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By Sanchia Berg
Today programme
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In summer 1980 Margaret Thatcher's economic experiment didn't seem to be working. Restricting the money supply was key to the new monetarist approach - but the government wasn't managing to do it, despite spending cuts. Both interest rates and inflation remained high. The effect was to squeeze industry - particularly the private sector - and the unemployment rate was starting to rise alarmingly. Files
released at the National Archives
show that Harold Macmillan, once Mrs Thatcher's political mentor, chose this moment to try to persuade her to change tack.
Thatcher was clearly concerned about the former PM's criticism of her policy
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After a lunch at Chequers he wrote her a long paper, explaining where and how he thought she was going wrong. He was highly critical of some aspects of her policy. The "so-called money supply policy" he compared to a speedometer in a car - it "may be a useful guide to what is happening but...it cannot make the machine go faster or slower". Harold Macmillan was worried about an "alarming increase of unemployment" which could be "dangerous socially". He argued for a return to "consensus politics" which, he tellingly noted was "sneered at by some, but the essence of Tory democracy". "In effect, it's an alternative economic policy" says Lord Peter Hennessy, Professor of Contemporary History at Queen Mary University of London. "In many ways it would have probably shaken her more than anything the Labour Opposition could have put up against her".
Harold Macmillan was not convinced by Margaret Thatcher's economic policy
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The Labour Party at the time was beginning its own civil war. But former Tory PM Harold Macmillan, "Supermac" as the cartoonists had nicknamed him, was still a popular and influential figure. The files at the National Archives don't show how Mrs Thatcher responded, but her private papers do. Her foundation at Churchill College Cambridge generously gave us an advance view of the relevant documents, which will be released in full next year. Mrs Thatcher's own copy of the paper has many words underlined - it's annotated with arrows, in blue and black, suggesting she read it more than once. "She certainly took it seriously" says Lord Hennessy. The Thatcher Foundation documents show the Prime Minister sent the paper to the Treasury for analysis - their report is a detailed rebuttal, point by point. She also shared it with senior Conservatives. Within the Foundation's file is a short note to Margaret Thatcher from the then Conservative Party Chairman Lord Thorneycroft. He considered that the paper could "do damage" to the Prime Minister's position. He concluded that Macmillan "should, if possible, be stopped from saying it... Could we ask him to lunch to discuss the memo?" It is not clear whether that was tried. Only weeks later, at Conservative Party Conference, Mrs Thatcher gave a definitive response to all her critics. "U turn if you want to. The Lady's not for turning".
The great post-war Conservative leaders disagreed with one another
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Four days later, Harold Macmillan went public, in the form of a long peak time BBC Television interview. It was in essence a reworking of the critique he made in private. He said the government had their policy "the wrong way round", because they hadn't managed to scale back local authority spending. "In a way, they've spent the year hitting the wrong head". He was particularly concerned about the social consequences when the government did turn to the nationalised industries and the public sector, apparently foreseeing the industrial strife which really did lie ahead. "What will the Chancellor do when the miners go on strike? What will he do when the trains don't run? What'll we do when the motor car drivers don't run, when the electric light goes out?" he said. The interview is transcribed in Mrs Thatcher's personal file, with a note from an official: "PRIME MINISTER - likely to come up in Questions I'm afraid". It didn't - though from then on Macmillan was more public in his opposition. It didn't deflect Mrs Thatcher from her course. Less than a year later, her government brought in an even harsher budget, despite the deepening economic recession.
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