26 October Nigel Lawson resigned. Ironically, his resignation was swiftly followed by that of Alan Walters.
Recalling the period today, my lack of foreknowledge of these events strikes me as odd. The signals were there, if only we had decoded them. Perhaps I should have done. It was clear to all that Nigel was no longer working in harness with Margaret; by shadowing the exchange rate of the deutschmark and pressing, repeatedly, for our entry into the ERM, he was setting out his own economic stall in competition with his prime minister. Indeed, with Geoffrey Howe he had put his position on the line even before the Madrid summit. Their differences with the Prime Minister became all the greater as the economic clouds gathered in the first half of 1989.
This discontent intermittently boiled over in public. In June 1989, a month after Alan Walters’s return to Number 10, Nigel announced in a television interview that the length of his stay at the Treasury – already, at six years, a near-record – ‘is a matter partly for the Prime Minister and partly for me and it will be resolved in the fullness of time’. Pressed on whether he would stay in office if asked in the coming reshuffle, he could only reply, ‘You’ll have to wait and see.’
These were not the words of an ‘unassailable’ chancellor. Indeed, in the reshuffle that followed, Margaret gave thought to moving Nigel. Even so, I was not alone in my surprise at the events of October 1989. The Prime Minister was just as stunned. There had seemed to be no differences that could not and would not be best worked out with Nigel in the government rather than outside it. Only later, when I had experience of the chancellorship, did I realise just how difficult his position had been. His departure was particularly tragic because he and Margaret agreed on almost everything apart from the management of the pound. They had dominated the government machine and, when working together, had done much to restore the British economy to vitality.
Nigel is unlucky to be remembered as the author of an unsustainable boom, for his radical policies had, with his predecessor Geoffrey Howe, reshaped a ramshackle inheritance into a vigorous economy. His achievements in areas such as privatisation, tax reform and the Public Sector Borrowing Requirement (PSBR) laid some of the foundations for the steady recovery of the 1990s. And, like all the best chancellors, he resisted the temptation to panic in the face of cries from the opposition, the press, the backbenches and, at times, his own prime minister.
After Margaret’s bombshell I returned to the Foreign Office and phoned Norma. She was at Finings preparing to go to a constituency event. ‘Oh, no,’ she said. ‘Another upheaval just as we were beginning to enjoy ourselves. But it is the job you always wanted.’ And it was.
Stephen Wall, my Private Secretary, came in to see me. He knew I had been with the Prime Minister and sat down, pad in hand, for a read-out. I told him I might be leaving the Foreign Office, and he went white, believing the Kuala Lumpur row had escalated. Knowing how irritated I was by the criticism that I was only at the Foreign Office to do the Prime Minister’s bidding, he feared the worst. When I explained what had happened he was relieved on my behalf, but also aghast at the political implications.
Stephen and I had worked well together, and our partnership was about to end. He would have a new foreign secretary – the third in under a hundred days. ‘Careless,’ I suggested, ‘to lose two foreign secretaries in such a short time.’
He grinned but, being the excellent civil servant he was, he was already thinking ahead and calculating who my successor might be.
‘Douglas would be the best choice,’ I said.
‘Is he going to be?’ asked Stephen.
‘I’ve no idea,’ I replied, ‘but I’ll do all I can to see that he is.’
Stephen didn’t comment. For nearly two hours we paced around, considering the options, and regretting what might have been with our plans for Foreign Office reform, reliving the events of the past three months and waiting to see if the phone would ring. It did.
When I arrived at Number 10, Margaret was in her study on the first floor, tense but composed. At times of crisis officials close to prime ministers throw a protective girdle around them. Margaret knew that a storm was brewing, and her remarks were already beginning to take on the character of the response she would make in public to Nigel’s departure. This was a sure sign of preparation for battle. She often convinced herself in private in order to be convincing in public. She told me that Alan Walters would also be resigning, thus ensuring that I did not have to raise this sensitive matter.
I accepted the chancellorship, reflecting that in this same room, only a short time before, I had tried to talk Margaret out of appointing me foreign secretary. I had thought that promotion premature. Now, a mere ninety-four days later, I was again reluctant to accept a glittering prize. I remember thinking gloomily that few people could ever have felt as I did at both such moments. Yet again political Christmas had come early for me and I was to have the job I most coveted, but under the most unhappy circumstances. The Chancellor had resigned because, despite his persistence, he had been prevented from pursuing the economic policy he thought right for Britain. Indeed, it was the only coherent policy on offer. Despite carping at Nigel for wanting to join the ERM, Margaret had no alternative policy of her own to put in place. I was now stepping into the destabilising policy vacuum that had been created.
The Prime Minister and I discussed the politics of Nigel’s resignation. ‘It’s unnecessary. He’s being silly,’ was the view she expressed, but I don’t think she really believed it. Sometimes this remarkable woman could seem very vulnerable, and she did then. I thought she was close to tears at one moment, and briefly took her hand. I would have offered her any support she needed. She seemed to be trying to convince herself that he was resigning because the economy was going wrong and he didn’t know what to do. That seemed to me highly improbable; Nigel Lawson was a battler, not a shirker. We talked briefly about the economy and inflation, but no mention was made by either of us of European monetary union or the ERM. It was not the moment.
As for myself, I had begun to enjoy the Foreign Office. Only later were malicious tongues to say that in fact I had loathed it. And yet here I was being moved before I had had a chance to make any mark on policy, or to leave any lasting legacy. Even worse, the fact that I was being moved so swiftly and in a crisis meant that the canard that I was the Prime Minister’s alter ego would follow me from the Foreign Office to the Treasury. This was no good, either for me or the Prime Minister.
The offer of the chancellorship did put me in a position to argue for Douglas Hurd to succeed me at the Foreign Office, and I did so. I seem to recall the Prime Minister wistfully expressing a preference for Cecil Parkinson, but officials assure me that he had been ruled out of contention. Tom King also got a mention. In any event, she conceded readily that Douglas was the obvious choice. Allowing yourself to be persuaded to do something you intend to do anyway is a useful ploy if you want to win over the persuader. Margaret may have been playing that game – as prime ministers sometimes do – but whatever her motives, the right decision was made, and Douglas, formerly a career diplomat, aware of other countries’ problems but no pushover, got the job for which he was so exceptionally well qualified.
Once Douglas’s appointment was agreed, Kenneth Baker joined us and the Prime Minister briefed him on the changes. As chairman of the party he would have to bear the brunt of the inevitable media onslaught. He rallied quickly from the shock and was practical and supportive. Kenneth’s great strength was his presentational skill. As he braced himself, I reflected that if the Prime Minister had sent Beelzebub himself to the Foreign Office, Ken, with a straight face, would have presented his appointment to the media as that of a man with a wide experience of dealing with problems in a warm climate. Ken, thank God, was without shame.
At the Treasury rumours that ‘John M’ was to be the new chancellor were causing confusion. Did the ‘M’ stand for Major, MacGregor,
