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spending reasons and in order to deal with the ‘Why Work?’ problem (namely, the disincentive to work created by the small disparity between in-work and out-of-work incomes), we had already agreed to tax short-term social benefits as soon as possible. In the interim we decided to reduce these benefits — unemployment, sickness, injury, maternity and invalidity benefits — by 5 per cent. The so-called earnings related supplement (payable with certain short-term benefits) would be reduced from January 1981, and abolished in January 1982. We also decided to introduce legislation to deal with the vexed question of supplementary benefit for strikers’ families. This was not only expensive to provide; it shifted the balance of power in industrial disputes against employers and responsible union leaders. In future, assessments would assume that £12 a week was provided either from the striker’s own resources, or from union strike pay. We finally agreed a number of disparate savings on housing, on expenditure by the Property Services Agency, and from a rise in prescription charges to £1.

When Geoffrey Howe delivered his second budget on 26 March 1980,* he was able to announce that we had found over £900 million in further savings in 1980–81 (though part of that was absorbed by an increase in the contingency reserve). Overall, at current prices this was over £5 billion less than Labour had planned to spend. In the circumstances, it was a formidable achievement, but also a fragile one. As the economy sank deeper into recession, there would be fresh demands, some of them difficult to resist, for higher public spending on programmes like social security and the loss-making nationalized industries. In a paper he wrote for me in June 1979, John Hoskyns had used a memorable phrase about governments ‘trying to pitch [their] tent in the middle of a landslide’. As we moved into the 1980–81 public expenditure round and the forecasts worsened, I could hear the canvas strain and the ground rumble.

IRISH TERRORIST OUTRAGES

The second half of 1979, though dominated by economic policy and by the intense round of diplomatic activity,* was also a time darkened by terrorism. Barely a fortnight after entering No. 10 I had delivered the address at the Memorial Service for Airey Neave.* Not long afterwards, IRA terrorists struck another blow which shocked people around the world.

I was at Chequers for the Bank Holiday Monday of 27 August when I learnt of the shocking murder of Lord Mountbatten and, that same day, of eighteen British soldiers. Lord Mountbatten was killed by an explosion on board his boat off the coast at Mullaghmore, County Sligo. Three other members of his party were killed and three injured.

In an even greater defiance of civilized custom, the murder of our soldiers was even more contemptible. Eighteen were killed and five injured in a double explosion triggered by remote controlled devices at Narrow Water, Warrenpoint, near Newry, close to the border with the Republic. The IRA had exploded the first bomb and then waited for those who came by helicopter to rescue their comrades before detonating the second. Among those murdered by the second bomb was the Commanding Officer of the Queen’s Own Highlanders.

Words are always inadequate to condemn this kind of outrage: I decided immediately that I must go to Northern Ireland to show the army, police and civilians that I understood the scale of the tragedy and to demonstrate our determination to resist terrorism. Having returned to London from Chequers, I stayed there on Tuesday to allow those involved to deal with the immediate aftermath while I held two meetings with colleagues to discuss the security requirements of the province. That evening I wrote personally to the families of the soldiers who had died; such letters are not easy to write. There were, alas, to be many more of them during my time in office.

I flew to Ulster on Wednesday morning. For security reasons, the visit was given no prior publicity. I went first to the Musgrave Park Hospital in Belfast and talked to the injured