Downing Street Years - Margaret Thatcher [73]
This last point was still extremely contentious. Michael Edwardes told Geoffrey Howe and Keith Joseph that the BL Board would be willing to sell Land Rover and such other parts of the business as they could and close down the volume car business: but they were not willing to sell Land Rover if they were also required to go on trying to salvage the volume car business. He said that the Board’s position would be quite impossible if a public deadline were to be set for its sale.
This attitude, of course, put us in a very difficult position — as it was doubtless intended to do. It irritated one or two ministers to the point of turning them against the whole Plan. Moreover, it had not been possible for us to find the ‘middle way’ which I had sought and which would have involved progressive sale of the business without a total and immediate shut-down. But the political realities had to be faced. BL had to be supported. We agreed to accept BL’s Corporate Plan, involving the division of the company into four more or less independent businesses. We settled the contingencies which would lead to the Plan being abandoned. We set out the objectives for further collaboration with other companies. And — most painfully — we provided £990 million.
This was not, of course, the end of the story for BL, any more than it was for BSC. In due course, it would be shown that the changes in attitude and improvements in efficiency achieved in these years were permanent.* To that extent, the account of our policy in 1979–81 towards BL is one of success — at a cost. But the huge extra sums of public money that we were forced to provide came from the taxpayer or, through higher interest rates needed to finance extra borrowing, from other businesses. And every vociferous cheer for higher public spending was matched by a silent groan from those who had to pay for it.
* These were areas, typically around 500 acres in size, within which major tax incentives were made available to business — 100 per cent capital allowances for industrial and commercial buildings, complete relief from development land tax, exemption from local taxation, drastically simplified planning control and lighter regulation. The idea was Geoffrey’s own brainchild.
* Notes and coins are included in all the monetary measures. But since the great majority of transactions in the economy are not conducted in cash, but in transferring claims on the banking system (e.g., writing cheques), most measures also include some part of total bank deposits. Wider measures often include the deposits of other financial institutions such as building societies. £M3 comprises notes and coins in circulation with the public, together with all sterling deposits (including certificates of deposit) held by UK residents in both public and private sectors. The argument about which is the best measure continues, though a misplaced obsession with the exchange rate has since rather put such argument into the shade. There were two important points which were forgotten by many of those who criticized the MTFS on the basis of the changes we made. First, ‘monetarism’ is simply the view that inflation is a monetary phenomenon and that, therefore, the reduction in the rate of growth of the money stock is essential to achieving a permanent reduction in inflation. Second, there is a difference between the measurement and the control of the money supply. Our difficulty was to measure the money supply, which led to our seeking different or better measures to supplement £M3. We knew how to control the money supply, through interest rates, and did so: indeed Alan Walters was to argue persuasively that we had controlled it too much.
* See below, pp. 102–4, 107.
* The report was damning. SLADE