The Heath Government, 1970-74

Margaret Thatcher's relations with Edward Heath

Edward Heath had a poor opinion of his Education Secretary, Margaret Thatcher, and of her department, from the very beginning of her tenure in 1970, official records show. Margaret Thatcher struggled to interest the Prime Minister in education policy, with little success.

Bad chemistry between the two seems to have explained much of the difficulty. A proposed meeting to discuss "The Principles of Education" took 18 months to arrange and Thatcher's suggestion that it take place over a weekend at her home in Kent was instantly dismissed by Heath. An official thoughtfully suggested to the Prime Minister in October 1970, only four months into Thatcher's tenure as Education Secretary: "I doubt if it would be practicable to exclude her from the discussion, but you might perhaps like to bring in a number of non-officials to liven things up".

Nevertheless the long awaited meeting, which took place at Chequers in January 1972, proved helpful to Thatcher, then at the low point of her time at the Department of Education and Science (DES). Ironically, the press interpreted it as a sign of Heath's confidence in his Education Minister and her officials.

The "Principles of Education" were not much discussed at the meeting, in fact. The minute shows Heath springing into life only on the subject of music teaching. Thatcher was well-briefed, as ever, and responded in detail, instantly conceding the Prime Minister's request that the London music colleges receive direct funding on the same scale as the Royal College of Art.

Private minutes also show that Heath was highly critical of DES officials - as Thatcher was herself on occasion - finding their paperwork slow and inadequate. In November 1971 there were discussions between the Prime Minister and officials at Number Ten on "the internal problems of the Department of Education and Science", an unusual proceeding in Whitehall terms.

The DES could never get it right. Heath complained angrily (with some justice) that "an amicable process for consultation" on reform of student union finance had turned into "a very sour wrangle with Dons and students alike". Less fairly, a technical change to the law governing work experience for children was rejected by him as "reactionary & wrong", though it had the endorsement of the Cabinet's Home Affairs Committee and in modified form was eventually accepted by the Prime Minister himself.

Thatcher on her part criticised to Heath's face his cherished "Programme Analysis and Review" initiative, designed to identify cuts in bureaucracy and make expenditure savings. She pointed out the heavy demands it made on officials and doubted whether it would improve decision-making. In this she was prescient: historians generally rate PAR a costly waste of time.

By the end of 1972 Thatcher's position politically was stronger and her relations with Heath a little less strained. She had no difficulty persuading the Prime Minister to accept a new White Paper Education: A Framework for Expansion, securing for the DES its share of the rapidly increasing level of public expenditure.

1971 May: the Paris Summit which took Britain into the E.E.C.

1972 March 21: Budget

The 1972 budget (delivered on Tuesday 21 March) was a critical moment in the rapid evolution of the Heath Government, reflating the economy to reverse the rise in unemployment figures (which passed one million in January 1972) and laying the groundwork for a more systematically interventionist industrial policy. Critics saw it as one of the first (and largest) deviations from the party's manifesto of 1970, a harbinger of the "U-turn" and a significant contributor to the massive inflation of 1973-74.

The Prime Minister's file on budget preparation (PREM 15/818) (232 pages) shows him pressing for greater measures of reflation than his Chancellor and senior officials originally favoured. But at a meeting on 6 March Sir Donald MacDougall, Chief Economic Adviser, backed the more radical course, signalling a shift in Treasury thinking towards a pessimistic reading of the prospect for economic growth in the year ahead.

The file also shows Prime Ministerial concern as to how Conservative backbenchers would respond to budget measures designed to boost Britain's regional economies, as well as irritation on the part of industry ministers at their exclusion from the planning of a budget of unusual breadth. Margaret Thatcher's view at the time went unrecorded.

1972-73: Chief Whip's reshuffle notes for Edward Heath

The Cabinet Office has recently begun releasing a new series of documents on government appointments (PREM 5), which include sensitive reports by the Chief Whip to the Prime Minister assessing colleagues and suggesting reshuffle moves.

In the early years of the Heath Government Margaret Thatcher had a rough time as Education Secretary. During this period the whips at no point suggested that she be moved (or removed). She appears in the notes only after 1972, and always in a favourable context.

The most significant suggestion for her future dates from October 1972. As the Government prepared to introduce a new statutory prices and incomes policy (one of the most significant of the " U turns " of 1972), the creation of a new Minister of Fair Trading was planned, with responsibility (among other things) for new powers to control prices. The post was expected to have a large impact on public perception of the government, particularly among women voters.

The file (PREM 5/ 530) shows that MT was very seriously considered for the job. The Permanent Secretary of the Department of Trade and Industry (in whose department the job would have been located) was asked by the Head of the Civil Service to comment on how things would work with MT in the post, a request which strongly implies that the Prime Minister was giving the idea close consideration. And assuming that was the case, one can only conclude that Heath supposed MT a solid supporter of the new statutory policy.

The report—marked "Confidential and Strictly Personal "—gives a rare insight into official views of MT at this time. She was understood to be "critical of Nat[ionalised] Ind[ustrie]s, especially gas". Her Permanent Secretary at the Department of Education and Science contributed his assessment: "Pile says highly subjective in her reaction to people ". Relations with other ministers were a source of concern.

In the event, the job was given to Sir Geoffrey Howe. But MT was in the frame for a further significant move during 1973 (PREM 5/541). The Chief Whip, Francis Pym, sent the Prime Minister a positive assessment of her in June 1973: " Present Performance: held in high esteem by the Party and by her junior ministers. (H)as kept us out of trouble on this front [education]. Future Treatment: would like to move, but not to DHSS because she does not want the "other obvious woman's department". In September Pym put her forward as a possible Secretary of State for the Environment, with responsibility for the politically vital issue of housing.

In the event, the reshuffle never took place because the advice was overtaken. The Government itself fell within months. MT was then made Shadow Environment spokesman when responsibilities were handed out in Opposition and as a result played a key part in the political controversies of housing and interest rates in spring and summer 1974.

1973 November 16-17: Heath's last summit with President Pompidou

Released only this year, the records of Heath's final summit with the French President, Georges Pompidou, show the scale of his ambition to recast British foreign policy in a European, rather than an Atlantic, mould. (The documents derive from PREM 15/2093.)

Heath's relationship with Pompidou was crucial to his foreign policy. Their summit in Paris, in May 1971, had cleared the way for British membership of the European Economic Community. Any major British initiative within the Community required French agreement as a practical necessity.The many files of briefing and preparation for this meeting are reminiscent of those prepared for meetings with US Presidents.

The records of these conversations show Heath pressing Pompidou to make rapid progress on a number of issues at the Copenhagen European Council the following month. Pompidou's responses were cautious, hinting at French and German reservations.. It is perhaps unsurprising that the Council proved a disappointment to the British Government.

1973 December 17: Emergency Budget

As a result of the Arab-Israeli war in October 1973 the cartel of oil producing nations (OPEC) dramatically increased its prices and simultaneously reduced oil exports to European nations, cutting off all supply to the US and the Netherlands in retaliation for their strong support of Israel.

Brtiain avoided a total embargo, but industrial action in the coal, electricity and railway industries made fuel supplies critically short, prompting the Government to declare a "three day week" for industry on Thursday 13 December and to introduce a deflationary emergency budget the following Monday.

A week before the three day week, a Prime Ministerial file (PREM 15/1429) (39 pages) shows the Treasury working on a package of tax, credit and spending measures. The intention was to slow the booming economy and so reduce Britain's balance of payments deficit, which was forecast to reach the unheard of level of £3,000 million during 1974, threatening a sharp fall in sterling and consequent rise in inflation.

Heath's Principal Private Secretary, Robert Armstrong, briefed him about Treasury thinking on 6 December. Armstrong's note shows that privately it was understood within government that the fuel crisis was only part of the problem: Britain was developing a huge balance of payments deficit in any case, as the economy overheated. Understandably, however, the measures were presented to the public as a consequence of events outside Government control, with OPEC and the trade unions serving as highly credible bogey-men.

The situation continued to worsen after the emergency budget, with OPEC raising oil prices again - more than doubling them - on 23 December and the miners moving from an overtime ban to a full strike on 5 February 1974.

1974 February 18: Helmut Schmidt admits British budget contribution to EEC "unfair"

During the February 1974 General Election, the terms of British entry to the European Economic Community were sharply criticised by Labour, which promised "re-negotiation" if elected.

Britain's heavy net contribution to the EEC budget was the crux. Although the Heath Government defended its record in public, a remarkable letter from a senior Foreign Office official in Brussels shows that other European governments were already being pressed privately by Britain to revise the budget settlement.

The letter describes a dinner of European Finance Ministers at which Helmut Schmidt, later German Chancellor, admits that the British were paying too much and expresses a readiness to look again at the terms of entry.This discussion took place a full ten years before the question was settled at the Fontainebleau European Council of June 1984.