He did not, though, make the concessions to his critics in the Party which would have been required. He might have provided effectively against future threats to his position if he had changed his approach in a number of ways. He might have shown at least some willingness to admit and learn from the Government’s mistakes. He might have invited talented backbench critics to join him as Shadow spokesmen and contribute to the rethinking of policy. He might have changed the overall complexion of the Shadow Cabinet to make it more representative of parliamentary opinion.
But he did none of these things. He replaced Tony Barber — who announced that he intended to leave the Commons though he would stay on for the present in the Shadow Cabinet without portfolio — with Robert Carr, who was even more committed to the interventionist approach that had got us into so much trouble. He promoted to the Shadow Cabinet during the year those MPs like Michael Heseltine and Paul Channon who were seen as his acolytes, and were unrepresentative of backbench opinion of the time. Only John Davies and Joe Godber, neither of whom was ideologically distinct, were dropped. Above all, he set his face against any policy rethinking that would imply that his Government’s economic and industrial policy had been seriously flawed. When Keith Joseph was not made Shadow Chancellor, he said he wanted no portfolio but rather to concentrate on research for new policies — something which would prove as dangerous to Ted as it was fruitful for the Party. Otherwise, these were depressing signals of ‘more of the same’ when the electorate had clearly demonstrated a desire for something different. Added to this, the important Steering Committee of Shadow Ministers was formed even more in Ted’s image. I was not at this stage invited to join it, and of its members only Keith and perhaps Geoffrey Howe were likely to oppose Ted’s wishes.
With everyone expecting another election before the end of the year — October being the favoured date — the Tory Party entered on an almost frantic search for attractive policies to be deployed in our next manifesto. These had to meet two criteria: they had to be novel, and they had to cast no doubt on the underlying correctness of the recent Conservative Government’s policies. I added a third complication: as far as my area of responsibility was concerned, the new policies also had to be recognisably Conservative. Meeting all these criteria involved us in some extremely testing acrobatics.
Between the February and October 1974 elections most of my time was taken up with work on housing and the rates. I had an effective housing policy group of MPs working with me. Hugh Rossi, a friend and neighbouring MP, was a great housing expert, with experience of local government. Michael Latham and John Stanley were well versed in the building industry. The brilliant Nigel Lawson, newly elected, always had his own ideas. We also had the help of people from the building societies and construction industry. It was a lively group which I enjoyed chairing.
The political priority was clearly lower mortgage rates. The technical problem was how to achieve these without open-ended subsidy. Of course, the purist view would be that artificially controlling the price of borrowing for house purchase was bound to be counterproductive. And in this matter the purist, as so often, was right. If we had pursued a responsible economic policy there would have been no boom and bust of property prices, and rising inflation would not have driven up mortgage rates. Policies providing for sound money and the release of sufficient quantities of development land are the proper way to ensure an orderly housing market. But of course we had not pursued policies of that sort. And Labour was already embarking on a vendetta against property development. In these circumstances, holding the mortgage rate down below the level the market — or more precisely the building societies — would otherwise have set made short-term political sense. In Government we had introduced a mortgage subsidy, and there had even been talk of taking powers to control the mortgage rate. The Labour Government quickly came up with its own scheme devised by Harold Lever to make large cheap short-term loans to the building societies. Our task was to devise something more attractive.
As well as having an eye for a politically attractive policy, I had reasons of conviction for action on the mortgage rate and for the other measures we devised to help homebuyers. I had always believed in a property-owning democracy and wider home ownership. At this point too, I was acutely aware of how much the middle classes were suffering. Because of the inflation which we and the Labour Party had conspired to create, the value of people’s savings had been eroded by negative real interest rates. On top of that, by 1974 house values had slumped. So had the stock market: the FT Ordinary Share index went down to 146, the lowest level for twenty years. Trade union power and left-wing socialism were in the ascendant. Tax increases were bearing down on businesses and people.
In such circumstances, it can be right to make modest temporary provision for the interests of the middle classes of a country on whom future prosperity largely depends. Moreover, it is cheaper to assist people to buy homes with a mortgage — whether by a subsidized mortgage rate, or by help with the deposit, or just by mortgage interest tax relief — than it is to build more council houses or to buy up private houses through municipalization. I used to quote the results of a Housing Research Foundation study which observed: ‘On average each new council house now costs roughly £900 a year in subsidy in taxes and rates (including the subsidy from very old council houses)… Tax relief on an ordinary mortgage, if this be regarded as a subsidy, averages about £280 a year.’
My housing policy group met regularly on Mondays. Housing experts and representatives from the building societies gave their advice. I reported from time to time to Shadow Cabinet where, in the absence of real agreement on economic policy or much constructive thinking on anything else, attention focused heavily on my areas of responsibility. It was clear to me that Ted and others were determined to make our proposals on housing and possibly rates the centrepiece of the next election campaign, which we expected sooner rather than later. For example, at the Shadow Cabinet on Friday 3 May we had an all-day discussion of policies for the manifesto. I reported on housing and was authorized to set up a rates policy group. But this meeting was more significant for another reason. At it Keith Joseph argued at length but in vain for a broadly ‘monetarist’ approach to dealing with inflation.
The question of the rates was a far more difficult one than any aspect of housing policy, and I had a slightly different group to help me. There was a huge amount of technical information to master. Moreover, reform, let alone abolition, of the rates had profound implications for the relations between central and local government and for the different local authority services, particularly education. I drew on the advice of the experts — municipal treasurers proved the best source, and gave readily of their technical advice. But working as I was under tight pressure of time and close scrutiny by Ted and others who expected me to deliver something radical, popular and defensible, my task was not an easy one.