Howe from the Foreign Office to the Leadership of the House of Commons and Deputy Prime Minister, a nominal title in which he would take little consolation.

But Lawson would be the first to go. In October he resigned as Chancellor in protest at the growing influence of Mrs Thatcher’s economic adviser Alan Walters, who shared her hostility to the ERM. Lawson’s departure fatally weakened her grip on power, to the extent that the Cabinet presented her with little choice but to join the ERM the following year. ‘The truth is that she was in a tiny minority in the government always in opposing joining the ERM, and she fought off attempt after attempt to do it,’ her respected foreign affairs adviser, Charles Powell, pointed out.¹⁹

For Mrs Thatcher’s new Chancellor, John Major, membership of the ERM was a means to an end. ‘Like Nigel Lawson, I never saw it as a stepping stone to a single currency,’ he says. ‘Inflation for me was a week in which the week lasted longer than the money, as had been my life experience, and I knew that was the experience of many people. It wasn’t an abstract political theory, I hated it – and I saw the ERM as the only available way of bringing inflation down. We had tried everything else and it failed.’²⁰

By early 1990, the tension at the heart of government had begun to affect party morale from top to bottom. Mrs Thatcher had survived a leadership challenge from Sir Anthony Meyer, a stalking horse on the left of the parliamentary party, but speculation only intensified about Heseltine’s intentions. Shortly after winning her third victory, she angered some by promising to ‘go on and on’ when asked by an interviewer about when she might stand down. Aside from Europe, a major aspect of domestic policy had become a serious bone of contention. Hailed as one of the flagship policies of the third term, the Community Charge, or ‘poll tax’, was intended to make local councils more accountable for the services they provided, but it became instantly unpopular in the country. Mrs Thatcher was determined to push ahead with the plan to replace the local rates, despite warnings that it would be a political disaster. ‘How could a leader who was wise make thirteen million people pay a tax that they had never paid before? It showed she was no longer thinking in a rational way, and really created controversies where it was unnecessary,’ recalls one of her ministers, David Mellor.²¹ The costs of implementing the poll tax were spiralling, and when it was piloted in Scotland before being introduced in England, thousands refused to pay. Anger would soon spill out onto the streets, when a large demonstration in central London turned into a riot on 31 March 1990.

For the party’s footsoldiers in local government there would be a heavy price to pay in town hall elections later that spring. But it was the Prime Minister who had become the real electoral liability. By April 1990 Mrs Thatcher’s ‘satisfaction rating’ had fallen to 23 per cent, a post-war low, and many Tory MPs began to conclude that unless she stood down their seats would be in jeopardy. A series of disastrous European and by-election results in the summer reinforced their fears. ‘My trouble was that the believers had fallen away,’ she regretted in 1993.²² She could not believe that her troops had lost the fire in their bellies. However, after eleven years in office, the party was exhausted and desperate for a change of leadership style, if not a change in policy direction. ‘One of the mistakes that some ultra-Thatcherites made was that [they believed] you could have radicalism forever – a permanent revolution,’ says another former minister, Norman Lamont. ‘I don’t think the public would have ever accepted that and I think there’s always been this argument between those who wanted radicalism for ever and those who wanted to go back to a more traditional Conservative Party.’²³

‘Ten more years! Ten more years!’ was the evangelical chant from the party faithful during what was to be Mrs Thatcher’s last conference speech as leader in October 1990. The country, though, had lost its appetite for the Iron Lady’s revolutionary fervour. True, Britain was no longer considered the sick man of Europe after years of economic decline and industrial unrest, but the harsh edges of Thatcherism had begun to grate on the electorate. For every admirer there seemed to be a sworn enemy. Not only had the Prime Minister become dangerously estranged from most of her Cabinet and many Conservative MPs, she had polarised public opinion to such an extent that something would have to give.

The fatal blow came from her long-suffering ally Geoffrey Howe. ‘No! No! No!’ was how she reported her reaction to plans for a single European currency, Social Chapter and federal Europe when she returned from an EC summit in Rome on 28 October. For Howe, her open hostility to Europe was the final straw. On 1 November he resigned. Thirteen days later a packed House of Commons listened to his resignation statement in silence. Speaking from the backbenches for the first time in fifteen years, he delivered a withering critique of Mrs Thatcher’s increasingly abrasive style of leadership and ever more strident position on Europe. As he went on, the faces around him (including that of Lawson, who sat beside him) turned to ash. Uncharacteristically savage for a politician whom a Labour opponent once described as a ‘half-dead sheep’, Howe tore into the Prime Minister. He derided her ‘casual’ dismissal of the idea of a single currency, which he argued had undermined ministerial dealings in Europe. ‘It is rather like sending your opening batsmen to the crease only for them to find, the moment the first balls are bowled, that their bats have been broken before the game by the team captain,’ he declared to ecstatic laughter from the opposition benches. The Prime Minister sat on the frontbench visibly trying to restrain her anger. Proclaiming loyalty to the Prime Minister he had served for eleven and a half years in office, and as party leader for fifteen years, was no longer possible for Howe. ‘The time has come for others to consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long.’²⁴

In one of the most dramatic scenes in the House of Commons for years, the Prime Minister’s longest-serving minister had fired the starting gun for a leadership election. Heseltine now declared his hand, arguing that he could take the party to a fourth term in office. As Mrs Thatcher left for an international conference in Paris with her entourage just before the first ballot, she was not even contemplating defeat. While she could hardly bring herself to court MPs in the Commons tearoom, her lacklustre campaign team led by her complacent Parliamentary Private Secretary Peter Morrison assumed it was in the bag.

Mrs Thatcher won the first ballot on 20 November, with 204 votes to Heseltine’s 152, but under the rules of the contest she fell short of outright victory by an agonising four votes. Her authority was shattered. Yet on hearing the result in Paris, Mrs Thatcher resolved to fight on. The BBC’s political correspondent John Sergeant was talking live on camera when the Prime Minister strode out of the British Embassy to address reporters. As Bernard Ingham, her press secretary, brushed Sergeant aside, she vowed to put her name forward for the second round of voting. The chaotic scene, watched by millions on television at home, caused widespread dismay among Tory MPs. On her return to London Mrs Thatcher held individual interviews with members of the Cabinet. Almost all of them warned that she would not win in a second ballot, despite pledging their support. ‘It was treachery,’ she said later, ‘with a smile on its face.’²⁵ The following morning, Thursday, 22 November, she tearfully told the Cabinet that she had decided to resign, and urged ministers to unite behind the figure most likely to defeat Michael Heseltine. ‘It’s a funny old world,’ she told them.

For the young team of researchers in Central Office, the defenestration of their idolised leader was an act of total betrayal. How could their political masters have done such a thing? Cameron feels that Mrs Thatcher had every right to be aggrieved, and friends remember his sadness on the day she fell. ‘We were all as upset and horrified as anybody else was about her departure. But we soon adapted to the new regime,’ Guy Black recalls.²⁶ Life had to go on: a new Prime Minister had to be found midway through the Parliament.

In the three-horse race that ensued in the week after Mrs Thatcher’s announcement, John Major, the Chancellor, emerged as the winner. The outgoing Prime Minister had worked tirelessly to advance his interests, phoning newspaper editors and friends to tell them that the revolution would be more secure with him than with the other two candidates, Michael Heseltine and the Foreign Secretary, Douglas Hurd. Yet Major was hardly in need of her assistance: he already had 160 Tory MPs signed up on the day he declared his intention to stand. Heseltine admitted that ‘He who wields the knife rarely wears the crown,’ while the affable Douglas Hurd was considered to be too much of a patrician to have widespread appeal in the country. In the second ballot on 27 November, Major won 185 votes to Heseltine’s 131 and Hurd’s fifty-seven. Heseltine and Hurd graciously conceded, handing the leadership and the premiership to Major. The following morning a tearful Mrs Thatcher and her husband Denis left Downing Street after eleven and half years.

The rise of John Major was meteoric. His father, Tom, had a burgeoning career as a variety performer, including a brief spell as a trapeze artist, before settling down with his second wife, Gwen (Major’s mother), in Worcester Park, south-west London. Born in 1943, during the Second World War, Major rose from humble origins in Brixton to scale the heights of the Conservative Party. He left school at sixteen, with few qualifications, because his family needed the money he could earn, but continued to study at home first thing in the morning and late at night. After periods of temporary unemployment he eventually found his feet as a banker with Standard Chartered Bank. He also became an active member of Brixton Young Conservatives. Inspired to enter political life, he was elected as a local councillor in Lambeth and eventually as MP for Huntingdon 1979, after a long search for a safe seat. Mrs Thatcher thought highly of Major as an able and loyal minister, promoting him to Chief Secretary to the Treasury in 1987. To his surprise he replaced Geoffrey Howe as Foreign Secretary in July 1989, and succeeded Lawson as Chancellor three months later. On 28 November 1990 the forty-seven-year-old from Brixton entered 10 Downing Street as Prime Minister.

Major Tonic

‘I want to see us build a country that is at ease with itself,’ Major declared on the steps of Number 10. It was a sentiment that resonated throughout the country, after over a decade of Thatcherite medicine. Major’s disarming smile and emollient manner were the antidote to troubled times. He had made few enemies in the party; a huge political asset that others like Heseltine could not claim. He appointed a ‘Cabinet of friends’, welcoming back Heseltine from the cold to become Environment Secretary, as well as promoting his campaign manager, Norman Lamont, to the Chancellorship and appointing Chris Patten as Party Chairman. Major’s consensual approach to decision-making endeared him to Cabinet colleagues, who felt bruised and battered by Mrs Thatcher’s handbag. A party that had been reduced to despair in the dying days before her downfall, and guilt-ridden shock in the immediate aftermath, soon recovered its poise. Major reassured her supporters by being the anointed heir, and enthused her detractors by offering an inclusive style of leadership.

Most importantly for the party, John Major’s incredible rise led to a dramatic reversal in public opinion. A fortnight before Mrs Thatcher resigned, Labour enjoyed a 16 per cent lead in the opinion polls. Within days of her leaving Downing Street, the Conservatives had leapt to a 12 per cent lead.²⁷ Focusing the minds of Tory MPs was the reality that they would have to go to the country within eighteen months. They believed that Major represented their best hope of uniting the party after the trauma of deposing the Iron Lady. Even after more than eleven years in office, and despite the ever-widening differences of opinion on Europe, the hunger for power was still there.

The new Prime Minister’s in-tray was distinctly uninviting. He had to deal with the unpopular Community Charge, complex European negotiations and a conflict in the Middle East. But by far the hardest situation facing the country was the deteriorating state of the economy. Major inherited a dire political and economic situation. ‘Interest rates were at 14 per cent, inflation was going up to double figures, growth had fallen through the floor and the recession had started with a vengeance and was going to take unemployment up very high indeed.’²⁸ Within twelve months the Community Charge had been replaced, British troops had played a key role in expelling Iraqi forces from Kuwait, and public spending was increased to assuage concerns that the party would desert the public services during the downturn.

The future shape of the EC was one of the most immediate concerns for Major. European leaders were about to negotiate a treaty that would strengthen the institutional bonds of the European project, forging closer cooperation in a wide range of policy areas that had hitherto been the domain of individual nation states. The Single European Act, which Mrs Thatcher had signed (and then regretted) in 1986, paved the way for further integration, particularly on the creation of a single European currency and social policy (known as the Social Chapter) which the former Prime Minister had railed against since her Bruges Speech. Major headed for the Dutch town of Maastricht in December 1991 with the intention of securing ‘opt-outs’ from both the single currency and the Social Chapter. Unlike his predecessor, he consulted the parliamentary party and the Cabinet widely before and during the negotiations. Yet his hand was weakened when his European counterparts reminded him that Mrs Thatcher had signed up to an ‘ever closer union’ in Europe.

The fact that the majority of the 376-strong parliamentary party were largely pragmatic towards Europe, if not pro-European, should have been in Major’s favour. Many were from a generation that came of age after the war and believed strongly that peace and prosperity would endure through closer cooperation (which involved pooling sovereignty) with Britain’s Continental neighbours. However, a significant minority of Tory MPs had become deeply suspicious of what they saw as a perpetual loss of British sovereignty as unelected European institutions accrued more powers. Major feared that a growing rift at the heart of the party could very easily turn into something more dangerous. ‘I was very conscious of the two historic precedents – the Corn Laws and Tariff Reform,’ he recalls. ‘The danger of the party splitting in November 1990 seemed to me to be very real. The proximity of an election eighteen months later actually quite helped us in the short term, because people tend to pull together, but I felt the party was near to splitting – even then.’²⁹

Following some deft negotiations at Maastricht, Major returned to Westminster having secured the opt-outs from the European Social Chapter and the single currency. In the Commons, Tory MPs waved their order papers in appreciation of his achievement. He had considered ratifying the new treaty by taking it through the Commons as soon as he returned to London, but the impending general election, which was planned for the following spring, curtailed the parliamentary timetable. It was a decision he would soon come to regret.

Despite his renewed confidence after Maastricht, Major was acutely aware that his predecessor was watching his every move. His appointment of Heseltine and scrapping of the poll tax, and the government’s position on Europe, particularly alarmed Mrs Thatcher, who remained in the Commons on the backbenches until the election. Soon after leaving office she had promised to be a ‘good back-seat driver’, words which infuriated Major. He had scrupulously consulted his predecessor in the months after her departure, but that was now becoming increasingly difficult. ‘The Labour Party were very keen to play on the fact, “Oh well, she’s still running the government, yet she wouldn’t have won the election,”’ said one senior figure within the government. ‘It wasn’t a credible position. Had she not said that, we could have consulted her and brought her in much more than we did.’

The former Prime Minister struggled to come to terms with the loss of power after being in office so long, particularly during the conclusion of the Gulf War, that began just before she left Number 10. Her court of former aides and advisers let it be known to a number of Tory MPs and sympathisers in the press that she was disappointed with Major’s performance and questioned his judgement. She gave him her support in public, particularly as the general election approached, but as one of his aides remarked, ‘The evil was in the drip feed, the constant gnawing away at him.’³⁰ One of the senior figures in the party still sympathetic to her admits, ‘She had become her own worst enemy by blocking off anyone who could replace her – Major was the only person in Cabinet who could claim to be her heir.’

Major himself was exasperated by the influence she still commanded in the party. A low point in their relationship came in June 1991 when the press reported comments allegedly from her that he was a ‘grey man’ who had ‘no ideas’. She had also delivered a speech in New York in which she made an implicit attack on the government’s ERM policy. According to one of his closest advisers in Number 10, Judith Chaplin, the Prime Minister was exasperated, labelling Mrs Thatcher’s behaviour ‘emotional’ and her views ‘loopy’. Chaplin, who later became a Tory MP before her untimely death in 1993, recorded Major’s frustration in her diaries. ‘I want her isolated,’ Chaplin recorded Major saying. ‘I want her destroyed.’³¹ Major’s supporters deny that he ever said this, but Chaplin’s account reveals how difficult things had become for the new Prime Minister.

Despite the bitterness and resentment behind the scenes, in March 1992 the Conservative Party went into the general election campaign with steady determination. Major’s allies believed that his down-to-earth style would contrast favourably with the Labour leader, Neil Kinnock. Kinnock had led the party since its landslide defeat in 1983, when the party gained a mere 27 per cent of the vote. Originally from the left of the party, he had toiled to overturn Labour’s divided image, shedding some of its most unpopular policies such as unilateral nuclear disarmament, withdrawal from the European Community and nationalisation of the high street banks. He had dealt with the militant tendency on the left of the party and helped to heal wounds after a breakaway group of MPs formed the Social Democratic Party (SDP) as a rival on the centre-left, in 1981. Kinnock’s hope was that a deepening recession in 1991 and early 1992 would ruin the Conservatives’ chances of a fourth election victory. He also hoped to capitalise on the Tories’ huge unpopularity leading up to Mrs Thatcher’s downfall. Yet he had a credibility problem: many voters regarded him as a Welsh windbag, and not a Prime Minister-in-waiting. The contrast with Major could not have been starker as the election drew closer. The Prime Minister noticed as he toured the country that the eyes of voters were not sliding away, and that people wanted to talk to him rather than walk away. The connection was still there, just.

The battle lines of the 1992 general election were shaped well before Major decided to go to the country in March. Even before he became Prime Minister the Conservative strategy had been to ruthlessly exploit Labour’s weaknesses, particularly on tax and spending. The young guns at the CRD had prepared an offensive which culminated in the ‘Labour’s Tax Bombshell’ poster campaign in January 1992. David Cameron now headed the department’s Political Section, where he had been responsible for devising the earlier ‘Summer Heat on Labour’ campaign against the opposition’s tax plans. Cameron’s briefings were now being regularly fed into Major’s preparations for Prime Minister’s Questions. ‘He was an extraordinarily able and bright young man,’ recalls Major. ‘I didn’t know him well, but I was impressed with him – his coolness and his capacity to think under pressure.’³²

As Cameron made an impression on the Prime Minister, he was making friends with someone who would become an important influence on his career. Steve Hilton had taken over Cameron’s Trade and Industry brief the previous year. The son of Hungarian parents who moved to Britain in the mid-1960s to pursue their education, Hilton was not a conventional CRD recruit. Although he and Cameron shared a public school education (Hilton at Christ’s Hospital and Cameron at Eton) and both went to Oxford (where they did not meet), their upbringing could not have been more different. After Hilton’s parents’ marriage broke down, his mother and stepfather, a builder, raised him in modest circumstances in Brighton. Cameron was the son of a stockbroker and a justice of the peace, brought up in the comfortable surroundings of an old rectory in the Berkshire village of Peasemore. Hilton’s hatred of Communism deeply informed his politics, and he found a soulmate in Cameron, who had travelled to East Germany shortly after the fall of the Berlin Wall. ‘Steve had clear views about the Cold War and freedom, as did David, whose trip had left a big impression on him,’ recalls a mutual friend. Learning their trade together at the CRD, they formed an enduring friendship and a shared political outlook.

They were handed a gift when Kinnock and his Shadow Chancellor, John Smith, unveiled their ‘shadow budget’ on 17 March, just six days after the start of the election campaign. Laid out in detail, Labour’s tax and spend plans became a hostage to fortune which the CRD ruthlessly exploited. The CRD, under the direction of Andrew Lansley, primed the media with briefings about how Labour’s tax increases would hit the average voter by an extra £1,000 a year. For Lansley’s protégés, the 1992 campaign would leave an indelible mark. ‘We could not afford to make mistakes,’ recalls Lansley. ‘It was a learning experience for all of them. David, in particular, learnt that an election campaign is relentless and based on rigorous research.’³³ When the party launched a highly effective poster campaign, which featured a boxer under the slogan ‘Labour’s Double Whammy’, his gloves labelled ‘1. More Taxes’ and ‘2. Higher Prices’, it was clear that this was going to be a hard-hitting campaign. Designed by the party’s advertising agency, Saatchi & Saatchi, it was one of the most successful political advertisements in modern times, and would haunt Labour for years to come. However, 1992 would be the last general election campaign for many years in which the Tory electoral machine would outshine its opponents’. On 1 April, eight days before the election date, with Labour seeming to hold a decisive lead in the polls as Major crisscrossed the country with his soapbox, Neil Kinnock took the stage at a glitzy rally in Sheffield. ‘We’re all right!’ he shouted three times, overcome by emotion. His party assumed victory; the voters had not.

The Pyrrhic Victory

In the last few days of the campaign most pundits predicted either a hung Parliament or a narrow Labour victory, but on 9 April 1992 the country returned the Conservative Party to office for an unprecedented fourth term. It was a remarkable turnaround in fortunes since November 1990. Over fourteen million people had voted Tory, the largest popular vote for any party before or since. Many Conservative MPs were surprised and relieved to have held on to their seats. Major’s overall majority of twenty-one was a modest reward for the 8 per cent lead his party achieved over Labour in the share of the vote. If the small swing to Labour had been uniform across the country, the Conservatives would have won a majority of seventy-one, and the history of the next five years would have been very different indeed.

The next day Major consoled one of his closest political friends, Chris Patten. The voters of Bath had ousted the Party Chairman who had masterminded the Conservative victory. ‘He would have had a much bigger job had he been elected,’ regrets Major. ‘We sat together in the White Room of Downing Street. We were very conscious that we had won four elections in a row, which was unprecedented in modern politics, and that winning a fifth would require the Labour Party to continue to implode, or us to have a remarkable run of success.’³⁴ Although not impossible, they knew this would be extra ordinarily difficult, especially with such a shrunken majority. Major rewarded Patten with the last governorship of Hong Kong. As he left for the Far East, Patten knew the omens for his party were not good. ‘The electorate didn’t really want us to win,’ he recalls. ‘We won by default, but they didn’t really think we deserved it. From the moment we won, the press and people at large were looking for things to criticise us for: we gave them plenty of opportunity to do just that.’³⁵

The 1992 general election had delivered the Conservative Party a Pyrrhic victory. Within five months, on Wednesday, 16 September, Britain’s ejection from the ERM dealt a devastating blow to the party’s reputation for economic competence. On ‘Black Wednesday’ the cornerstone of the government’s economic policy was knocked out of place as interest rates soared by 5 per cent within a matter of hours. At one point they reached 15 per cent, before falling to 12 per cent. For a Prime Minister who regarded ERM entry as one of his finest achievements as Chancellor, it was particularly damaging. In fact Major had been seeking an exit point for months beforehand, aware that the government faced the prospect of a sudden hike in interest rates during a recession, and a falling exchange rate which would have rekindled inflation.

As a reserve currency in the mechanism, the pound could not be sustained at the rate at which it had originally entered, principally because of the demands of a re-unified Germany, whose domestic economic concerns had begun to dictate the whole system. Sterling became easy prey for speculators on the currency markets, while the Bank of England spent several billion pounds of its reserves trying to prop it up. The markets went into turmoil, and as the Bank of England tried and failed to stabilise the currency that morning, Major agreed with Lamont to raise interest rates to stem the run on the pound.³⁶ He called an emergency meeting of senior ministers at Admiralty House on Whitehall, where he had decamped because of refurbishments to Number 10.

Lamont was aghast to find that Heseltine, Hurd and Clarke had been invited to discuss the crisis – in his collegial style, Major was anxious that they should be bound into the decision-making process – and was furious when they urged Major to intervene further to keep sterling in the ERM. ‘They all sat around umming and hawing and saying, “Should we put interest rates up?”’ he recalls. ‘Well, of course it offended me hugely, because I felt it was my decision and the recommendation of the Governor of the Bank of England was that our membership of the ERM was over and we should recognise it.’³⁷ At 7.30 p.m. Lamont made a brief statement in the central courtyard of the Treasury. ‘Today has been an extremely difficult and turbulent day … The government has concluded that Britain’s best interests can be served by suspending our membership of the exchange rate mechanism.’