Was there not some way of sorting out the mess? There were wrangles between government and local government, especially London and Liverpool, where high spenders proposed to ignore government guidelines for the control of inflation. The only way to deal with this was to set a rates ‘cap’ and here there were battles, one problem being that if the government ‘capped’ rates, it would necessarily be responsible for the ‘cuts’ that followed — old folks’ homes closed, etc. How could this problem be solved? There had been inquiries, six since the war, but there seemed to be no alternative to rates, from property. In the USA there was a local sales tax, and the country was easily large enough to have endless variety. Neither there nor in Germany did central government take detailed control of local finance, and in both cases there were large units, ‘states’, which produced somewhat different and healthily competing ways of doing things. The Heath government had attempted a reform along these lines, ending up with things that were too large to be changed or too small to be effective. Local government was an unrewarding karst of a subject, and the matter was now dealt with in an almost casual way. Had local government’s powers been confined, what followed might have made sense. As matters came to a head, there emerged the most absurd piece of reactionary triumphalism since Charles X of France, in 1830, had appointed as prime minister a man who had visions of the Virgin and decreed a closure of the press. The revolution of 1830 quickly ensued.
It was called a service charge. In theory, high-spending and inefficient councils would be penalized by their own voters, because the service charge would be so high, higher than in comparable areas. Nigel Lawson and one or two others demurred, but in January 1986 the plan was introduced, with preparation time of ten years. Parliament’s system of select committees strangely allowed it through, and a one-time Heathite, scorned by Sherman, and greatly promoted thereafter, introduced the Bill more or less without criticism, so long as he was given money (over £5bn) to smooth its passage. There were to be safety nets and rebates, complications that made the Bill very difficult to understand. Nigel Lawson argued that the best thing would be to remove education from local government responsibility, as it accounted for half of its spending. At any rate, serving bills for several thousand pounds on a family not used to paying anything at all was not a sensible method of gaining popularity, especially as so much of local government was inefficient and pointless (Oxford had forty times as many AIDS ‘counsellors’ as there were AIDS victims). By 1989 a large number of Conservative MPs were feeling their heads. The details, as monks, the disabled, etc. had to be exempted, were surreal.
All of this amounted to a piano and chromatic version of a funeral march, but there was another version in the major going on very loudly at the same time. The government had failed in its aims, a failure concealed by some magnificent victories, and above all by the legendary status of its leader. Neither in England nor in the USA had ‘the State’ really been cut back. The concomitant, inflation, now returned. By the end of 1988 house prices were rising by almost one third per annum. In 1987 the consumer price index rose by only 2.7 per cent, but in 1988 it was rising and in 1989 was at 15 per cent — more or less the figure with which this administration had started. The pound slid, and the balance of payments registered alarm. To all of this, the European lobby in London responded with cries for closer co-operation with the Europeans. The Confederation of British Industry was important in this respect. It consisted mainly of well-established businessmen of the older type, not expert in finance, and brought up in the corporatist world of the seventies, when businesses really flourished only through their links with a then all-governing government. The Economist, the Financial Times and a small host of respected commentators all blamed the troubles upon failure to join the ERM, the early stage on the way towards a European currency, in the context of the Single European Act. The monetarists had been waved aside, and the one-time Chancellor, Geoffrey Howe, was now in favour of some British co-operation with the would-be European currency (he had recently and very uncomfortably given up smoking). So was his successor, Nigel Lawson (soon to give up eating). Charles X had been overthrown by his cousin Louis-Philippe, a man for the wallet, and the Orleanists now gathered, to conspire in London.
The point as to the ERM was that it was the product of a world of two decades before, the failure of the Bretton Woods system. It could only really be made to work if there were real partnership, i.e. if the German Bundesbank agreed to support currencies such as the pound that were based on very different economies from the high-saving German one. Any restriction of credit, in pursuit of exchange rate stability through higher interest rates, would mean unemployment, but the ERM had become a sort of totem, and the Americans, who had invented its original version, were in support. ‘Europe’ was a sort of deus ex machina for dealing with intractable internal problems, as the Italians, welcomingly, had found, and as Mitterrand in France, needing a bomb to blow up his allies on the Left, astutely discovered when his wooden Brave New World collapsed in 1982-3. It became, as a nineteenth-century English radical had observed of foreign affairs, a sort of outdoor relief for a sort of aristocracy, and for that matter the Foreign Office, not, generally, having much of a role, and having weakened its esprit de corps with half-baked positive discrimination, now found a role: it could interpret the awful complexities of Europe for politicians who had many other things on their minds.
A Sir David Hannay was apparently deputed to ‘Europeanize’ Margaret Thatcher, to inform her of the advantages of the institutions of what was supposed to be a united Europe. She took up the invitation to address the training school for European bureaucrats, the Collège d’Europe, at Bruges, in Belgium. Even then, she went not out of enthusiasm but because she had to be in Luxemburg anyway. Just then, the ‘president’ of the European Commission, Jacques Delors, was promoting his own candidacy for renewal quite vehemently: Germans, latterly, had been collecting such functions (as Manfred Wörner had done with NATO) and Delors wished to keep his. He went the rounds, making European speeches, announcing that within six years there would be a real government and a real parliament, responsible for ‘80 per cent’ of all laws passed in Europe. A few weeks later, the British Trades Union Congress gave him a standing ovation, as he sketched a picture of a left-wing Europe, with social benefits and low unemployment. In September 1988 Margaret Thatcher made her Bruges Speech, having lost from the draft a good part of the Foreign Office emollients, and made a characteristic assessment of Europe as she saw it — she played up the British contribution, but then told truths, to the effect that Brussels had been painfully slow and reluctant as regards the freeing of markets and capital movements, and that ‘we have not successfully rolled back the frontiers of the state in Britain only to see them reimposed at a European level, with a European super-state exercising a new dominance from Brussels’. It was a good swan-song; but the fact was that she had already lost the campaign. ‘Europe’ was marching on regardless, and even Geoffrey Howe, the Foreign Secretary, regarded the speech with ‘a weary horror’.