Geoffrey Howe

Howe represented Bebington in the House of Commons from 1964 to 1966 with a much reduced majority. He became a chairman of the backbench committee on social services, being quickly recognised for promotion to the front bench, as HM Opposition spokesman on welfare and labour policy. He was defeated at the 1966 general election.

Howe returned to the bar. He participated in the 1966 Aberfan Disaster Tribunal, representing the colliery managers.[8] He sat as deputy chairman of Glamorgan quarter sessions. More politically significant was work on the Latey Committee tasked with recommending a reduction in the voting age. In 1969, he chaired the committee of inquiry into investigate alleged abuse at Ely Mental Hospital, Cardiff. On Howe's insistence, the inquiry's remit was expanded to cover the treatment of patients with intellectual disabilities within the National Health Service. The report had a wide impact on mental health provision in the UK, beginning a process that led to the widespread closure of large mental hospitals.[9] But of more legislative importance were the Street Committee on racial discrimination, and Cripps Committee on discrimination against women, the reports of which helped the Labour government to change the law.

He returned to the House of Commons as the MP for Reigate from 1970 to 1974, and East Surrey from 1974 to 1992. In 1970, he was appointed Solicitor General in Edward Heath's government and was knighted.[10] He was responsible for the Industrial Relations Act that caused immediate retaliatory union strikes. He was promoted in 1972 to Minister of State at the Department of Trade and Industry, with a seat in the Cabinet and Privy Council membership, a post he held until Labour were returned to government in March 1974.[4]

In 1974, the Reigate boundary changes redrew the seat as East Surrey, and Heath appointed him as spokesman for social services. Howe contested the second ballot of the 1975 Conservative leadership election, in which Margaret Thatcher was elected as party leader. She saw him as a like-minded right-winger and he was appointed Shadow Chancellor of the Exchequer. He masterminded the development of new economic policies embodied in an Opposition mini-manifesto The Right Approach to the Economy through dogged patience and quiet determination.

At the same time, Labour Chancellor of the Exchequer Denis Healey "went cap in hand to the IMF" to ask for a loan as Britain was bankrupt. In 1978, Healey said that an attack from Howe was "like being savaged by a dead sheep".[11] Nevertheless, when Healey was featured on This Is Your Life in 1989, Howe appeared and paid warm tribute.

With the Conservative victory in the 1979 general election, Howe became Chancellor of the Exchequer. His tenure was characterised by an ambitious programme of radical policies intended to restore the public finances, reduce inflation and liberalise the economy. The shift from direct to indirect taxation, the development of a medium-term financial strategy, the abolition of exchange controls and the creation of tax-free enterprise zones were among the most important decisions of his Chancellorship.

The first of five budgets, in 1979, promised to honour Professor Hugh Clegg's report that recommended a return to pre-1975 pay levels in real terms, conceding Howe's point about "concerted action".[lower-alpha 1] Rampant inflation had however eroded competitiveness, devalued pensions, investments, and wages. Thatcher reminded him: "On your own head be it, Geoffrey, if anything goes wrong," commencing an often tense and querulous working relationship.[6] Thatcher's point was that the vast increase in (indirect) taxation and government spending (notably in public sector pay) in 1979 would lead to terrible consequences – which it did, as unemployment doubled. The financial policy tightened money supply, restricted public sector pay, with the ultimate effect of driving up inflation, at least in the short-term, and unemployment in the medium-term.

Fundamentally we do believe in German principles of economic management and should be able to get ourselves alongside them ... pronounce in favour of ... providing greater stability as encouraging convergence on economic policies.[12]

During Thatcher's first term the government's poll ratings plummeted, until the 'Falklands Factor'. Howe's famous 1981 Budget defied conventional economic wisdom at the time by slowing the rate of inflation at a time of recession. At the time, his decision was fiercely criticised by 364 academic economists in a letter to The Times, who contended that there was no place for de-stimulatory policies in the economic climate of the time, remarking the Budget had "no basis in economic theory or supporting evidence". Many signatories were prominent members of the academic sphere, including Mervyn King who later became the Governor of the Bank of England.[13]

The logic in his proposals was that by reducing the deficit which at the time was £9.3 billion (3.6% GDP), and controlling inflation, long-term interest rates would be able to decline, thus re-stimulating the economy. The budget did reduce inflation from 11.9% in early 1981 to 3.8% in February 1983. Long-term interest rates also declined from 14% in 1981 to 10% in 1983.[14] The economy slowly climbed out of recession. However, unemployment, already extremely high, was pushed to a 50-year high of 12% by 1984, narrowly avoiding the figure reached during the Great Depression of 13.5%. Some have argued that the budget, although ultimately successful, was nevertheless over the top.[15] Specialist opinions on the question, expressed with 25 years' hindsight, are collected in an Institute of Economic Affairs report.[16]

Unlike Reaganomics, his macro-economic policy emphasised the need to narrow the budget deficit rather than engage in unilateral tax cuts - 'I never succumbed... to the mistaken interpretations of Lafferism, which have led some US policymakers so far astray';[17] despite these measures the budget deficit remained on average 3% of GDP during Howe's tenure. His macro-economic policy was designed to liberalise the economy and promote supply-side reform. This combination of policies became one of the defining features of Thatcherism in power.[18] However, by the time of his last budget shortly before a general election there were early signs of a recovery, which Howe used to justify a cut in taxes.[6]

Documents released under the British government's 30-year rule in 2011 revealed that in the wake of the Toxteth riots in Liverpool in 1981 Howe had warned Thatcher "not to overcommit scarce resources to Liverpool", writing that "It would be even more regrettable if some of the brighter ideas for renewing economic activity were to be sown only on relatively stony ground on the banks of the Mersey. I cannot help feeling that the option of managed decline is one which we should not forget altogether. We must not expend all our limited resources in trying to make water flow uphill".[19] Howe later stated that he had not advocated the "managed decline" policy and that he had merely been warning of the danger of concentrating excessive resources on one area of need.[19]

Howe (left) and West German Foreign Minister Hans-Dietrich Genscher in 1986

After the 1983 general election Thatcher reluctantly appointed Howe Foreign Secretary, a post he held for six years, the longest tenure since Sir Edward Grey in 1905 to 1916.[20] With "the quiet determination" applied in the Treasury he set off on a tour of Warsaw Pact countries, interviewing communist leaders and sounding out opponents.[21] The trip opened the way to further discussions with Mikhail Gorbachev, with whom he believed Thatcher shared "extraordinary chemistry."[22] He later looked back on this period (1983–85) as his happiest, and most fruitful and productive, engaging with world leaders across the summit table, sharing decisions with Thatcher, including a notable encounter with Caspar Weinberger on 6 September 1982. Success with the Americans proved decisive in bringing about the end of Communism in Europe.[23]

Howe was closely involved in the negotiations leading up to the 1984 Sino-British Joint Declaration on the future of Hong Kong, and developed a good working relationship with the U.S. Secretary of State George Shultz, mirroring the close connection between Thatcher and President Ronald Reagan.[24] However, Howe's tenure was made difficult by growing behind-the-scenes tensions with the Prime Minister on a number of issues, first on South Africa, next on Britain's relations with the European Community, and then in 1985 the Anglo-Irish Agreement. For his staff, Howe was a respected boss; mild-mannered, polite and courteous, he was assiduous in his attention to detail. However the human rights questions over South African sanctions and trade embargo coupled to his deep concern over Thatcher's strident style in Europe, increasingly drove a stressful wedge between Nos 10 and 11. On policy objectives they began to drift apart with fatal consequences for the Prime Minister's ambitions. Thatcher's dominant style contrasted with his emollience, patience and capacity for negotiation. Their differences were dated to the Westland Affair in 1986, when senior ministers almost forced her to resign, according to Douglas Hurd's memoirs.

In June 1989, Howe and his successor as chancellor, Nigel Lawson, both secretly threatened to resign over Thatcher's opposition to British proposed membership of the exchange rate mechanism of the European Monetary System. Howe supported the ERM both because of his general support of European integration and because he had become convinced as Chancellor of the need for more exchange rate stability.[4][25] She turned increasingly for advice to her No.10 private secretary Charles Powell, a career diplomat who contrasted to Howe's mandarin-style. Howe remarked: "She was often exasperated by my tenaciously quiet brand of advocacy."[26] His friends often wondered why he put up with her style for so long; but many considered him to be her successor. One historian has suggested that the government would have survived even the ructions over Europe had Howe remained her ally.[27]

In the following month of July 1989, the then little-known John Major was unexpectedly appointed to replace Howe as Foreign Secretary, and the latter became Leader of the House of Commons, Lord President of the Council and Deputy Prime Minister. In the reshuffle, Howe was also offered, but turned down, the post of Home Secretary.[28] Although attempts were made to belittle this aspect, Howe's move back to domestic politics was generally seen as a demotion, especially after Thatcher's press secretary Bernard Ingham belittled the significance of the deputy prime minister appointment, saying that the title had no constitutional significance, at his lobby briefing the following morning.[29]

Howe then had to give up the Foreign Secretary's country residence Chevening. The sceptical attitude towards Howe in Number 10 weakened him politically – even if it might have been driven to some degree by fear of him as a possible successor, a problem compounded by the resignation from the Treasury of his principal ally Nigel Lawson later in the same year. During his time as deputy prime minister, Howe made a series of coded calls on Thatcher to realign her administration, which was suffering rising unpopularity following its introduction of the poll tax, as a 'listening government'.[4]

Tensions began to emerge in 1982 during the Falklands War when Thatcher, on the advice of Harold Macmillan (who warned against including the Treasury), refused to appoint him to the war cabinet.[30] During his first budget, Thatcher wrote to Adam Ridley: "The trouble with people like Geoffrey – lawyers – they are too timid."[31] On the occasion of the general election victory of 1983 there were heated exchanges of views in No. 10 on her decision to move him to the Foreign Office. Howe was one of those who persuaded Michael Heseltine that on balance it was probably better that he, rather than she, resign during the Westland Affair in 1986. At the Scottish Party Conference in Perth in 1987, Howe spelled out his position for the European single market and the proposed Delors Plan (Thatcher having accepted the Single European Act in 1986[32]). In the following year, Thatcher made her speech at Bruges declining the offer to deepen the bureaucratic state towards a "Federalist Superstate".

At the Madrid inter-governmental conference the tensions were ratcheted higher as Thatcher emphatically renounced any advance in British policy over the European agenda for "ever closer union" of political and economic forces. Howe forced her to give conditions for entering the proposal for entry to the ERM in June 1989. Howe and Nigel Lawson threatened to resign; but she called his bluff by appointing John Major over his head. Howe resented having to give up the state residence of Chevening, in Kent on being effectively demoted to Lord President of the Council. He deeply resented leaving the Foreign and Commonwealth Office which was a job he had always coveted. When Lawson resigned it looked like a natural reshuffle, but Howe was frozen out of the inner circle. When Howe attended a meeting with the Queen he found to his surprise that Britain had joined the ERM before he had been informed about it – the ERM had been Howe's policy. The pound sterling was thus pegged to the Deutsche Mark, instead of the U.S. dollar and the consequence was that Britain's currency was pummelled into devaluation by a much stronger German economy. The option to leave cost Britain billions in 1992. But at the Rome Summit in October 1990, Thatcher was said to have exclaimed, in a fit of pique, "no, no, no" to the Delors Plan, and repeated the government's policy at Paris summit on 18–20 November.[33] She also repeated the "no, no, no" message in the House of Commons on her return to Westminster. Howe had told Brian Walden (a former Labour MP) on ITV's Weekend World, that the "government did not oppose the principle of a single currency", which was factually inaccurate.

Howe tendered his resignation in a famous moment on 1 November. Sometimes mocked as "Mogadon man" – Mogadon being a well-known sleeping medication – Howe delivered a blow to Thatcher's government in full view of Prime Minister's Questions and a packed House of Commons on 13 November. Howe later contended that the Community Charge was incompetently implemented, but it was the direction of European policy rather than domestic rioting that tipped the balance. His dispute with Thatcher was over matters of substance more than ones of style; he advocated a move back towards a more centrist position on constitutional and administrative issues, such as taxation and European integration. Howe represented a kind of moderate whiggery in the party, being educated, lawyerly, and diligent; while direct, he was conciliatory and collegial in style.[6]

Howe wrote a cautiously worded letter of resignation in which he criticised the Prime Minister's overall handling of UK relations with the European Community. After largely successful attempts by 10 Downing Street to claim that there were differences only of style, rather than substance, in Howe's disagreement with Thatcher on Europe, Howe chose to send a powerful message of dissent. In his resignation speech in the Commons on 13 November 1990, he attacked Thatcher for running increasingly serious risks for the future of the country and criticised her for undermining the policies on EMU proposed by her own chancellor and governor of the Bank of England.[34]

He offered a striking cricket simile for British negotiations on EMU in Europe:

It is rather like sending your opening batsmen to the crease, only for them to find, as the first balls are being bowled, that their bats have been broken before the game by the team captain.

He ended his speech with an appeal to cabinet colleagues:

The time has come for others to consider their own response to the tragic conflict of loyalties, with which I myself have wrestled for perhaps too long.[35]

A few days later, Cledwyn Hughes, the Labour leader in the Lords remarked with thinly-disguised pleasure,

I much regretted the departure of Sir Geoffrey Howe from his office and from the Government. Sir Geoffrey was an outstanding member of the Prime Minister's Administration since 1979 and his decision to leave reveals a fatal flaw in the management of our affairs.[36]

Although Howe wrote subsequently in his memoir Conflict of Loyalty that his intention was only to constrain any shift in European policy by the Cabinet under the existing prime minister, his dramatic speech is widely seen as the key catalyst for the leadership challenge mounted by Michael Heseltine a few days later.[35] Although Thatcher won most votes in the leadership election, she did not win by a large enough margin to win outright and subsequently withdrew from the contest on 22 November.[37] Five days later, Chancellor of the Exchequer John Major was elected party leader and thus became prime minister.[37] The change proved to be a positive one for the Tories, who had trailed Labour in most opinion polls by a double-digit margin throughout 1990 but soon returned to the top of the polls and won the general election in April 1992.[37]