As Margaret Thatcher’s chancellor and then foreign secretary, Geoffrey Howe was responsible for some of the era’s most contentious policies. He talks to Matthew O’Toole about governing the country in recessionary times
“What Wass did not know – although he might have guessed – was that he was one of those whom we considered disloyal and would be replacing upon arrival in office.” Geoffrey (now Lord) Howe (pictured above) is reading from his memoir, A Conflict of Loyalty, and the Wass in question is Douglas, permanent secretary at the Treasury when Howe became chancellor in 1979.
Though Howe had, and has, a famously gentle demeanour, his commitment to the Thatcherite economic agenda – much of which he helped drive through – meant he was willing to countenance getting rid of very senior officials who were not, to use Mrs Thatcher’s phrase, “one of us”. Since Howe had to implement some of the last century’s most astringent economic policies with the help of a frequently sceptical Whitehall, his reminiscences are of more than historical interest – they may shed light on a how a future Tory government would harness the civil service.
As it turned out, Wass was not forced out of his post, and remained as permanent secretary until 1983 – the entire duration of Howe’s chancellorship – while the department enacted a new set of policies based on monetarism: tackling inflation through tight control of the money supply. The devotion of Thatcher, Howe and influential economists such as Alan Walters to the policy – which was accompanied by tough spending cuts – was met with suspicion within Whitehall; but Howe acknowledges that a sceptical Wass performed his duty with “dignity”.
There were, the former chancellor admits, certainly sceptics inside the civil service – but the economic shock therapy can’t have been a surprise: the Tories had preached monetarism in opposition, and the International Monetary Fund had already imposed belt-tightening conditions on the 1976 loan given to Labour chancellor Denis Healey. Indeed, Howe now insists there was more continuity between his policies and those of his predecessor (and friend) Healey than is often thought.
Monetarism may not have been universally popular amongst mandarins, but Howe suggests that many Treasury officials welcomed the opportunity to decisively tackle the “British disease” of high inflation and poor economic growth. “I think that the Treasury did actually welcome our arrival,” he says. “There were only two lucky prime ministers in the 20th century: Churchill and Thatcher. They both arrived at a time when the country was in the last chance saloon, and I think the civil service knew that as well. We had to pick ourselves up from rock bottom so there was a sense of relief.”
What’s more, there was an added sense of continuity stemming from the fact that many of Thatcher’s first Cabinet had been in the 1974 government of Edward Heath. “Really, the Thatcher government was the Heath government having a second chance,” he says. For both of these reasons, Howe says, the period after the 1979 election was “a pretty easy transition”. Though he doesn’t say it, today’s Conservative leadership is not as clearly armed with either experienced personnel or cross-party political consensus.
Some commentators – usually right-leaning – are keen to find parallels between the elections of 1979 and 2010, arguing that a future Tory government might have to be still more aggressive than Thatcher’s in attacking public spending. Howe shies away from offering detailed prescriptions to David Cameron or George Osborne, but does suggest that a prospective Tory administration would need to establish consensus among “colleagues in government, the civil service and the nation” about the level of austerity needed. This is made difficult, Howe points out with a customarily elegant turn of phrase, by the fact that the economic situation has not created as much “manifest horror” as 30 years ago. “It’s a difficult one to handle and [the problem] is not as evident as it was in 1979,” he says. “We’d had the three day week and then the winter of discontent.”
If Gordon Brown and Alistair Darling are to be believed, the lack of horrific evidence of recession is due to government action, which they contrast with what Brown has repeatedly called the “do nothing” approach of Tories during past downturns – including that of the early 1980s. Howe calls this comparison “grotesque”, arguing that the problems then were “very different” and would only have been made worse by a fiscal stimulus. “The core problem was inflation – it was running at over 20 per cent – and we’d been struggling with it since 1970. The last thing you wanted to do in those circumstances was to [create money].”
He certainly didn’t do that; in fact, his landmark 1981 Budget famously defied all received economic wisdom by deflating the economy during a recession in an attempt to bring inflation and the budget deficit under control. Many in the Treasury, he says, were “disturbed” by the document – which cut spending and hiked taxes by £4bn – but Howe is not only unrepentant, but proud of the plan and its ambitions.
Having forced one department to adjust the basic assumptions which underlay policy formation, Howe moved to the foreign office (FCO) in 1983. It’s an area in which he still takes an interest, and he’s recently intervened in the Lords over funding for the FCO; the decline in sterling, he warned, risks “destroying the calibre of the diplomatic service”.
Howe has a traditionalist’s appreciation of the “quality” of personnel in the FCO during his time there, though he says Thatcher herself was often of the opinion that the foreign office “represented the foreigners”. He is sceptical of the rationale behind Labour’s hiving off of international development work to a separate department, arguing that keeping foreign policy and overseas aid together makes for greater consistency. Nonetheless, he doesn’t advocate re-merging the two, simply because – as he’s at pains to point out – he hates structural tinkering. “The longer I’ve been near government, the more wary I’ve become of institutional change for its own sake,” he says.
Perhaps unsurprisingly, Howe is also against regular ministerial reshuffles. He was spared too much of that, with long stints as chancellor and foreign secretary before Thatcher moved him in 1989 to become Leader of the Commons and the sinecure deputy prime minister. The latter were short-lived job, ended by a 1990 resignation speech made all the more devastating by his mild manner.
If Howe asked civil servants to implement some fairly radical policies, he also seems to have had great respect for many of his officials; and this affection produces a stream of anecdotes. He tells, for example, of becoming Solicitor General in the Heath government, and being embarrassed to find his most senior official was a former contemporary at the bar who insisted on addressing him in the most formal terms. When he became minister for labour in the trade department, he remembers, one official absented himself one lunchtime to meet “an old girlfriend”; the event turned out to be a birthday lunch for Barbara Castle, Howe’s Labour predecessor.
Any new government, Howe says, introducing another anecdote, should treat the civil service with “a combination of enthusiasm and respect”; equally, officials should respect politicians’ mandates and their nose for public opinion. “Douglas Wass began enthusing to me one day about a message he’d picked up by attending the annual dinner of the Cutlers’ Feast in Sheffield, and I was struck by how detached and naïve he seemed to be,” Howe says with a smile. “Ministers were exposed to this all the time, and some civil servants tend to underestimate the osmotic merit of contact with people.”
Lord Howe: A life near the top
1964: Elected to Parliament as MP for Bebington
1970: Joins Heath government as solicitor general
1972: Promoted to minister for labour with a Cabinet seat
1975: Appointed shadow chancellor by new Tory leader Margaret Thatcher
1979: Enters government as chancellor
1983: Moves to become foreign secretary
1989: Reshuffled to Commons leader and deputy prime minister, a demotion
1990: Dramatically resigns from government, precipitating leadership contest
1992: Steps down as an MP and is elevated to the peerage