Finally, we naively assumed that our opponents would play by the same rules as we did. In particular, we imagined that there would not be either mass opposition to laws passed by a democratically elected government or mass infringement of the criminal law, as in the miners’ strike of 1972. We did not recognize that we were involved in a struggle with unscrupulous people whose principal objectives lay not in industrial relations but in politics. Had we understood this we might have embarked upon a step-by-step approach, fighting on our own territory at our own timing, as we were to do after 1979. It was later, as Leader of the Opposition, that I realized how far the extreme Left had penetrated into trade union leaderships and why that ‘giant’s strength’, of which the Tory pamphlet had spoken in the late 1950s, was now being used in such a ruthless manner. The communists knew that they could not be returned to Parliament, so they chose to advance their cause by getting into office in the trade union movement. And the fact that both the Wilson and Heath Governments had stood up to the unions and then lost increased their influence more than if we had not challenged their power in the first place.
But at this early stage we pressed ahead. The TUC was told by Robert Carr in October 1970 that the central aspects of the Industrial Relations Bill were not negotiable. The Bill was published and had its Second Reading in December. February and March 1971 saw mass protests and strikes against it. Labour used every device to fight the Bill, but in August 1971 it duly reached the Statute Book. The TUC Congress passed a resolution instructing unions to de-register. It therefore remained to be seen, when the Act came into force at the end of February 1972, what its practical effects would be — revolution, reform or business as usual. We were soon to find out.
Meanwhile other problems preoccupied us. It is sometimes suggested — and was at the time by Enoch Powell — that the Government’s decision in February 1971 to take control of the aerospace division of Rolls-Royce marked the first U-turn. This is not so. Shortly before the company told the Government of the impossible financial problems it faced (as a result of the escalating cost of the contract with Lockheed to build the RB–211 engine for its Tri-star aircraft), a constituent of mine had told me that he was worried about the company. So I asked Denis to look at the figures. I arrived home late one evening to find him surrounded by six years’ accounts. He told me that Rolls-Royce had been treating research and development costs as capital, rather than charging it to the profit and loss account. This spelt real trouble.
A few days later I was suddenly called to a Cabinet meeting and found Fred Corfield, the Aviation Minister, waiting in the Cabinet ante-room. ‘What are you here for, Fred?’ I asked. I wasn’t surprised when he replied gloomily: ‘Rolls-Royce.’ His expression said it all. At the meeting itself we heard the full story. To the amazement of my colleagues I confirmed the analysis, based on what Denis had told me. We decided without much debate to let the company itself go into liquidation but to nationalize the aerospace division. Over the next few months there were many more complicated discussions as we renegotiated the original contract with Lockheed, which was then itself in financial difficulties. One could argue — and people did — about the terms and the sum which needed to be provided. But I do not think any of us doubted that on defence grounds it was important to keep an indigenous aircraft engine capability. And in the long term, of course, this was one ‘lame duck’ which eventually found the strength to fly away again into the private sector, when I was Prime Minister.
The Rolls-Royce controversy proved to be of short duration, and it was to be a year before the serious economic U-turns — reflation, subsidies to industry, prices and incomes policy — occurred, and began the alienation of the Conservative right in Parliament and of many Tory supporters outside it. The failure of these U-turns to deliver success divided the Party still further and had other consequences. It created an inflationary boom which caused property prices to soar and encouraged a great deal of dubious financial speculation, tarnishing capitalism and, in spite of all the disclaimers, the Conservative Party with it. I shall return to the economic developments which led to all this shortly. But it is important not to underrate the impact on the Party of two non-economic issues — Europe and immigration.
FROM EMPIRE TO EUROPE
I was wholeheartedly in favour of British entry into the EEC for reasons which I have already outlined. General de Gaulle’s departure from the Elysée Palace in April 1969 had transformed the prospects. His successor, Georges Pompidou, was keen to have Britain in; and, of course, no one on our side of the Channel was keener than the new Prime Minister, Ted Heath. There was never any doubt what the incoming Conservative Government’s position would be; but nor was there doubt that many people across the political spectrum would oppose it. These included seme of the most effective parliamentarians such as Michael Foot, Peter Shore and Enoch Powell. But the worlds of business, the media and fashionable opinion generally were strongly in favour, for a variety of high-and low-minded reasons.
Talks formally opened in Brussels at the end of October 1970, with Geoffrey Rippon reporting back to Ted and a Cabinet Committee and, on occasion, to the rest of us in full Cabinet. Twice in December we had detailed discussions of our negotiating position on the EEC budget. There was no doubt that the financial cost of entry would be high. It was estimated that the best we could hope for would be a gross British contribution of 17 per cent of total EEC expenditure, with a five-year transition, and three years of so-called ‘correctives’ after that (to hold it at 17 per cent). To defuse the inevitable criticism, Geoffrey Rippon also hoped to negotiate a special review provision which we could invoke at any time if the burden of our net contributions to the budget threatened to become intolerable; but he seemed to attach little significance to it, and assumed that we could reopen the question whether there was a formal review mechanism or not.
At the time Ted resolved discussion about the costs of entry by saying that no one was arguing that the burden would be so intolerable that we should break off negotiations. But this whole question of finance should have been considered more carefully. It came to dominate Britain’s relations with the EEC for more than a decade afterwards, and it did not prove so easy to reopen. Though the Community made a declaration during the entry negotiations that ‘should an unacceptable situation arise within the present Community or an enlarged Community, the very survival of the Community would demand that the Institutions find equitable solutions’, the net British contribution quickly grew. The Labour Government of 1974–79 made no progress in reducing it. It was left to me to do so later.
Cabinet discussed the matter again in early May 1971, by which time the talks were reported to be ‘deadlocked’. There were difficulties outstanding on preferential arrangements for New Zealand products (butter and lamb) and Commonwealth sugar, and shadow-boxing by the French about the role of sterling as an international currency. But the budget was still the real problem. We had an idea what deal might be on offer: promises to cut the cost of the Common Agricultural Policy and the creation of a Regional Development Fund from which Britain would benefit disproportionately. It was still not the settlement we would have wanted — and anyway promises are not bankable — but at the time none of us foresaw how large the burden would turn out to be. Ted ended the discussion by telling us that he was planning a summit with President Pompidou in Paris to cut through the argument.