CNB George Coșbuc.

Grade 12 – The Making of Modern Britain, 1970-2018

The Fall of Thatcher and the Rise of Major

Margaret Thatcher’s Fall

Although Thatcher had won three general elections for the Conservative Party – in 1979, 1983 and
1987 respectively – and had overseen the transformation of the UK , by 1990 her political star was
on the wane. A number of problems came together to spell her political doom – not at the hands of
the British electorate, but at the hands of the parliamentary Conservative Party. In the first place,
there was the problem of the economy. Under Chancellor of the Exchequer Nigel Lawson,
monetarism had been abandoned, the financial services industry had been deregulated, taxes had
been cut and the West German mark was shadowed. These policies created the so-called ‘Lawson
Boom’, the benefits of which were high levels of economic growth and a dramatic fall in
unemployment. However, the boom also created a balance of payments deficit, stoked inflation and
led to an increase in interest rates. These did not bode well for the Conservative Party – which
always liked to contrast its economic competence with the incompetence of the Labour Party.

Secondly, there was the community charge, though better known as the poll tax. The tax was not
only unpopular, but it had led to a campaign of civil disobedience that drained support for the
Conservatives. Although Thatcher was advised to drop the tax, she pressed on. And after the poll tax
riots in March 1990, support for the government continued decline.

Thirdly, by 1990 the Labour Party was again a serious contender for government. Under the
leadership of Neil Kinnock (born: 1942) and his Shadow Chancellor John Smith (1938-94) Labour had
modernised its organisation, expelled far-left extremists and developed more moderate policies,
above all with regard to the economy. The combination of Conservative turmoil and Labour
moderation meant that by 1990 Kinnock’s party was leading in the opinion polls.

This leads us to a fourth problem – elections. Politics is about power – and power means winning
elections. By 1990 many Conservative MPs were worried that the party could lose the next general
election, which had to be held by early summer 1992 at the latest. The re-emergence of the Labour
Party as a credible alternative government was worrying enough, but for many Conservative MPs a
bigger local threat was posed by the Liberal Democrats,1 now led by Paddy Ashdown (born: 1941),
an energetic former officer and diplomat.2 These jitters were exacerbated by the results of the
Eastbourne by-election in October 1990. The sitting MP, Ian Gow, had been murdered by the IRA.
Given the circumstances of Gow’s death and the fact that he had a comfortable majority at the 1987
general election, the Conservatives were expected to win. However, much to everyone’s surprise,
the Liberal Democrats won the seat. By-election results are rarely replicated in general elections, not
least because electors often feel free to cast a protest vote. But this makes by-elections barometers

1
The Liberal Democrats (Lib Dems) was formed in 1988 following a merger of the Liberal Party and the Social Democratic
Party. Between 1981 and 1988 the two parties had cooperated as the SDP-Liberal Alliance. Following the 1988 merger the
party was initially known as the Social and Liberal Democrats, though this was often shortened to The Democrats. Its
current name was adoped in 1989.
2
Ashdown is an interesting figure: he was born in New Delhi before his family moved to Northern Ireland in 1945 – hence
the nickname ‘Paddy’, a derogatory term for an Irishman. He joined the Royal Marines in 1959, eventually joining the elite
Special Boat Squadron. While based in Hong Kong he learnt Chinese. On leaving the Royal Marines in 1972 he officially
became a diplomat, though in reality he was a member of the Secret Intelligence Service – often referred to as MI6, the
branch of the secret services that also employed James Bond! In 1976 he left the diplomatic service to seek election as a
Liberal MP, which he finally achieved in 1983. Given Ashdown’s CV, he was portrayed in the press as an action man.
CNB George Coșbuc. Grade 12 – The Making of Modern Britain, 1970-2018

of public feeling – and the Eastbourne by-election signalled deep dissatisfaction with Thatcher’s
government, intensifying the fear among Conservative backbenchers that they could fall victim to
the anti-Thatcher mood in the next general election.

Finally, there were deep divisions within the Conservative Party itself over the direction of the
economy, over the poll tax and over Europe. Things came to a head when the Deputy Prime
Minister, Geoffrey Howe, resigned on 1 November 1990. Howe’s principal objection was Thatcher’s
attitude to Europe, above all her position on European Exchange Rate Mechanism (ERM). On 13
November Howe gave his resignation speech to a packed House of Commons in which he delivered a
devastating critique of Thatcher’s leadership style. This was the moment Michael Heseltine had been
waiting for since his own resignation from the government in 1986. He now triggered a leadership
contest in the Conservative Party. Thatcher actually ‘won’ the ballot by 204 votes to Heseltine’s 152.
However, Conservative Party rules required a supermajority – that is, the winner had to have a
margin of victory over the runner-up of at least 15 per cent of the total parliamentary party. In 1990,
this meant that Thatcher needed to win by 56 votes, but she only had a majority of 52. The rules
therefore required a second ballot, in which new candidates could enter the race. Intially Thatcher
indicated her intention to stand. But after consulting her cabinet colleagues, she decided to resign as
Conservative Party leader and therefore as prime minister.

John Major Becomes Prime Minister

With Thatcher gone, two new candidates entered the leadership race to oppose Heseltine: Douglas
Hurd, the Foreign Secretary (born: 1930) and John Major, the Chancellor of the Exchequer (born:
1943). In the second ballot, held on 27 November, Major won the most votes, but not enough to be
elected leader. However, Hurd and Heseltine quickly concluded that they could not win, so
withdrew. The new leader of the Conservative Party and therefore British prime minister was John
Major.

Most Thatcherites saw Major as ‘one of us’ – and, indeed, Thatcher favoured Major’s election. Yet
while Major was committed to the free market, he was not a radical Thatcherite – he was a much
more consensual politician. And his first instinct was to try to heal the deep divisions within the
Conservative Party, between those who felt that Thatcher had been ‘stabbed in the back’ and the
one-nation Conservatives who had rallied behind Heseltine and Hurd. His government therefore
sought to continue aspects of Thatcher’s policies, such as privatisation and participation in the First
Gulf War;3 but at the same time Major argued for a more conciliatory approach to European policy.
Domestically, he initiated consultations on the poll tax, which eventually led to its being abandoned
and replaced by a new local property tax – the council tax – in November 1991.

The 1992 General Election

Given the Conservatives’ unpopularity in the opinion polls, Major decided against a general election
until the very last minute, namely the spring of 1992. The Conservatives entered the campaign
lagging badly in the polls: they were on 29 per cent, Neil Kinnock’s Labour Party was on 41 per cent

3
The First Gulf War (August 1990-February 1991) was caused by Iraq’s invasion and occupation of Kuwait in August 1990.
An international coalition, led by the United States, launched a counter-offensive, expelled Iraqi forces and therefore
liberated Kuwait.
CNB George Coșbuc. Grade 12 – The Making of Modern Britain, 1970-2018

and Paddy Ashdown’s Liberal Democrats were on 15 per cent. Most commentators reckoned that a
Labour victory was the most likely outcome. Indeed, on the eve of the election, Labour held a rally of
party supporters in Sheffield in which Kinnock’s rhetoric came across as triumphalist. Whether the
infamous Sheffield rally swayed many voters is open to debate, though it may have reinforced pre-
existing doubts among some electors. And many voters were certainly still suspicious of the Labour
Party, associating it with the economic crises and industrial strife of the 1970s and the extremism of
the early 1980s. Major also had a good campaign. He had a good personal story: he was from a
working-class background in south London, had left school at 16 and had worked his way up to
become an executive in the banking industry. Moreover, during the campaign he literally got on his
soapbox – holding impromptu speeches on the streets of towns and cities. When it came to election
day, many more people were willing to give Major rather than Kinnock the benefit of the doubt.

The result was a victory for the Conservatives – they won 336 seats with 41.9 per cent of the vote
whereas Labour managed 271 seats with 34.4 per cent. The Liberals got 17.8 per cent of the vote,
but won only 20 seats. Overall, the Conservative majority shrank from 102 to only 21 – and that
would be gradually whittled away by defections and by-elections until Major was left with a majority
of just one by 1996.

Major’s Government, 1992-97

Major’s second government continued to pursue a free-market agenda – hence, the coal industry
and the railways were privatised. But he also sought to improve the quality of public services by
introducing the Citizens’ Charter – an attempt to improve standards in the public sector by
specifying the quality of service that citizens could expect from public bodies. This included the
publication of school test results – an attempt to make the quality of schools transparent in order to
encourage competition and therefore drive up standards.

However, while Major’s government was not devoid of achievements, his administration would
come to be defined by a narrative of crisis and division. The most important of these was the
economy. Thatcher may well have transformed the British economy, but it was not in rude health
when she bequeathed it to Major in 1990 – manufacturing output was in decline, interest rates were
high, unemployment was again rising and there was a slump in house prices. The decline in house
prices was particularly worrying for the Conservative Party as it trapped many homeowners – the
core of the Conservative vote – in ‘negative equity’, that is, the value of the property was less than
the value of the mortgage.

In order to provide some monetary discipline to the British economy, above all to control inflation,
the UK had entered the European Exchange Rate Mechanism (ERM) in 1990. The ERM had been
established in 1979 to stabilise exchange rates between EEC member states, which essentially meant
shadowing the bloc’s strongest currency, the West German mark. In September 1992 the pound
came under pressure from foreign exchange speculators – given the weaknesses of the British
economy, they gambled on the pound’s devaluation. The Bank of England sought to preserve the
currency’s value by buying up pounds – which meant spending its own foreign currency reserves. At
the same time, the government sought to persuade foreign investors to buy pounds by increasing
interest rates on 16 September from 10 per cent to 12 per cent and finally to 15 per cent. When
these two tactics failed, the government announced that the UK was leaving the ERM, thus allowing
CNB George Coșbuc. Grade 12 – The Making of Modern Britain, 1970-2018

the markets to devalue the pound. This humiliating failure of government economic policy was
quickly dubbed ‘Black Wednesday’ by the press – and it would shape the narrative of government
economic incompetence for years to come. This narrative was shaped by the press, including those
newspapers usually supportive of the Conservative Party, and by the Labour leadership – above all
John Smith and later Tony Blair (born: 1953) – who now had an economic weapon with which to
beat the government.

And yet the narrative of economic incompetence belied the fact that ‘Black Wednesday’ actually
helped the economy recover. British exporters benefited from the devaluation of sterling, which, in
turn, helped to bring down unemployment. Moreover, the UK no longer had to maintain high
interest rates to defend the currency, which provided a further boon to businesses and to
homeowners. By the end of the parliament in 1997, most economic indicators were positive –
unemployment was down, productivity was up, consumer spending was rising, car ownership had
increased and house prices had recovered. And yet the electorate was reluctant to credit Major’s
government with this benign economic climate – the shadow of ‘Black Wednesday’ hung over the
government until its end.

‘Black Wednesday’, though, was not the only problem that confronted Major. The Conservative
Party was also bitterly divided over the question of Europe. Thatcher had supported the creation of
the single market, but by the late 1980s was openly hostile to the idea of ‘ever closer union’. Indeed,
after the fall of Communism, Thatcher eagerly embraced the EEC’s eastward expansion as a means
of weakening the Franco-German axis and the power of the European Commission in Brussels – in
other words, Thatcher favoured a wider and shallower Europe rather than a narrower and deeper
Europe.

By the time that Major became prime minister in 1990 Eurosceptics in the Conservative Party had
become a vocal minority. Their cause was given added impetus by the Maastricht Treaty in 1992.
Maastricht was negotiated to strengthen European institutions in the wake of the EEC’s eastward
expansion and the reunification of Germany – so the EEC now became the European Union; the
notion of European citizenship was accepted; a single European currency was to be created; and a
Social Chapter dealt with workers’ rights. Major proved to be a skilful negotiator – he gave the UK’s
backing to the Maastricht Treaty, but only on conditions that the UK secured a number of important
opt-outs, not least on the single currency and the Social Chapter. Most Conservatives MPs concluded
that Britain had the best of both worlds – inside the single market, but outside the drive for ever
closer union. But for the Eurosceptics in the party, Maastricht was like a red rag to a bull.

Given that Major commanded only a small parliamentary majority, ratifying the Masstricht Treaty
proved difficult. The Europsceptics waged parliamentary guerrilla warfare against their own
government – little wonder that Major referred to them as ‘the bastards’. In the end, Major had to
resort to a confidence motion on one vote – in other words, he dared the Eurosceptics to bring
down the government and trigger a general election.

Although the Maastricht Treaty was eventually ratified, the Eurosceptic cat was now out of the bag –
Eurosceptic MPs continued to cause trouble for Major inside parliament; in 1993 the Anti-Federalist
League was established, the forerunner of the United Kingdom Independence Party (Ukip); and in
CNB George Coșbuc. Grade 12 – The Making of Modern Britain, 1970-2018

1994 Sir James Goldsmith founded the Referendum Party with the straightforward aim of
demanding a referendum on the UK’s continuing membership of the EU.

‘Black Wednesday’ and arguments over Europe weakened Major’s government. But a number of
other problems also served to undermine public confidence in his administration. Major made the
mistake of trying to rally political support by adopting the slogan ‘back to basics’ – but this opened
up the government to ridicule as Conservative MPs were caught in one scandal after the next. Some
of these involved sex, with two cabinet ministers being forced to resign because of extramarital
affairs. But the Conservatives were also embroiled in corruption scandals – two leading
Conservatives were convicted and imprisoned for perjury, while some Conservative MPs were
accused of taking cash in order to ask parliamentary questions. These scandals undermined the
legitimacy of Major’s government, in part because stories appeared frequently in the press and in
satirical programmes, creating the impression that the government was mired in sleaze. At the same
time, the government often seemed incompetent. The worst scandal concerned BSE (bovine
spongiform encephalopathy) – more generally known as ‘mad cow disease.’ BSE had been identified
as a problem in the mid 1980s, but ministers insisted that it posed no risk to human health. One
minister even fed a beefburger to daughter on television to make the point. By 1996, however, it
was apparent that infected beef was a risk to human health – as a consequence, British beef was
banned in the EU and further afield. When all these scandals are taken together, they affected not
only the government, but also Major’s own personal standing – he came over as an inadequate and
weak leader of an increasingly divided, incompetent and dysfunctional party.

By 1995 there was widespread criticism both within the Conservative Party and the Conservative-
leaning press of Major’s leadership style. The accusation was that Major was too weak and
consensual – what was needed, it was argued, was a ‘strong leader’ to ‘save the party’. In the end,
Major decided to confront his critics head on. He resigned as leader of the Conservative Party, but
announced his intention to stand in the subsequent leadership election – his critics were told to ‘put
up or shut up’. John Redwood (born: 1951), a Thatcherite and Eurosceptic, rose to the challenge.
Major then did a deal with Michael Heseltine, offering him the position of deputy prime minister in
return for his support. This allowed Major to win the leadership election comfortably – by 218 votes
to 89. Yet even after this victory, Major was never truly in control of his party – and as such he led a
divided Conservative Party into the 1997 general election.

Questions
1. How do you explain Margaret Thatcher’s political demise?
2. How and why did the Conservatives win the 1992 general election?
3. What problems confronted Major’s government between 1992 and 1997? What were the
political consequences of these problems?