Downing Street Years - Margaret Thatcher [193]
When I was questioned later about the declaration in the House of Commons, I replied: ‘I must make it quite clear that I do not in any way believe in a federated Europe. Nor does that document. ‘Certainly it did not transfer powers to a centralized Europe in the way that the Maastricht Treaty was to do. But the high-flown language of the declaration has become familiar from later developments: the linguistic skeleton on which so much institutional flesh would grow was already visible.
THE ECONOMY
It sometimes happens in politics that relatively small matters, with no obvious connection between them, combine to create a political atmosphere in which the Government seems to do nothing right. I have suggested earlier some underlying reasons why such an atmosphere developed at the start of our second term. But there were other problems. There continued to be misunderstanding and resentment of the new system by which the retirement pension was uprated in line with inflation. Many of our best supporters were angry that proposals to reintroduce capital punishment were thrown out on a free vote by a Conservative-dominated House of Commons, some of whose members had undoubtedly dissembled their views (or worse) to those who had selected them. Also, shortly afterwards Members of Parliament decided to vote themselves a pay rise considerably greater than the Government had recommended, at a time when unemployment was rising and many people could expect little or no increase.
But this malaise would have had little importance had it not been for the economy. The underlying economy was sound: indeed, as we pressed ahead with further structural changes, especially privatization, it would steadily become sounder still. When I spoke in the House of Commons on 22 June 1983, introducing the Queen’ Speech, I could point to the lowest rate of inflation since 1968, to higher output and to record levels of productivity. But part of the trouble was that after an election a government’ past achievements are immediately discounted. As one of my advisers put it, paraphrasing La Rochefoucauld: ‘the only gratitude in politics is for favours still to be received.’ And we had been so lucky in choosing the date of the election (though it was not all luck) that expectations about the rate of future progress had risen too high. Inflation started to move up from the low point of 3.7 per cent in May and June to reach 5.3 per cent in December, though it would stay at that level or lower for the next twelve months. Unemployment also began to rise again, remaining above three million, and it seemed very difficult to predict when the higher economic growth which was now apparent would begin to bring the total down. Although the interest rate actually fell, mortgage rates rose to meet the extra demand for mortgages — in itself a sign of the progress we were making towards a property-owning democracy, but naturally unpopular with borrowers. All this led to accusations that the Government had ‘cooked the books’ on the economy before the election.
It was public spending which became the focus of this attack. Indeed, there had been tell-tale signs of trouble in the weeks before the election. In April, the first month of the new financial year, the PSBR was well above target and it soon became clear that the provisional outturn for the PSBR for 1982–3 – a figure we regularly published — would be £9.2 billion, £1.7 billion higher than the budget estimate. It was possible that lower than expected revenues were part of the problem. But there had been an earlier misjudgement about the extent to which cash limits would be underspent, and much of the problem arose from the action we took to correct this. The previous winter we had had such strong evidence that capital programmes were being underspent that we had taken positive action to encourage spending up to target. (In principle, it is right to spend up to planned levels, otherwise you pile up spending for