Margaret Thatcher & the Centre for Policy Studies, 1974-79

Introduction: what the CPS was all about

Formed by Keith Joseph in 1974, immediately after the fall of the Heath Government, the CPS began life at one of the lowest points in Conservative fortunes during the twentieth century. Usually described as a think tank, its calling in the early years was to evangelise rather than research, working by whatever means it could to overturn the collectivist political and economic orthodoxies of the day.

Its target was as much the Conservative Party itself as opinion at large, because the CPS's diagnosis of Britain's ills stressed the failure of the right to challenge the advance of socialism, conceding by a ratchet effect the institutions of big government and the mentality that went with them. It argued that the party had done this for electoral reasons, assuming that the key to success lay in occupying "the middle ground", a location that steadily drifted left as Labour pushed its agenda. The CPS urged the Tories to push back, to plant themselves on the "common ground", and tried to set out what that meant in terms of policy. At heart the assumption was that unless the right itself could be reformed, nothing else would be.

For all the novelty and boldness of the CPS's goals, at the beginning its chief weapon was the political speech. Its resources were limited, for one thing, but also the work of repudiation had to come from within the political class itself.

And so during 1974 Keith Joseph travelled Britain making a succession of speeches assaulting the fundamental assumptions of the post-war settlement, devastating, hair-shirt performances reported prominently in the press. Though the campaign was anachronistic in method - Keith Joseph was probably the only politician in Britain who did not even own a televison, fittingly enough - it proved astonishingly successful in opening up the battle of ideas.

In the longer run of course whatever results the CPS achieved in reshaping assumptions would have to be sold to the electorate. When Margaret Thatcher served as Leader of the Opposition, 1975-79, the CPS played a crucial part in helping her do just that, not least because she conspicuously lacked the support of many in her Shadow Cabinet and in the party's official machine.

1973-74: Birth of the centre

The issue which first provoked active collaboration between the three key figures in the CPS was the Yom Kippur War of October 1973. This one of the few occasions on which Keith Joseph and MT made common cause in Cabinet against Edward Heath, opposing his response to the war, Britain embargoing military supplies to both sides and refusing to condemn the attack on Israel in the hope of exempting ourselves from the Arab oil embargo. This hugely controversial, and ultimately unsuccessful, policy was unpopular with many Conservatives, especially those of Jewish descent, like Joseph, or with close links to Anglo-Jewry, like MT (who had many Jewish constituents). It caused Joseph to revive earlier contacts with Alfred Sherman, a British journalist who sometimes wrote for the Israeli daily, Haaretz. Their conversations widened and deepened as the disasters of early 1974 tempted Heath to call the early General Election which brought him down. MT and Alan Walters also seem to have played a part in some of these quiet chats.

Sherman has left the fullest account of the early days of the CPS, and in fact so great was his influence over its development at this point it would in any case difficult to separate the man from the institution. Like many of the most effective and influential on the 'New Right', he came originally from the other side, a former marxist who had been turned by experience and events to become a highly effective critic of the left, writing with deep understanding of the inner logic of state socialism in its many variants. He had joined the International Brigade during the Spanish Civil War as a machine-gunner, and certainly in later life, as journalist then speechwriter, he wrote to kill. It tells one a lot about Keith Joseph that he had so much time for Sherman, which often meant subjecting himself to scornful analysis, edging towards the abusive. MT acknolwedged Sherman's great ability, but saw far less of him and would not have tolerated a tenth as much.

Sherman believed that the CPS was formed because Heath refused Keith Joseph the Shadow Chancellorship in March 1974, but finding that he wouldn't accept a lesser portfolio, suggested instead that he set up a think tank to study the "social market economy", code for the West German economic model. Whatever the truth as to jobs, in fact the initiative to establish the Centre seems to have come from Joseph, and Heath was suspicious of it, acquiescing on condition that a trusted economic adviser serve on its board. Sherman was not the only person Joseph had been talking with. He was in touch with Ralph Harris and Arthur Seldon of the IEA, Alan Walters and the Letwins also, feeling his way towards political renewal. He at first invited Sherman to become its director, though finally Martin Wassell, a former CBI man, was appointed to the role, with Nigel Vinson, a millionaire businessman, in the crucial post of treasurer. Small offices were found in Wilfred Street, Sherman posted to a basement room where he endlessly complained about the absence of a proper salary and natural light.

1974 June - September: revolution by speech - Upminster, Leith & Preston

The very earliest management meeting of the Centre, on 20 May, saw Joseph planning to make three speeches over the summer. And that is precisely what he did, to revolutionary effect.

The first came at Upminster on 22 June, bluntly titled: "This is not the Time to be Mealy-Mouthed: Intervention is Destroying Us". The speech was explicitly tied to the work of fundraising: possible donors would not be approached till it had been delivered.

So Upminster began the work of setting out the stall, spelling out Britain's relative economic decline and fastening the blame on "too much Socialism", the adoption by both governing parties since the war of "short cuts to Utopia", self-defeating interventionism to "force the pace of growth" which only succeeded in stalling the engine of free enterprise. Joseph's trademark self-laceration was prominently in place (as a minister he was as guilty as any, "I fought my colleagues hard for extra resources"). The work of sketching alternative policies was left for another day, Joseph going no further than calling for "a market economy within a framework of humane laws and institutions".

The political background to the speech helps to explain its shocking impact. The minority Labour Government was shortly expected to seek, or be forced into, an early General Election. In those circumstances leading Opposition frontbenchers were not expected to launch public revaluations of party policy. And Joseph was doing so while attempting to force debate on those very issues within the Shadow Cabinet, with predictably little success. But its challenge to the guiding assumptions of post-war British politics was so fundamental that there would never have been a good time to deliver such a speech, in the opinion of most Conservatives, Heath particularly. Sherman plausibly recalls agonising on Joseph's part lasting weeks before delivery. Did the speech go too far? Was it all a terrible mistake?

The seriousness with which it was treated in the press gave one answer. The response to the subsequent fundraising effort supplied another: the leading businessmen Joseph approached were very positive indeed. Encouraged, Joseph and Sherman began work on the next speech.

MT first appears in the CPS's archive immediately after Upminster, attending a management meeting three days later. She was given the title of Vice Chairman. Sherman recalled that she had not read the speech in advance and gave a cautious verdict, praising his "economy of words". Her own statements at this time did nothing to rock Ted Heath's boat: in public at least she remained entirely within the fold until the October election campaign, though a CPS meeting of 23 July clearly envisaged "speeches by KJ/MT" on the fundamentals. (She did, on the other hand, strikingly endorse the idea, in a radio interview in mid-May, that the Conservatives were likely to become the radical party of the future, "because we are not naturally a people who submit to control for a very long time" and a backlash was coming.)

Joseph's second speech, at Leith on 8 August, explained and defended the key role of profit in the economy. It warned that inflation was "de-capitalizing British industry", leaving businesses unprecedently fragile. The whole business of money-making had been demonised by the left and the cosy assumption prevailed that failing firms could and should be rescued by the state, neglecting the fact that public spending itself depended on the existence of profits to tax. It is worth recalling the condition of British business at the time the speech was made. Stock prices collapsed in 1973-74, London's FT-30 index falling an astonishing 73 per cent from peak to trough (Jan 1973 - Dec 1974). Joseph's own family firm, the builder Bovis, was brought down as the property bubble burst, a huge blow to family pride, and one that greatly reduced his personal wealth. Many, not all on the left, believed that we had entered the terminal crisis of the free market economy.

Before the final speech, at Preston on 5 September, emissaries were sent to Joseph in the hope that he could be persuaded at the very least to turn the volume down. Heath had had enough. Geoffrey Howe and MT were asked to intercede, calling on him at Wilfred Street (where in fact MT did more than praise the draft than bury it), and Joseph was summoned to a lengthy one-on-one meeting with his leader. There is little reason to think these efforts made any significant impact on the speech.

Preston was titled simply: "Inflation is Caused by Governments". Of the three speeches, this represented the deepest and most direct challenge to conventional thinking and to the record of the Heath Government in particular. Joseph pronounced incomes policy ineffective and conceptually flawed. But this had been the centrepiece of Heath's policy after the U turn of 1972. And for the first time he introduced the monetarist argument into the debate. Government was causing inflation by bolstering demand whenever unemployment threatened. Successive bouts of reflation created the "stop-go" cycle, which finally increased unemployment as well as inflation: there was no long-term trade off between the two.

Monetarism was not invented by Keith Joseph, or first promulgated in Preston. But by his speech there he brought it into the centre of political discussion in a way that no one had previously achieved, whether academic economists like Alan Walters, who helped to write it, or politicians like Enoch Powell, who had said similar things in his time.

Within days of the speech the second General Election of 1974 was called, Labour winning with a majority of only three seats.

1974-75: Election of mt as leader

As the CPS's campaign progressed, its impact was so great that Joseph began to be spoken of as a possible successor to Heath. At times he seems to have encouraged the idea, at others not. MT certainly wanted and expected him to run, describing herself to two startled journalists shortly after the October election as "Keith's campaign manager". People waited for a public sign that he intended to challenge Heath, but the weeks passed without one.

A crucial event in this respect was a speech on social policy he made at Edgbaston on 19 October - reprinted for the first time on this site - which attracted massive criticism. The Centre had always conceived its remit as wider than economics. An early meeting agreed (7 July) that balancing the "social market", CPS would encourage initiative and choice, "an independent rather than a dependent society". Edgbaston developed those themes. It stressed that "Our party is older than capitalism, and wider than any class", and that "(y)ou will only have a healthy economy in a sound body politic". It called for "the remoralisation of public life". But Joseph went on, in a passage he rather than Sherman specifically drafted: "The balance of our population, our human stock is threatened", referring to the growing number of births to teenage mothers from "classes 4 and 5", the "problem children" of tomorrow. Should birth control be extended to young unmarried girls, he wondered? Although there was some strong public support for the speech, from Mary Whitehouse among others, criticism of these remarks dominated coverage. At the extreme Joseph was virtually accused of Nazism, wanting to engineeer a "master race" according to one Labour MP. He issued defences, denials, and explanations, all of which made things worse. Hounded by the press, he and his wife experienced utter misery and he began to accept that he was not cut out to lead.

Even before Edgbaston, MT had begun to wonder whether Joseph would actually make the challenge. She had quietly withdrawn earlier statements that she lacked the experience for the top job, in a press interview which appeared the day after the speech but which was given the day before it. Nevertheless she loyally waited a further month for Joseph formally to tell her that he would not be a candidate before annoucing her own intention to stand (which took place on 21 November). She immediately informed Heath of that intention too, characteristically burning her bridges. By this stage backbench pressure following the October election defeat had forced Heath to submit himself to reelection, so a contest of some kind had become almost unavoidable.

Joseph gave MT his strongest backing and most of those who had wanted him to run transferred their support to her (with the striking exception of some who were also close to Enoch Powell, like Nick Ridley). He was probably the only member of the Shadow Cabinet who voted for her on the first ballot. Her victory undoubtedly signified a rightward tilt in the outlook of the Conservative parliamentary party, though this phenomenon was less important in explaining her success than Heath's failings and the skill of her campaign team in positioning her as offering a more pugnacious political style and a new start. And ideological change was less evident the higher you went in the party. As MT assembled her Shadow Cabinet, it was clear that Heath's men continued to dominate the collective leadership. Although a figure sympathetic to monetarism, Geoffrey Howe, became Shadow Chancellor, Joseph remained in a policy role, it was said at the insistence of Willie Whitelaw, MT's principal rival in the leadership contest and the new Deputy Leader. The party machine acquired a new chairman, and there were changes lower down, though these left in place the Heathite Chris Patten as director of the Conservative Research Department (CRD).

1975: Finding a role under the new regime

MT's unexpected arrival at the leadership created a new role for the CPS, yet real difficulties too. It now had proximity to power and an obvious role supplying ideas, drafts, support of all kinds, directly to the leader's office. But with Heath gone, and a sympathetic successor installed, was the Centre needed at all?

The question was certainly asked during early 1975. In fact closure of the Centre seems to have been a serious possibility, Joseph himself sometimes wondering out loud whether it still had a role. Might CPS not be competing with the Conservative Party for funds, perhaps not under Heath, but now? Was its closeness to the new leader consistent with the kind of trail-blazing it had been set up to do, perhaps allowing political opponents to represent its output as her unspoken thoughts, a "hidden agenda", hard or impossible to disavow? And how would Joseph actually run it? He found himself uncomfortably placed, with ultimate authority over the party's research machine as well as a private think tank. There were deep rivalries between CPS and CRD, endlessly threatening to drag him into the kind of personal conflicts he particularly detested. Sherman recalled him spending hours walking between his various offices, lumping along a heavy case of books and papers, relishing the solitude, but with neck pain an unfortunate by-product.

By late summer 1975 the issue was resolved, to the relief of somewhat demoralised staff. Joseph decided the Centre should survive, slimmed-down, its functions more tightly defined, its budget reduced. Pledges were given not to raise funds from people already subscribing to the party. In its way this was an act of remarkable self-denial on Joseph's part: massively overworked, life might have been much easier for him if he had closed it. (His marriage was already suffering from the all-consuming nature of politics.) But of course the case for keeping the CPS was also powerful. Influencing the climate of opinion had always been its core function, as Sherman reminded him, and it remained a valid one irrespective of the identity and outlook of the new leader. And in many ways MT's position as leader was not strong: she and her supporters were very far from achieving the sea change in Conservative thinking that the Centre sought.

Accompanying Joseph's endorsement of its role, MT issued a direct invitation to the Centre to cooperate more closely with the party 'regulars', and Sherman himself began to submit drafts for some of her speeches, an entrée to the inner circle. Plainly, though - powerfully implicit in such an invitation - the Centre would need to take some care not to embarrass the new leader. Unsurprisingly this often proved a difficult line to walk.

Joseph's speechmaking had dominated most of the CPS's first year. It now began to mature a whole programme of "public education", or 'output', broadly under Sherman's direction (working, for a time, alongside Jock Bruce-Gardyne). Spokesmen on economics would be found and offered to tv and radio. Speakers would be posted up and down the country. Pamphlets, articles and books would be produced, as well as set-piece speeches for politicians themselves. Later, study groups were formed to write in-depth reports in key areas on policy. Helpfully, Routledge, Kegan Paul brought the whole body of Hayek's works back into print in the hope of a CPS-led boom in sales.

'Input' meant recruiting people to do the work, sometimes paid, sometimes not. Research was commissioned where needed, but the Centre explicity defined itself as a consumer rather than a producer of research. It was in the business of opinion forming. To that end a number of MPs were quietly approached. Sympathisers in academia, business, journalism, all came forward, prompted and otherwise. As a result the CPS emerged as one of the most important routes by which alternative thinking (and thinkers) reached the party leadership, not the least of its contributions to Thatcherism.

By the end of the years of Opposition, 1974-79, the Centre had become the biggest publisher of its kind, and its study groups tangibly influenced frontbench thinking and the party programme itself in areas like energy, union policy and transport.

1976-79: Insiders/outsiders

Joseph's role in the Shadow Cabinet was a loose one, deliberately ill-defined. As head of policy he was licensed to range across the political territory of colleagues, and did so freely, as his papers show. He continued his campaign of speech-making, notably in the Stockton Lecture Monetarism Is Not Enough (Apr 1976), which holds its place alongside the great speeches he had made in 1974. Through all of this, CPS acted as one of his main supports, even describing itself as his cabinet (in the French sense).

But in practical influence he contended unsuccessfully with Geoffrey Howe for mastery in the crucial area of economic policy - a rivalry marked by its unusual gentleness and good manners, but a rivalry all the same - and over the course of the remaining years in Opposition, CPS often felt itself marginalised by CRD, its capacity to criticise in public diminished by the political damage criticism might do. The party's principal policy documents in Opposition, The Right Approach (1976) and The Right Approach to the Economy (1977) owed something to Joseph, but rather more to Chris Patten and Geoffrey Howe. And in regard to union policy, Jim Prior remained dominant, protected in his position by the Heathite majority who still sat around the Shadow Cabinet table.

The Grunwick strike of 1977 illustrates the frustrations CPS experienced and the difficulties of its role. Beginning in August 1976, the dispute became hugely controversial when mass picketing started in June 1977, thousands descending on the narrow streets of suburban North London in an attempt to force a photo processing firm to recognise a trade union, a union which the great majority of workers did not want and which had a history of imposing a "closed shop" (compulsory membership). Inevitably violence followed, massively covered on television. Three cabinet ministers sponsored by the union - prominent figures on the right of the Labour Party - appeared in person on the picket lines, before things turned nasty. For CPS, and Keith Joseph in particular, the dispute became emblematic. In a series of speeches and letters to the press he cast it as "a make-or-break point for British democracy", a fight against "red fascism" for which Labour's "so-called moderates" offered apologetics. When a Court of Inquiry under Lord Justice Scarman reported in September, he attacked it sharply, urging recognition of people's right not to join a union, particularly under pressure.

This position collided, however, with official Conservative policy, as voiced by Jim Prior, that the closed shop was an inevitable (if regrettable) thing and that the law should be changed to provide those forced out of work by unions to seek compensation rather than to allow them to keep their jobs in the first place. Political opponents pointed gleefully to the contradiction and revisited the old theme that a Conservative Goverment would pursue policies of 'confrontation' with the unions, a widely held view and one party strategists judged highly damaging electorally, memories of the Heath Government remaining vivid in Britain.

MT, visiting the US, was not well pleased to find that Grunwick was the first thing reporters wanted to ask her about when she left the Oval Office after meeting President Carter. Although her sympathies were much more with Joseph than Prior on the point of substance, her PPS issued a statement on her behalf saying in effect that both Prior and Joseph were right, but that Prior was more right because his line was the official one. When she got back Lord Hailsham threatened to resign from the Shadow Cabinet, in defence of his judicial friend (Scarman having written him a letter of complaint), and MT reprimanded Joseph on this narrow ground ("Keith, you don't attack a judge"). In truth, CPS and Joseph had embarrassed her by focussing on a vulnerable point, drawing attention to Conservative policies which she had no faith in but felt constrained to adopt. CPS in turn plainly wondered how far MT was really committed to a fundamental break with business as usual?

Whether or not as a result of Grunwick, an initiative long matured at CPS now began to bear fruit. In September 1975 Sherman had been approached by an ex-army officer and successful businessman, John Hoskyns. He, and several others, began a long discussion with the Centre as to ways of persuading the Conservative Party to rethink its positions from fundamentals. At times these discussions seemed close to collapse, but both sides persisted and in late 1977, via Keith Joseph, Hoskyns and his associates were brought into direct contact with key frontbench Conservatives in a process which became known as "Stepping Stones". A lengthy report was drawn up in November 1977 which set out a model for systematic policy-making, and, crucially, raised in unavoidable form the question whether a Conservative Government could possibly succeed unless policies towards the unions were changed. Slowly, very slowly, party thinking on this question began to move.

There was a double success for CPS here. First, it is doubtful whether, without Stepping Stones, MT would have been able to toughen the party's stance on the unions as much as she did during the Winter of Discontent. Second, John Hoskyns and one of his collaborators, Norman Strauss, went on to become the nucleus of MT's first Policy Unit at Number Ten, bringing CPS close to the heart of things in government.

In Opposition Sherman in particular spent a lot of time planning how to counter the wiles of Whitehall, convinced that senior officials were fundamentally at odds with Conservative policies and would outmaneouvre many if not most Conservative ministers. To defeat this tendency he urged that a Conservative Government recruit a "Territorial Army of advisers", several hundred senior and not so senior figures to keep officials in line. The appointment of John Hoskyns might be seen as a fruit of this kind of thinking, but in truth MT was much more conventional in her approach to government than Sherman or indeed her successors, like Tony Blair, in whose term the role, and numbers, of special advisers became vastly greater. She allowed the appointment of only a handful of such people in the early years, and even later, far fewer than Sherman had wanted.

One intriguing might-have-been in this respect relates to Keith Joseph's efforts to recruit the monetary economist David Laidler, then and now based in Canada, as an adviser in government. He called on Professor Laidler in person during a visit to the US in February 1979, carefully warning MT what he was doing. In April 1979 there was a further phone conversation, which Joseph scrupulously reported to Howe. Finally in May 1979 an offer was made, only to be turned down, family commitments making it impossible for Professor Laidler to leave Canada at that point. He would certainly have occupied a very influential position had he taken the job, either at the Treasury, or more likely at No.10 in the spot Alan Walters came to occupy from January 1981.

1974-79: Conclusion

Sherman once said that the CPS was created to "think the unthinkable". The phrase has been associated with the Centre ever since, but like many brilliant encapsulations, it contains only a measure of truth. It captures the sense in which CPS set out to break political taboos, bringing into full view ideas and proposals once deemed too dangerous for serious consideration. But while these things may have been 'unthinkable', they were not exactly 'unthought'. After all what the Centre liked to call "market economics" had ruled the roost in Britain for several centuries before Labour's watershed victory in 1945.

CPS's programme was really a revivalist one. More precisely it sought - like MT - a national revival, in which conservative social values would once again provide the essential underpinning of market economics. Much of its enormous success derived from the fact that fundamentally it was cutting with the grain, not against it.

Of course, that was far from apparent at the time. Many doubted that what was once there would come back. Perhaps thirty years of intervention and the heavy hand of the state had wiped out the long British tradition of entrepreneurship, inventiveness and self-reliance? MT quietly asked herself that question in the early years of her government, as the economy struggled. Her answer finally was that there was only one way of finding out, and that once started you had to see it through. Famously she was not for turning, and in CPS she found a very encouraging echo to that sentiment during the long experiment that followed.