On 26 October, Lawson resigned, a decision long in the brewing. In the end, he had been undermined by Sir Alan Walters, Thatcher’s economic adviser, who questioned his judgement in an article for the Financial Times. Keeping sterling pegged to the fortunes of the Deutschmark had become Lawson’s obsession, and even rising inflation could not divert him. It was a rare lapse: he had been responsible for lifting almost a million of the poorest out of the tax system, for sowing and irrigating growth and investment on every side. His was a remarkable talent and the prime minister could little afford the loss.
When John Major was summoned to Number Ten, in order to replace Lawson as chancellor, he found the nation’s unbendable leader ‘close to tears’. She had never been so outfaced, and now a frightened little girl broke through the carapace. A more superstitious woman might have begun to study the signs: 1990 was full of disquieting omens. By-election results appeared to predict a Conservative defeat. On 30 July, Ian Gow, Thatcher’s former parliamentary private secretary, was killed by the IRA. Resignations, defections and conspiracies seemed to loom in the shadows. A month after Lawson’s resignation in October 1989, the unthinkable happened in the form of a challenge. Sir Anthony Meyer bid for the leadership. Thatcher received almost ten times as many votes, but the tremors of dissent were unmistakable. The next of many resignations came about largely by ill luck and unthinking flippancy, when in July 1990 Nicholas Ridley resigned over a faux pas in which he had compared European Monetary Union with the Third Reich. As with so many such blunders, much depended on context.
On 5 October 1990, Major and Thatcher announced Britain’s entry to the ERM. Major beamed, while Thatcher slipped on her patient smile. She had wanted inflation brought down first, while Major had argued that ERM membership would achieve that. Inflation was then running at 10.9 per cent. Nonetheless, euphoria flowered in the press and in the City. It would take only a few years for the flower to shrivel. The Rome Summit was held at the end of October. It was ragged and unsatisfactory, and Thatcher was not impressed by the Italian chair. At last, Thatcher openly opposed stage two of the Delors Report. She had envisaged the ‘ecu’, as it was still termed, as a currency that would run in tandem with national currencies, but now it seemed as if it would be imposed. Whatever lay over the hill could not be seen, but Thatcher saw smoke rising, and that was enough for her.
When she returned to the House, Thatcher found it in savage and mocking revolt. Baited by both Kinnock and Paddy Ashdown, she turned and bit. ‘Mr Delors said at a press conference the other day that he wanted the European Parliament to be the democratic body of the Community, he wanted the Commission to be the executive and he wanted the Council of Ministers to be the senate. No, no, no.’ It was intoned with utter finality. Howe, for one, was appalled. If it was hard for many to see how her position differed materially from his, it was clear enough to him. In her Bruges speech, Thatcher had spoken approvingly of the use of the ecu. Now, an unfathomably deep crevasse had opened.
On 1 November, having been effectively demoted and disparaged, Howe resigned as deputy prime minister and lord president of the council. He asked to speak in the House to explain his decision, and in soft tones began to dismantle his colleague and former ally, the prime minister. His first remarks were suffused with quiet irony. ‘If some of my former colleagues are to be believed, I must be the first minister in history who has resigned because he was in full agreement with government policy.’ Thatcher sat still, head cocked, an indulgent smile on her lips. ‘Not one of our economic achievements,’ he continued, ‘would have been possible without the courage and leadership of my right hon. Friend.’ Thatcher’s smile did not alter. He invoked too their former collaboration in Europe, ‘from Fontainebleau to the Single European Act’. Then, with the preliminary courtesies performed, he began the attack. ‘There was, or should have been, nothing novel about joining the ERM.’ He told the House that he and Lawson had consistently urged Mrs Thatcher to join the ERM, before assuring it that he did not ‘regard the Delors Report as some kind of sacred text’. He invoked Macmillan, who in 1962 had urged the nation to take its place at the heart of the EEC. Howe protested that we should not ‘retreat into a ghetto of sentimentality about our past and so diminish our own control over our own destiny in the future …’ He went on to say that ‘had we been ready, in the much too simple phrase, to surrender some sovereignty at a much earlier stage … we should have had more, not less influence, over the Europe we have today. We should never forget the lesson of that isolation.’ A choice between a Europe of entirely independent states and a federal one was ‘a false antithesis, a bogus dilemma … as if there were no middle way. We commit,’ he urged, ‘a serious error if we think always in terms of surrendering sovereignty.’ He contrasted Churchill’s stance with ‘the nightmare image sometimes conjured up by my right hon. Friend … who seems sometimes to look out upon a continent … scheming, in her words, to “extinguish democracy”, to “dissolve our national identities” and to lead us “through the back-door into a federal Europe”. What kind of vision is that, Mr Speaker … for our young people?
‘None of us wants the imposition of a single currency,’ he assured the House. ‘The risk is not imposition but isolation … with Britain once again scrambling to join the club later, after the rules have been set … Asked whether we would veto any arrangement that jeopardized the pound sterling, my Right Honourable Friend replied simply, “Yes.” The question of the ecu would be addressed “only by future generations. Those future generations are with us today.”’ Visibly warming to his theme, Howe decided that a cricketing metaphor might be apt. The chancellor and the governor of the Bank of England, he suggested, had been placed in the position of ‘opening batsmen … only for them to find, the moment the first balls are bowled, that their bats have been broken before the game by the team captain’.
The House laughed loud and long. Nigel Lawson, in the row behind Howe, permitted himself the briefest flash of a grin. He then quoted a letter to him from a British businessman living and working on the Continent, trading in Brussels and elsewhere, who wrote that ‘people throughout Europe see our Prime Minister’s finger wagging and hear her passionate, “No, No, No”, much more clearly than the content of the carefully worded formal texts.’ A little later, Howe’s reserve broke. ‘Cabinet government is all about trying to persuade one another from within … the task has become futile.’ If there had been any doubt as to Howe’s real intent, it was dissolved by his final words: ‘The time has come for others to consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long.’ The House heard the simple words of a man honestly aggrieved. It was a reliably devastating device.
The next day, Michael Heseltine formally challenged the prime minister for the leadership. He had had a mixed career under Thatcher’s rule. While he had done much to invigorate Liverpool and the Docklands area, and had served well as the government’s ‘ambassador’ in its dealings with environmental groups, he was perhaps too flamboyant and ambitious to garner very much affection in the House. He was also a passionate Europhile at a time when such a loyalty seemed suspect. Less than five years previously, he had resigned from the cabinet over the so-called ‘Westland affair’, a controversy so involved and intricate that Thatcher later reflected, ‘I can’t even remember what the actual Westland thing was about now.’ Few could.
At root, it was the tale of an ailing helicopter company that some felt needed to be rescued. Two bids for Westland had been made, one American and one European. Michael Heseltine, as defence secretary, had strongly supported the European bid. Given that it was the less ‘capitalist’ of the alternatives, offering far more bureaucracy than its rival, it was never likely to have Thatcher’s support. In an effort to contain him, Thatcher placed Heseltine under something like a gagging order, but it proved quite ineffective. On 9 January, he demanded in cabinet that all the options be discussed, and when Thatcher refused, he swept out and announced to the press outside that he had resigned. As he gathered his papers, she said simply, ‘I’m sorry.’ Whether or not she was sincere, the sentiment was widely shared. Indeed, ‘Tarzan’, as Heseltine had become known, enjoyed far greater popularity than the prime minister herself. Moreover, he had not been idle in his five years on the back benches. He had toured constituency associations all over the country, sounding out support obliquely but unmistakably.