The Downing Street Years (17 page)

The MTFS was intended to set the monetary framework for the economy over a period of years. The aim was to bring down inflation by decreasing monetary growth, while curbing borrowing to ensure that the pressure of disinflation did not fall solely on the private sector in the form of higher interest rates. The monetary figures for later years that we announced in 1980 were illustrative rather than firm targets — though this did not prevent commentators poking tiresome, if predictable, fun when the targets were altered or not met. The 1980 MTFS figures for the money supply were expressed in sterling M3 (£M3), though the Red Book noted that ‘the way in which the money supply is defined for target purposes may need to be adjusted from time to time as circumstances change,’ an important qualification.
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Not all of those who shared our fundamental economic objectives entirely welcomed the MTFS. To some it seemed like a new version of Labour’s 1965 ‘National Plan’. Others questioned whether it would succeed in affecting expectations in the economy as we intended, and wondered what would happen if it did not. But there was a crucial difference between the MTFS and the old style economic planning. We were seeking to secure greater financial stability, within which business and individuals could operate with confidence. We knew that we could do this only by controlling those things which government could control — namely the money supply and public borrowing. Most post-war economic planning, by contrast, sought to control such things as output and employment, which ultimately government could not control, through batteries of regulations on investment, pay and prices, that distorted the operation of the economy and threatened personal liberty. The MTFS broke with all of this. Certainly, no one could guarantee that people would adjust their behaviour to take account of the MTFS; indeed, pay bargainers, particularly in the public sector, conspicuously failed to do so, at least in the early period. The MTFS would only influence expectations in so far as people believed in our determination to stick to it: its credibility depended on that of the Government — and ultimately, therefore, on the quality of my own commitment, about which I would leave no one in doubt. I would not bow to demands to reflate: it was this which turned the MTFS from an ambitious aspiration into the cornerstone of a successful policy.

A firm financial strategy was necessary to improve our economic performance: but we never believed that it would be sufficient, even with tax cuts and deregulation of industry. We also had to deal with the problem of trade union power, made worse by successive Labour governments and exploited by the communists and militants who had risen to key positions within the trade union movement — positions
which they ruthlessly exploited in the callous strikes of the winter of 1978–9.

The economic effects of union power were still painfully clear. Pay rises were soaring while business prospects plummeted with the onset of recession. The engineering industry dispute in 1979 provided a good demonstration of how much poison excessive trade union power and privilege had injected into British industry — and not just the public but the private sector too. The engineering industry had every commercial reason to reduce costs so as to compete. Yet after a ten-week strike, the employers, the Engineering Employers’ Federation (EEF), conceded a 39-hour week, increases of £13 a week for skilled men and an extra week’s holiday phased over four years, all of this greatly increasing their costs. The EEF had crumbled and, because of the centralized system of pay bargaining, employers throughout the industry had also given in. The EEF had long accepted the closed shop as an unavoidable fact of life. So the unions’ power over their members was more or less absolute. Some employers, in search of a quiet life, preferred it that way. But it meant that when a dispute did occur the trade union was able to exercise what amounted to intimidation over its members — ‘lawful intimidation’ in the unhappy phrase coined by Labour’s former Attorney-General, Sam Silkin. Those who wanted to continue working could be threatened by the union with expulsion and the consequent loss of their job. The engineering strike was not a political strike, nor one which threatened to bring ordinary life to a halt. But it was precisely the sort of strike which no country fighting for its industrial future could afford — an object lesson in what was wrong. Its consequences damaged the whole industry for years to come.

Indeed, for the greater part of my term of office the need for new steps in trade union reform was repeatedly demonstrated by industrial disputes. The disadvantage of this was that, in a sense, we were always behind events, learning the lessons of the last strike. The advantage was, however, that we could point to recent abuses to justify reform and could therefore rely on public opinion to help us push it through.

On 14 May 1979, less than a fortnight after I formed the Government, Jim Prior wrote to me setting out his plans for trade union reform. There was a certain amount that we could do at once. We could set up our promised inquiry into the coercive recruitment practices of the printing union SLADE — which would deal also with the activities of the NGA in the advertising industry. We could also make certain changes to employment legislation by Order in Council, with the aim of reducing the heavy burden placed — on small firms in
particular — by the provisions on unfair dismissal and redundancy. But we would have to consult with employers and unions quite extensively about our main proposals on secondary picketing, the closed shop and ballots. As a result, the larger changes we wanted would not be in place in time for strikes which might occur that winter. Jim Prior was optimistic that if the TUC was properly handled — and he thought that he
could
handle the TUC — they would not reject our proposals outright. The CBI was also, as usual, opposed to any ‘precipitate’ action. In reply I pointed out that they would be the first people to complain if secondary picketing started again. I also made it clear that I thought that a bill must be published by November, if at all possible, and should reach its committee stage in the Commons before Christmas. I had a further discussion with Jim about tactics on the afternoon of Wednesday 6 June. Jim said that for purposes of negotiation his proposals to the TUC would go somewhat further than those in our manifesto, but I insisted that our final position should not be less than the manifesto — a significantly different emphasis.

Two weeks later Jim set out his proposals in a Cabinet paper. These were very similar to those which were ultimately contained in the 1980 Act. They covered three main areas: picketing, the closed shop and ballots. We planned to limit the specific immunities for picketing, given under the legislation of 1974 and 1976, strictly to those who were themselves party to the dispute and who were picketing at the premises of their own employer. Powers would be taken to issue a statutory code on picketing. Where there was a closed shop, we proposed to give employees who might be dismissed for refusing to join a union the right to apply to an industrial tribunal for compensation. There would be a legal right of complaint for those arbitrarily expelled or excluded from union membership. We would extend the present protection for employees who objected to joining a union because of deeply held personal conviction. A new closed shop could in future only be established if an overwhelming majority of workers voted for it by secret ballot. A statutory code relating to the closed shop would be drawn up. Finally, the Secretary of State for Employment would be given power to reimburse trade unions for the postal and administrative costs of secret ballots.

These early proposals were as notable for what they did not contain as for what they did. At this stage they did not extend to the question of secondary action other than secondary picketing, nor did they deal with the wider question of trade union immunities. In particular, they left alone the crucial immunity which prevented action being taken by the courts against union funds. On the first of these points — secondary
action — we were awaiting the conclusions of the House of Lords in the important case of
Express Newspapers v. MacShane.
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It is worth noting that the changes we made in all these areas, including that of picketing, were changes in the civil, not the criminal, law. In public discussion of subsequent strikes this distinction was often lost. The civil law could only change the way in which unions behaved if employers or, in some cases, workers were prepared to use it. They had to bring the case. By contrast, the criminal law on picketing, which was clarified but not substantially altered in the years ahead, had to be enforced by the police and the courts. Although the Government would make it clear that the police enjoyed its moral support and would improve police equipment and training, the constitutional limits on us in this area were real and sometimes frustrating.

As the summer wore on, it became obvious that although the TUC was prepared to talk to the Government about our proposals, it had no intention of actually co-operating with them. On 25 June at their request I met the TUC General Council. I was depressed, but not a bit surprised, to discover that there was no willingness on their side to face economic facts or to try to understand the economic strategy we were pursuing. I told the TUC that we all wanted high living standards and more jobs, but that if people wanted a German standard of living then they must achieve a German standard of output. When the TUC said that they wanted more government spending, I pointed out that there was no shortage of demand in the economy: the problem was that because of our uncompetitiveness that demand was being met by imports. I got nowhere. The TUC Conference in September was marked by unreasoning and unqualified opposition to everything we proposed — even the provision of funds for secret ballots in which no compulsion was involved, other than the moral pressure to consult their own members.

On the evening of Wednesday 12 September I held a meeting with Geoffrey Howe, Jim Prior and other colleagues to plan our strategy. I thought that it was hopeless trying to change the attitudes of most trade union leaders, who were socialist politicians first, second and third. Instead, we agreed that we must appeal over their heads to their members.

I was convinced that rank-and-file unionists felt very differently to the union bosses about the reforms. In due course, we must liberate them by breaking down the closed shop and by ensuring genuine democracy within the unions; then they themselves would bring the
extremists and union
apparatchiks
into line. But until we could make such changes — and it would take more than our present bill to do that — all we could do was to call for their support as persuasively and powerfully as we could.

So time and again I drummed home the message that it was ordinary trade unionists and their families who were hurt by the irresponsible use of trade union power. For example, in my speech to the Party Conference in Blackpool on Friday 12 October 1979, I said:

I developed this theme again when I spoke to the Conservative Trade Unionists’ (CTU) Conference in Nottingham on Saturday 17 November. Strikes were not the only problem; rather, it was the whole socialist economic approach to which the union bosses were wedded, and in particular their preference for monopoly and protection. I took the example of British Steel — which soon became all too topical — to make the point:

In the last part of 1979 and the early months of 1980 we continued refining the Employment Bill and spent a good deal of time on the question of secondary action and immunities. We also discussed item by item measures to deal with the burdens which past Labour legislation had placed on industry. One such burden was Schedule 11 of the Employment Protection Act, 1975. Schedule 11 was a typical case: it showed how an apparently harmless measure, introduced for the best of motives, could defeat the intentions of its originators and result in higher unemployment. Schedule 11 provided that the ‘recognized terms and conditions’ of employment for a particular industry should apply throughout that industry. The original aim was to deal with pockets of low pay; the principle had wartime antecedents, but in recent years it had been exploited by higher paid groups, such as those working for the BBC. In that instance the unfortunate television licence holder had to foot the bill. Generally, by forcing wage levels up to the level obtaining in the strongest firms, Schedule 11 caused jobs to be lost.

But by far the most contested issue was that of trade union immunities. Our proposals on secondary picketing had already begun to address it. But we now took a further step. We had received the report of the enquiry set up earlier into the recruitment activities of the printing union SLADE, undertaken by Mr Andrew Leggatt QC
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In response, we decided to remove the immunity where industrial disruption was called or threatened by people other than those directly working for a particular firm with the intention of coercing its employees into joining a trade union.