Downing Street Years - Margaret Thatcher [153]
I appointed John Nott to Defence in January 1981 with the remit of getting better value for money from the huge sums spent on defence. In February John, Peter Carrington and I had an initial discussion about what would be our 1981 Defence Review. John had already concluded that the defence budget was hopelessly overextended both in the short and long term. The real cost of ever more sophisticated weapons was remorselessly increasing the pressure. More sales of defence equipment could help a little — particularly if we were able to produce equipment more suited to the needs of potential overseas customers. However, defence orders were running way ahead of budget and would have to be cut back if we were to keep within any kind of financial discipline. Some fundamental strategic issues also had to be faced. There was very little scope for reducing our commitment to West Germany. A policy of forward defence was crucial to the alliance’s strategy: moreover the political implications of cuts here for NATO as a whole could be very serious. Nor could savings be found in home defence: indeed the effort here would have to be increased, for example by strengthening the Territorial Army. There was no room for savings on the RAF: on the contrary, additional expenditure would probably be required. This left the navy. The navy needed more submarines and more minesweepers. But it is extremely expensive to keep up a large surface fleet and so that was plainly the area to look for cuts. None of us had any illusions about the sensitivities involved in the approach John proposed, but it was difficult to fault his analysis.
In early May I had another discussion with John about the options emerging clearly from his review. He believed that his proposals would provide the basis for a far more effective defence force for the needs of the future. But it was already clear that opposition within the armed forces and in the Conservative Party would be strong. I would have to see the Defence Chiefs of Staff to discuss with them their reactions to what was proposed. Moreover, many marginal seats would be involved, especially in dockyard closures. We would have to make every effort to explain our priorities both in the country and to our NATO allies, particularly the Americans.
What I had not expected was that the most public opposition would come from a Defence minister. On Friday 15 May Keith Speed, the Navy minister, made a speech which effectively disowned the whole strategy of the review. John Nott did not want him to resign at once and suggested that he should be moved to another department. I said that there was no question of this: if he was going to be disloyal to the Government in one department, he would in another. I saw him very late on the night of Monday 18 May and told him he must go.
In early June I met the Chiefs of the Defence Staff, at their request, with John and Peter Carrington. The press had been full of stories about my ‘fury’ at their lobbying against the review. But in fact I had found the behaviour of the Chiefs of Staff throughout impeccable, and I said so. No one at the meeting openly contested that the NATO central front was bound to be the decisive arena. Scenarios of conflict in the Third World might be more likely: but only on the central front could the war be lost in an afternoon. It was argued that we should again press for a full-scale NATO