Thatcher was unable to avoid giving the impression that she imagined Britishness to be an extension of Englishness, an assumption unlikely to appeal to Celtic sensitivities. Few could have been
surprised that she demonstrated little empathy for the Irish nationalist outlook; and when the Cabinet secretary, Sir Robert Armstrong, mused in her hearing that in the long term a united Ireland
was probably inevitable, she shot back: ‘Never! Never!’
13
Yet she showed little understanding of unionist attitudes either, or rapport
with their spokesmen (and men they all were). This was made manifest when, on 15 November 1985, she signed the Anglo-Irish Agreement, which affirmed that the Irish Republic was entitled to be
consulted on policy within Northern Ireland, through the establishment of a joint committee with a permanent secretariat based on the outskirts of Belfast, and through regular meetings of an
Anglo-Irish Intergovernmental Conference attended by British and Irish ministers. Counter-terrorism and ‘the development of economic, social and cultural cooperation’ were to be
included in the discussions, though the nature and extent of the consultation remained vague.
While the government in Dublin kept the nationalist SDLP briefed on the
negotiations leading up to the Anglo-Irish Agreement, London refused to involve the unionist politicians, whose opposition could be taken for granted and who duly reacted with outrage at being
excluded from discussions about the administration of their own land. All fifteen unionist MPs resigned their seats in order to force by-elections to demonstrate that what they termed the
‘diktat’ was being imposed against the democratic will. Ian Paisley thundered indignantly before a 100,000-strong crowd outside Belfast City Hall: ‘Where do the terrorists return
to for sanctuary? To the Irish Republic! And yet Mrs Thatcher tells us that that Republic must have some say in our province. We say never! Never! Never!
Never!
’
In fact it was partly the Anglo-Irish Agreement’s intention to improve cross-border security and to remove the virtual impunity with which those suspected of terrorist activity remained at
liberty in the Irish Republic. In this respect, it proved a failure, especially after the more assertively nationalist Charles Haughey returned to power in Dublin in March 1987. There was no
diminution in the ferocity of the Provisional IRA’s activities, with republicans killing forty-two people in 1985, sixty-nine in 1987 and sixty-two in 1988.
14
It was not cooperation with Dublin but the vigilance of French customs officials that uncovered a major supply route to the IRA when, in October 1987, officers inspected a
rusty cargo ship and stumbled upon a consignment that included one thousand AK-47 assault rifles, one million rounds of ammunition, fifty surface-to-air missiles and two tonnes of Semtex plastic
explosive, sent from Libya. Under interrogation, the skipper revealed that he had already steered four previous shipments into the hands of the republican terrorists. Additionally, Colonel Gaddafi
had sent them $10 million in cash. Clearly, far from being appeased by the establishment of cross-border committees, the IRA was planning to escalate hostilities and was stockpiling an arsenal on a
scale sufficient for prosecuting a long war. Ten days later, their operatives detonated a bomb during the Remembrance Sunday service in the County Fermanagh town of Enniskillen, killing eleven
civilians
EN45
and wounding more than sixty. By chance, an even larger bomb timed for the same moment failed to explode in the village of Tullyhommon,
where its victims would have included the wreath-laying children of the local Boy’s Brigade and Girls’ Brigade. There was widespread condemnation from both sides of the divide, but no
end to the terror. In March 1988, a lone loyalist gunman retaliated by firing at mourners at the funeral of IRA operatives who had been shot in Gibraltar by the SAS. Three days later, as one of his
three victims was being given an IRA funeral, the mourners
spotted two British soldiers in a car, which they surrounded. In full view of television cameras, the mob dragged
out the two corporals from their Volkswagen Passat and lynched them. Stripped, struck and battered beyond recognition, they were taken off and executed. The horrific scene produced one of the
defining images of the Troubles: the Catholic priest Fr Alec Reid on his knees trying to administer the last rites to one of the broken and bloodied soldiers. Reid later played a role in the peace
process – one that seemed a distant prospect amid the darkness of such late eighties atrocities.
Whitehall versus Town Hall
Four main factors conspired to sweep Margaret Thatcher out of Downing Street. The implementation of the poll tax and the signs of a weakening economy (in particular the housing
market) badly hit the Conservatives’ popularity, scaring Tory MPs into believing that unless the prime minister changed course they would all go down to a crushing defeat at the next general
election, which was due by the summer of 1992. The other two factors principally concerned her deteriorating relations with her Cabinet colleagues, many of whom were tiring of her brusqueness and
rudeness, and some of whom disagreed fundamentally on a major policy issue – her growing Euroscepticism. In the end, it was her falling out – personally and politically – with key
members of the Cabinet that directly triggered the process by which she was toppled, but it was the poll tax that began the work of weakening her base in the country and at Westminster.
In its conceptual boldness, the poll tax appealed to Thatcher, for she was naturally attracted to radical solutions that upended conventional thinking. Her error was that, having been persuaded
of the philosophical case for this new means of paying for local government, she proved unwilling to digest the mounting evidence that it could only become practical politics if so much Treasury
money was thrown at it that it ceased to fulfil its original objective of holding town hall budgets to closer account. Earlier in her premiership, Thatcher’s ability to marry idealism with
the caution of a practised tactician had helped make her a formidable political operator. By contrast, the stridency with which she threw her weight behind the poll tax blinded her to its
contradictions and shortcomings. It was as if experience was making her careless.
It might be supposed that, as the daughter of an alderman, admiration for local government would have been inbred in her. But because she believed her primary task was to restore order to the
state’s finances, she instead grew incandescent at what she took to be the refusal of local authorities (who were responsible for one quarter of all public sector spending) to show the same
determination to bring their budgets into balance. As part of Whitehall’s
austerity measures, central government’s grant to local government was slashed during
the early eighties, falling from 61 per cent of local government income in 1979/80 to 53 per cent in 1982/3.
15
Councils were expected to make
corresponding budget cuts rather than to carry on spending regardless, making up the revenue shortfall by taxing their residents more punitively. The second course, however, was the one generally
adopted, increasing the tax burden on local ratepayers by 36 per cent above inflation between 1979 and 1983. The failure of many – especially Labour-controlled – councils to do as they
were told forced the Department of the Environment (into whose remit local government fell) to chose between tolerating what it took to be gross irresponsibility as the price of local democracy or
centralizing power in Whitehall. In 1981, with Michael Heseltine as secretary of state, it chose the latter course. Local councils were provided with a new block-grant formula and subjected to
financial penalties if they then proceeded to spend more than Whitehall deemed appropriate for their circumstances.
The natural response to this was to point out that if town and city halls opted to tax their residents more highly than the voters felt reasonable for the services that they received then the
councillors would face the consequences at the ballot box. That, after all, was the process by which central government was democratically held to account. However, in this respect central and
local government were not comparable. By paying direct taxes (like income tax) and indirect taxes (like VAT), almost all voters contributed to some extent to funding the Treasury. By contrast,
local government was funded on an entirely different basis, with only a minority of the electorate expected to shoulder the burden. Beyond the Treasury’s grant, local government raised
revenue through a tax on local businesses and a tax on householders called ‘the rates’. As a tax on owning a home, the rates (calculated by estimating the ‘rateable value’
of a property) promoted the interests of those who rented and penalized those who took out a mortgage – a disincentive to home ownership that ran counter to the Conservatives’ ambitions
for a ‘property-owning democracy’. It meant that out of an electorate of 40 million, only 18 million were ratepayers (though, in addition, many felt the consequences indirectly by being
married to or living with a ratepayer). Particularly in areas of low home-ownership, (usually Labour) councils could set large rate increases without seriously fearing the effects of the
ratepayers’ wrath at election time: Sheffield’s Labour group, for instance, was able to remain in power despite raising the rates by 41 per cent in 1980 and 37 per cent in
1981.
16
While nationally about half of the rates revenue came from the local business rate, in inner-city areas the number of homeowners was below
average, ensuring that businesses there were contributing as much as three quarters of the revenue raised by the council. The resulting
burden risked driving shops and
companies either out of business or out of the area, worsening unemployment in already deprived areas.
17
Although no lover of the rates, Thatcher came to power reluctant to initiate a fundamental overhaul of the system. In 1981, a green paper from the Department of the Environment examined three
alternatives – a sales tax, a local income tax and a poll tax – without endorsing any of them. There were clear arguments against replicating the same fiscal systems that existed at a
national level. A locally levied sales tax no longer appeared such an attractive option given the doubling of VAT, and might ultimately prove a breach of European law. Instituting a local income
tax on top of a national income tax was bureaucratically difficult, because Inland Revenue data was not aligned with the record of home addresses in the electoral register. It would have simplified
matters if, instead of running the same tax twice over, the Treasury were merely to increase the national income tax rate and to pass on the additional revenue to local authorities. But to do so
would separate totally town hall accountability from revenue-raising. In any case, the Conservatives were committed to reducing income tax, not augmenting it. This therefore left the untried
option, the poll tax, which – because everyone would have to pay it – would surely ensure maximum accountability for the leviers of the tax. As an idea, though, the green paper
struggled to take it seriously. In England’s history, ungraded poll taxes had only been tried twice before, in 1377 and 1380. Then, they had sparked the Peasants’ Revolt and had been
hastily abandoned.
EN46
A flat-rate tax on every adult, taking no account of the financial means of the payer, ran against the philosophical grain of
three hundred years of fiscal policy and, more to the point, seemed essentially unfair. The debate appeared settled when in 1983 the Department of the Environment issued a white paper defending the
retention of the rates, because ‘they are well understood, cheap to collect and very difficult to evade’.
18
Because of the unattractiveness of the alternatives, the rates might have survived without more than superficial tampering, but for two factors that caused a rethink. The first was the
provocation provided by those Labour-controlled councils that deliberately flouted Whitehall’s mechanisms for keeping their spending in check. The second was the panic spread by the Scottish
Conservative Party, whose determined advocacy of a replacement for the rates forced the matter back to the forefront of Cabinet discussions.
The penalties imposed on councils deemed to be overspending met with some success, but failed to rein in the most determined from continuing to
fund their budget deficits
through ever higher rate rises. To counter this, the Rates Act 1984 empowered Whitehall to set a legal ‘cap’ on rate rises. This remarkable infringement upon the autonomy of local
government took effect the following year with the capping of eighteen councils, sixteen of which were Labour-controlled. But they did not submit quietly. Emboldened by the example of Liverpool
city council, where the Trotskyite Militant Tendency held sway on the ruling Labour group, the sixteen councils – which included the Greater London Council, led by Ken Livingstone; Islington,
led by Margaret Hodge; Lambeth, led by Ted Knight; and Sheffield, led by David Blunkett – announced that if they were not to be free to determine the size of their own budgets then they would
set no rate at all. By deliberately abdicating their legal responsibilities in this way they would leave central government with little option but to step in and run local services directly, or see
the these inner cities descend into chaos.
Being illegal, the tactic was risky and pitched the councils against their party’s leadership since Kinnock, greatly alarmed by the destabilizing influence of the Militant Tendency, which
he described as ‘a maggot in the body of the party’, was as determined as Thatcher to see the hard left’s challenge basted. The result was bitter internal feuding among rival
Labour factions and the crumbling of resistance amid demonstrations, sit-ins and internecine denunciations. By the end of May 1985, only Camden, Lambeth and Liverpool were still refusing to set a
rate. Eventually, they set budgets well above the cap. Unable legally to meet its liabilities, and regarding looming bankruptcy as a valuable political manoeuvre, Liverpool city council dispatched
statutory ninety-day redundancy notices to its thirty-one thousand staff, hand-delivered by shop stewards conveyed in thirty hired taxis. The tactic was designed to raise the stakes and to mobilize
Liverpool for all-out civil disobedience against the government. Instead, it stirred Kinnock into action.