When he was Chancellor of the Exchequer, Nigel Lawson tried to avoid political engagements on Sundays. It was not surprising, therefore, that when he was invited to Chequers on Sunday 31st March 1985 to a seminar on alternatives to the rating system, he sent Peter Rees to represent the Treasury.
Lawson had been told that no decisions about the proposed poll tax would be taken at that seminar. Margaret Thatcher was becoming obsessive about the need to abolish rates; but Lawson believed that his clear-headed deputy was perfectly capable of representing his view that the whole poll tax idea was a nonsense. In fact the advocates of the poll tax carried the day at the seminar-with huge consequences.
If Lawson had bothered to go to Chequers that Sunday, his powerful debating skills might well have persuaded Thatcher that a broad-based banded property tax was an acceptable alternative to the rates. If she had adopted Lawson's alternative scheme for local taxation, she would not have been personally linked to the most unpopular tax this century, and things might have turned out very differently.
Lawson and Geoffrey Howe still presented their ultimatums about entry to the ERM and both men resigned later from the government. Without the personal damage inflicted on her by the poll tax, however, Thatcher comfortably defeated Michael Heseltine in the leadership election that followed Howe's exit.
Although Thatcher retained her popularity with the Conservative party, the voters had grown tired of her face and voice. Neil Kinnock's margin of victory in May 1992 seemed comfortable enough-even though it was not as big as the opinion polls had predicted.
In the first weeks after he entered No. 10, Prime Minister Kinnock was particularly anxious to parade his enthusiasm for the EU. "We must move our country to the heart of Europe," he proclaimed. Meanwhile his chancellor, John Smith, predicted that sterling would soon be the strongest currency in the EMS.
Immediately after her defeat, Thatcher resigned as leader of the Conservative party. Norman Tebbit was the right wing anti-European candidate while Michael Heseltine was the pro-Brussels candidate of the left. After some discussion among the Tory grandees, Tom King-rather than John Major-emerged as the candidate of the solid centre. It was acknowledged that Heseltine would be the best leader, but his decision to stand against Thatcher in 1990 meant that he was still hated by many of her friends. On the second ballot Tom King won by 160 votes to Heseltine's 120. "A reincarnation of Baldwin," the commentators chorused.
In retrospect, most commentators also agreed that it was the Labour party's victory conference that started the currency slide. Neil Kinnock's election manifesto had avoided specific commitments to increased expenditure but at the Blackpool conference several ministerial speeches hinted at large increases in public sector pay.
Within hours, sterling began to weaken. When parliament reassembled, the slide became a crash, as sterling was forced out of the ERM. In his autumn Budget John Smith introduced austerity measures to stop sterling's free fall. The increase in interest rates had been expected, as had the increase in the higher band of income tax from 40 per cent to 50 per cent. But there was uproar when the chancellor put VAT on fuel oil and added 30 pence to the price of a gallon of green petrol.
What broke the Labour party's collective back, however, was the announcement of a 12 month public sector pay freeze. Scores of new Labour MPs were not yet used to eating their words, while plenty of parliamentary veterans subconsciously preferred the comparative irresponsibility of opposition.
The Budget was defeated by ten votes, with 30 Labour MPs voting against their own chancellor. After 36 hours of constitutional dithering, Prime Minister Kinnock called an election. Ten days before Christmas the Conservatives won no fewer than 97 seats from Labour. Most commentators agreed that the whole debacle meant that Tom King's Conservative party was destined for at least 13 years in government.
