A few days later I reshuffled the Shadow Cabinet — moving in Francis Pym to replace John Davies, bringing back John Biffen to take responsibility for small businesses, and appointing Mark Carlisle to replace Norman St John-Stevas at Education, with Norman becoming Shadow Leader of the House. With an election so close at hand, I kept the various factions more or less in place.
I also did a little before the end of the year to still the embarrassing arguments about pay policy. When we failed to win the Berwick and East Lothian by-election in late October several backbench friends publicly blamed Ted Heath’s Blackpool intervention. I went on ITN and — with perhaps an excess of charity — exonerated him. And in the weeks following the Conference I temporarily bowed to the clamourings of a group of colleagues led by Peter Thorneycroft who urged me to reaffirm the line we had taken on pay policy in The Right Approach to the Economy. I spoke to this effect at Paddington in the week before Christmas.
So a difficult year approached its end. We were behind in the polls and seemed all too willing to behave like a permanent Opposition rather than a potential Government, a failing on which the actual Government readily capitalized. When we successfully defeated the Government’s attempts to impose sanctions on Ford for paying its workers more than the 5 per cent norm in the Commons, the Prime Minister was able to paint a picture of a responsible minority administration being prevented from defending the national interest by Conservative opportunism. And when the following day there was a debate on a Vote of Confidence the Government survived by ten votes — and I made a particularly poor speech.
It was true that we had made some progress towards converting the Party and public opinion in the direction I knew was required. Events too had contributed — the scenes at Grunwick and the failure of the ‘Social Contract’ deal with the unions, particularly. With Labour’s pay policy in ruins, the fact that we were keeping open the option of introducing a pay policy of our own troubled me less than it once had. What mattered far more was that our programme lacked the clear commitment to changes, particularly in trade union law, which I believed were necessary. In that respect, at least, we still had a long way to go.
LABOUR’S NEMESIS
But Labour’s time was running out. Jim Callaghan had been dealt a bad hand by history and Harold Wilson in 1976. Like a brilliant poker player, he had employed skill, gamesmanship and simple bluff to spin out his defeat as long as possible on the chance that an ace or two might suddenly appear from up his sleeve. As 1978 became 1979, however, a succession of deuces tumbled forth. On Tuesday 12 December trade unions representing National Health Service and local authority workers rejected the 5 per cent pay limit and announced that they would strike in the New Year. At the end of December the elements conspired to create more trouble, with heavy snow, gales and floods. On Wednesday 3 January the TGWU called the lorry drivers out on strike in pursuit of a 25 per cent pay rise. Some two million workers faced being laid off. Hospital patients, including terminally ill cancer patients, were denied treatment. Gravediggers went on strike in Liverpool. Refuse piled up in Leicester Square. With Government compliance, trade union shop stewards dispensed permits to allow lorry drivers to transport ‘essential’ goods across picket lines. In short, Britain ground to a halt. What was more damaging even than this to the Labour Government, however, was that it had handed over the running of the country to local committees of trade unionists.
Would we be able to grasp the opportunities this provided? That might depend in part on an operation which had been proceeding in fits and starts, under conditions of the greatest secrecy, since the summer of 1977 and which went under the umbrella title of ‘Stepping Stones’. It was the brainchild of John Hoskyns, an able ex-soldier who had set up one of the first computer software companies, which he had built up and then sold to concentrate on public affairs. John had been in contact with Keith Joseph at the Centre for Policy Studies for some time before we were introduced. Together with his colleague Norman Strauss, he had a refreshingly if sometimes irritatingly undisguised scorn for the ad hoc nature of political decision-making in general and the decision-making of the Shadow Cabinet in particular. The two of them argued that we could never succeed unless we fitted all our policies into a single strategy in which we worked out in advance the order in which actions had to be taken — hence the title. The first time I heard all this I was not very impressed. We met over Sunday lunch at Flood Street and the session ended by my remarking on the fact that they had eaten a whole joint of roast beef and I wasn’t sure what I had gained from it all. Alfred Sherman, who was with us, quipped that next time they would bring sandwiches.
But under different circumstances, when long-term thinking was concerned, I came to appreciate the depth and quality of John Hoskyns’ analysis. Ironically, in the light of events, the paper which he and Norman Strauss prepared in the autumn of 1977, whose title ‘Stepping Stones’ came to apply to the framework of discussions which followed, was about persuasion as much as about policy. Its theme was that union reform was at the centre of what we wanted to do; without it the rest of our programme for national recovery would be blocked. But that programme could only be implemented by a Conservative Government that had won the argument. Winning the next election, even by a large majority, would not be enough if the only basis for it was dissatisfaction with Labour’s performance in office since 1974. Therefore, far from avoiding the union issue — as so many of my colleagues wanted — we should seek to open up debate. Moreover, this debate was not something to fear: the unions were an increasing liability to Labour and correspondingly a political asset to us. With intelligence and courage we could turn on its head the inhibiting and often defeatist talk about ‘confrontation’.
I was warming to this analysis and said as much when (along with Keith Joseph, Angus Maude and Willie Whitelaw) I met its authors over drinks and supper at the House of Commons at the end of November 1977. To follow up the report I set up a Stepping Stones Steering Group which met in January 1978, and proposed that small groups of Shadow Ministers and outsiders with relevant knowledge should plan ways to advance the strategy through speeches, pamphlets, articles and so on. There would also be a ‘Policy Search’ group of some of the more solid Shadows, Keith Joseph, David Howell, Nigel Lawson and Norman Lamont, working alongside John Hoskyns and Norman Strauss, to seek new policy initiatives in line with the overall Stepping Stones theme.
But before this work could begin, sceptical and hostile colleagues had to be faced. I held a meeting of the Leader’s Steering Committee at the end of January at which we argued ourselves to a standstill. Colleagues vied with each other in praising the Stepping Stones paper, but then warning against doing anything to follow it up — a well-known technique of evasion. We should avoid being ‘too insensitive or controversial’ (Francis Pym). We were ‘against appeasement and confrontation but there had to be a third way’ (John Peyton). Peter Thorneycroft, Ian Gilmour and Jim Prior all expressed degrees of doubt. John Davies said frankly that ‘if we told the truth about the unions we should certainly lose the election’.