for much larger sums, they were not worth the argument. He knew this, and his stubbornness was a deliberate tactic. His approach to the Treasury was best summed up by an annotation in my appointments diary which simply read: ‘3.30 Public Expenditure Settlement – Wales (Secretary of State, Dick Turpin).’ Highway robbery was his forte.
Kenneth Baker, the Education Secretary, was the polar opposite of Peter. He would bound in full of enthusiasm, with lots of new ideas, all of which, he assured me, would be hugely popular with the electorate and would guarantee yet another election victory. Ken cared a lot about education, and in Cabinet committees he handled the Prime Minister on the subject better than anyone else I ever saw. As a former Education minister herself, she enjoyed picking holes in his plans, particularly when he was devising changes to the curriculum. It was a game they both enjoyed. ‘That’s absurd,’ she would say. ‘I know which official suggested that.’ Ken would demur, deny that it was that official, make a joke of it, deflect her criticism, and gradually manoeuvre the Prime Minister into a position where he made tiny concessions to her, and she would have appeared graceless to seek more.
It was good spectator sport for the rest of the committee, and I admired the way he performed, but his technique was less effective where the issue was money and not ideas. When detailed questions on cost were put to Ken, he was often poorly briefed. His spending plans were grossly inflated, and it never took long to remove the padding. At the end of our negotiations Ken bounded out as cheerfully as he had come in, but with much less money than he had sought.
Kenneth Clarke, the Health Secretary, simply enjoyed a good argument. It was evident to me why Ken had chosen the law and then politics as a profession. Our meetings always took a long time as we argued points of detail, agreeing the facts but disagreeing about the conclusion. It was good-natured but very time-consuming. Eventually, when we had reached stalemate, I suggested we throw the officials out and do a deal between ourselves. Behind closed doors I told Ken that his bids were outrageous. Rather disarmingly he agreed, but added that if he had frankly admitted it, I would have asked for even more reductions. This, of course, was true. Having agreed that he was asking for too much and I was offering too little, we soon reached an acceptable compromise. We then sat chatting over a drink before re-admitting the officials and announcing the outcome.
The Home Secretary Douglas Hurd was a subtle negotiator who began his meeting with a rather discursive statement setting out all the desirable expenditure he had himself excluded from the bids before he submitted them. ‘All very necessary,’ he would say, ‘and we’ll have to do it one day, but’ – and here he would shake his head sadly – ‘I know there are many demands to be met.’ It was a clever technique, designed to cut off many of the Treasury’s traditional arguments. Douglas was reasonable in manner but tough on substance. He would lean back in his chair, his right ankle across his left knee and an agonised expression on his face if any reduction to his bids was suggested. All this talk of money was obviously distasteful to him. If the Treasury case was good enough he would gradually concede, but eventually he would begin jingling a large bunch of keys in an agitated fashion. The key-jingling was a sign that he had reached his bottom line. Jill Rutter once said to me that Douglas and I would never have finished a negotiation if he had left his keys at home.
The Scottish Secretary Malcolm Rifkind was always difficult, and usually threatened to resign unless he got a better settlement. I once asked him at the beginning of a meeting whether he wanted to threaten to resign now, or to wait until we had finished. ‘I think I’ll wait,’ he grinned, knowing even then he would only settle at the last moment. Scotland was well served by a series of Scottish secretaries who turned public expenditure negotiations into an art form.
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
