Original subtitles

Nigel Lawson's shock resignation for the chancellorship has plunged

the Prime Minister into the most serious political crisis

of her career.

It has also confronted her with a full-scale economic crisis.

Can she resolve her political and economic problems?

The Prime Minister is with me here today.

Prime Minister, many people, including many of your own

supporters, blame you for the resignation of Nigel Lawson from the

chancellorship, and he blames you.

This is what he wrote. "Dear Margaret,

"the successful conduct of economic policy is possible only if there is,

"and is seen to be, full agreement between the Prime Minister

"and the Chancellor of the Exchequer.

"Recent events have confirmed that this essential requirement

"cannot be satisfied so long as Alan Walters remains

"your personal economic adviser.

"I have, therefore, regretfully concluded that it is in the best

"interests of the government for me to resign my office

"without further ado."

Now, Prime Minister, how you respond to this claim of blame

may be of crucial significance for you personally

and for your government. So I put it to you -

are you to blame for Nigel Lawson's resignation?

Well, we have done very well together for the last six years,

and very well for Britain.

And I think the results are clear to see.

To me, the Chancellor's position was unassailable.

I always supported him and said quite clearly, advisers

are there to advise, ministers are there to decide.

And that was the way we did business,

and we did it very successfully.

I tried very hard to dissuade the Chancellor from going,

but he had made up his mind, and in the end I had to accept

his resignation and appoint someone else.

Let's look, though, at what he says, you see?

He is making the claim here that successful conduct of economic

policy is possible only if there is seen to be full agreement

between the Prime Minister and the Chancellor of the Exchequer.

Now, he's right about that, isn't he? Yes.

And I am right about the successful six years he's had in the Treasury.

Very successful.

The economy of Britain has made great strides

under his chancellorship, and we have worked together.

Those are the facts, and no-one can get around them.

It has been extremely successful.

But you're not claiming, Prime Minister...

It may or may not have been extremely successful, but you're not

claiming that there WAS seen to be full agreement between yourself

and the Chancellor, are you?

I am claiming that I fully backed and supported the Chancellor.

Of course we discuss things.

We discuss things in Cabinet.

We discuss things in the economic Committee.

We discuss things with many advisers.

There's not only one adviser.

There are many advisers in the Treasury.

We have many advisers.

And we hammered out a policy.

And on that policy, we were totally agreed.

Totally. And it was implemented.

And it was implemented very successfully.

And the success matters.

That may or it may not.

I mean, many Conservatives would agree with you.

I suppose the opposition wouldn't.

That may or may not be true, but I must press

you again, Prime Minister.

Plainly, he, Lawson, didn't think that you were seen to agree.

Else he wouldn't have resigned.

He did resign.

He heard me say many, many times,

faced with this question, "I fully support my Chancellor."

And of course you do.

We could not have been successful if I hadn't.

And I did. And we worked out many, many things together.

Advisers advise.

Ministers decide.

Nigel was decisive.

I was decisive.

The result was success.

OK. But it's pretty obvious from the letter

what it is he objects to.

He objects to the position of, as he then held,

of Professor Alan Walters, and he says, "This essential

"requirement cannot be satisfied so long as Alan Walters

"remains your personal economic adviser."

Now, he must have made that clear to you.

What did you say to that?

Nigel's position, as I said to him, is unassailable.

He was a very strong... It isn't now, is it?

He's gone. That is his choice.

I tried to persuade him to stay.

I couldn't believe that he would go when he's been such a strong

Chancellor, and his position was unassailable.

And he knows and I know that the adviser's role is to put his view.

The minister's role is to take a lot of advice, to discuss things,

to analyse them, to work them out, to consider the political problems

which arise and then to decide.

We did just that.

Somehow, Nigel had made up his mind that he was going.

I spent a long time just talking, just the two of us together, trying

to dissuade him, but his mind was made up.

I was sad, but then once he had decided to go,

then one had to accept it and set about refashioning one's Cabinet.

But, Prime Minister, it's fairly clear, isn't it,

what was getting up Nigel's nose?

It wasn't that you had an economic adviser who very quietly

and silently whispered things to you in the still watches

of the night.

He felt that you weren't seen to be united because

Professor Alan Walters, a very able man, was making absolutely clear to

anybody who cared to listen to him fundamental disagreements

that he had with the Chancellor.

And Nigel feared that people would therefore assume

that these were your views.

And that's what he means when he says you weren't seen

to be united.

Now, surely he put that point to you.

And what did you say to that?

Alan Walters is part-time as my adviser.

He's only just recently returned.

The article to which you're referring was written

over a year ago.

It is just not possible that this small particular thing

could result in this particular resignation.

You know full well that the press have been causing trouble

for a very long time.

No matter how much, no matter how firmly I have supported Nigel,

no matter how firmly we have been saying the same things,

that, I'm afraid, was a fact of life, that was what they were doing.

Ah... It's not for me to say how they saw it.

It is for me to say that Nigel has advisers,

that I had Alan Walters part-time, there only a few days a month,

that Nigel and I and others hammered out the economic policy.

We did so successfully.

Neither of us is manipulated in any way by advisers.

Neither of us thinks that we knew everything, that we didn't

have to take advice.

We did. We listened to it.

We decided. We succeeded.

And I am very sad that he's gone.

But he has.

And now we must turn to the future.

The same policies will continue because they are sound.

And we shall carry on in precisely the same way.

Well, I want to ask you about that, of course, Prime Minister.

Let's come back to Professor Alan Walters.

You see, it isn't just this article that he wrote 18 months ago

and that got recent publicity.

It's very well known,

and you must know it, that Professor Alan Walters

has been going round the city.

He's been attending lunches.

He's been giving journalists his views on matters,

and he's been expressing disagreements with Lawson.

Lawson wouldn't just have objected about an ancient article.

What he objected is the whole basis of Alan Walters' activities.

Now, isn't that the case?

Many people in departments at the top of civil service

departments go out and have lunches in the city.

They have to keep in contact, particularly

if they're in economic departments.

That is not unknown at all.

But, Brian, I'm not going to get involved in this tittle tattle.

I've had a very competent adviser.

Nigel also had very competent advisers.

They worked together, Alan and his advisers.

I'm not going to get involved in this.

There are far bigger things to consider.

The economy has been run extremely successfully.

We've created more wealth than ever before and spread it more widely

than ever before.

A standard of living people have never had before,

and a reputation of Britain overseas that is second to none.

These are the achievements, and I'm not concerned

with the tittle tattle.

I'm concerned with getting on with the job,

and that I shall do.

Well, Prime Minister, I couldn't agree with you more about

tittle tattle.

And as you well know, I have nothing to do with it myself.

But this is not tittle tattle.

For instance, look at what Sam Brittan said

in the Financial Times yesterday.

Their most distinguished correspondent and assistant editor.

"There is one thing on which I will stake my reputation.

"This is that the constant flow of rumours and speculation

"about Thatcher's and...Thatcher and Walters was undermining

"the pound, the British economy and the prospects of job increases."

Now, that's what Lawson objected to.

Why didn't you, when he asked you to, sack Alan Walters?

I am not responsible for rumours.

I see many things in the press that are totally and utterly false.

Totally and utterly false.

They are speculation.

I'm not responsible for those.

I am responsible for the conduct of business.

Nigel and I worked very well together, with great success.

Now, let's consider the policy.

All right. Well, let's consider Lawson.

I mean, I have to take it the way you have put it, Prime Minister,

that you blame Nigel for the resignation, not yourself.

It is not a question of blaming anyone.

Nigel was a very successful, brilliantly successful Chancellor

for six years.

Of course, I knew that one day he would go,

he's an extremely able person and I knew that one day

we would lose him.

I didn't expect it to happen this way or as soon,

as I've said to you.

To me, Nigel's position was unassailable,

and I supported him wholeheartedly.

He decided to go.

Now, that is a fact.

And I have appointed a new Chancellor, whose ambition

it was to be Chancellor,

a new Home Secretary, whose ambition it was to be Home Secretary,

a new Foreign Secretary, whose ambition

it was to be Foreign Secretary.

Now let's get on with the future.

We've had a very successful past.

That chapter has come to an end.

I'm sorry it did, but it is the future now that matters.

It is, but it is also, of course, your political

Prime Minister...your political position, Prime Minister.

And I have to question you on that, and you know that I do.

Yes, do. Go question. Go ahead.

Of course. Now, so let me ask you again.

Why did Nigel resign?

You say he knew that he was unassailable.

He knew that you loved him and that everything

he did was marvellous.

But he resigned.

Now, people are going to want to know why.

I think that is a question you must put to him and not to me.

I tried to dissuade him.

I saw him three times on Thursday.

First, I really didn't believe that he had any intention of going.

And then just before Questions, he told me

that that he would be going.

And I said, "Look, I must go to Questions and deal with the House

"and the statement. I will see you immediately

"I return and perhaps we can talk it through."

And so we talked it through, just the two of us.

And it was quite clear that he had made up his mind,

and there was nothing I could do to dissuade him.

Quite clear.

It was that was just a fact of life, and I had to accept it.

More you must ask of him.

He went with great dignity...

He's coming on next week, so I'll have the chance.

He's been very generous in the remarks he's made

about John Major, and very supportive, and he will continue

to be supportive, as you would expect of him.

Well, you see, again, Prime Minister, obviously you saw Nigel

several times on that Thursday.

Four times, was it?

I saw him just before we...just before 9 o'clock.

I had seen him the previous day on our regular bilateral meeting.

Then, of course, we had Cabinet. Then I saw him.

He wanted to see me just before I went into Questions.

And then after Questions.

Though the long discussion was, of course, after Questions.

All right, Prime Minister, but I have to put it back to you.

And you know that I do, because everybody's going to ask

you about this again and again.

He was unassailable, you say. You were in agreement, you say.

Everything was going well, you say.

And he said to you, "Margaret, you have got to get rid

"of Alan Walters."

Why didn't you and keep your Chancellor?

Nigel had determined to go.

I made it quite clear that advisers are there to give advice.

Ministers are there to decide.

You have asked me, Brian, the same question about five times,

and I have given you the same answer.

If you continue to ask that same question, I shall continue to give

you the same answer.

I am concerned now with future policy and with the conduct of it,

and with the future Chancellor of the Exchequer, and the conduct

of the Economic Policy Committee of the Cabinet, and the Cabinet,

and in the House of Commons.

I am answerable for that.

Nigel made his decision.

Reluctantly, I accepted it.

I want to come on to future policy, but I also want to clear this up,

which will not just go away.

A last question.

Do you deny that Nigel would have stayed

if you had sacked Professor Alan Walters?

I don't know.

You never even thought to ask him that?

That is not... I don't know.

Nigel had determined that he was going to put in his resignation.

I did everything possible to stop him.

I was not successful.

Now you're going on asking the same question.

But that's a terrible admission, Prime Minister.

I don't know. Of course... You don't know

you could have kept your Chancellor, possibly, if you had sacked

your part-time adviser?

I wanted to keep my Chancellor in any event,

because he was very good. His position was unassailable.

And let's face it, Brian, he was Chancellor.

He and I decided this is not a matter of advisers.

Nigel and I and the Economic Committee decided.

We answer to the House of Commons.

Now, that is the fact,

and that is the big fact of the matter.

And I am not going on with this. All right.

We, I think, have in some ways got fairly clearly...

I suppose I must ask you once more.

Just once more.

You say don't know whether you could have kept him

if Walters had gone.

Did he ask you to sack Walters?

I am not going to disclose the conversations

which the two of us had together. All right.

I admired Nigel very much.

I'm immensely grateful for his stewardship as Chancellor.

Nigel was Chancellor.

Nigel's position was unassailable.

Unassailable.

I can't make you say, Prime Minister,

what you don't want to say,

but of course, you are aware what people will assume

from this discussion, don't you?

That you could have kept the Chancellor

if you had sacked Walters.

I wanted to keep Nigel.

The position of the Chancellor is a very great one.

It does not depend upon advisers at all.

Mine doesn't depend upon advisers.

I make the decisions. Nigel make the decisions.

We discuss those together.

That is the important fact,

and I think people will see it as that.

Advisers, many of them, are there to advise, ministers to decide.

Nigel made his decision.

I had to accept it. All right.

Let's look at it from the other point of view now, Prime Minister.

This is not something that suddenly blew up.

It's been known in pretty well all circles,

and indeed, it's one of the reasons that there have been trouble

in the markets, that there have been disagreements

between yourself and the Chancellor.

There have not been many troubles in the markets.

And those markets are there... And no disagreements

between yourself and the Chancellor? Of course, markets go up and down.

You wouldn't have a market if it didn't.

What do you mean, trouble in the markets?

Because the Sam Brittan quote...

There was a stock exchange crash in 1987.

Oh, sure. I don't mean that. There was trouble on Wall Street

when it fell just 150 points.

And my goodness me, all television and radio and the press

tried to blow it up as big as they as they could.

That is the way they work.

The markets were far calmer than either television or the press,

and the markets have been far calmer.

Now, let's start the question again in a different way.

Well, all right, I will. I will. If you won't take my word for it,

that there's been trouble in the markets,

and of course, I didn't mean the stock exchange crash,

let me read you the first paragraph of the leader

in the Financial Times yesterday.

And it says, "With his resignation yesterday, Mr Lawson put an end

"at last to what has long been an impossible situation,

"both for him personally and for the government as well.

"It is more than likely that the behaviour of the Prime Minister,

"which drove him from office, may be seen,

"in hindsight, as the beginning of the end for her too."

"An impossible situation."

All the financial journalists are saying that there was enormous

uncertainty in the markets because of the presumed disagreement

between you and the Chancellor.

Now, do you deny that?

Brian, you must be quite crazy.

Do you think that kind of situation could have gone on for six years?

Alan Walters was with me... It could have for 18 months, though,

couldn't it? Do you really think that kind of situation

could have gone on for six years?

Yes, everybody thinks that. One moment.

18 months! No, they do not. 18 months.

You've come from six years to 18 months pretty smartly. Yes.

Let's get it down to 18 days or 18 minutes or 18 seconds.

18 months is a long time. Look, Brian,

we had six years of highly successful stewardship

from the Chancellor of the Exchequer.

Six years. Very successful. Created more wealth and spread it

more around than ever before.

Better social services, higher standard of living,

high reputation abroad.

If you think that could have gone on for six years with that success,

you are talking nonsense.

Now, let's stop this simple tittle-tattle.

Let's get down to the success we've had,

the way in which people now copy "Thatcherism", as they call it,

the world over,

the proud reputation we have abroad,

the way people listen to us.

We couldn't have had all of that unless Nigel and I had worked

very closely together.

We did.

Well... Now let's go on to the future. It isn't tittle-tattle.

Don't you want to face the future?

Of course I do. I do, and I'm ready to face it.

I'm most anxious to talk about the future, Prime Minister. Good.

But I'm also anxious to talk about the political aspects

of this crisis. Yes. And there are, you know there are.

You see, there have been disagreements between you and Lawson

in the last 18 months.

He says so himself. And they have caused certain

uncertainties on the market.

The question I want to put to you is this.

If you found that you could not resolve these things in private

with him, rather than lose Alan Walters,

why didn't you sack Lawson and appoint a new Chancellor?

We have resolved them.

I think you're probably talking about the European aspect

and the Exchange Rate Mechanism.

We resolved that and we set it out at Madrid

precisely what we intended to do

and how we intended to go in the future,

and we have adhered to it absolutely,

because we hammered it out.

Let me switch from Lawson,

keeping on this issue of the political problems

that you face, to something that some people say,

you may want to accept it, you may want to reject it, but some people

draw a lesson from all this.

They say it isn't the first time. Margaret Thatcher has problems

with strong, independent figures.

Look at Heseltine at the time of Westland.

Look at Biffen, whom she got rid of.

Look at even Sir Geoffrey Howe, who had to be moved

from the Foreign Office in rather unhappy circumstances, and all that.

She just cannot get on with anybody except "yes" men.

Now, is that true, Prime Minister?

No. And it is a great insult to members of my Cabinet,

and you know it.

You also know from many, many years of arguing with me

that I enjoy a good argument. I know.

I enjoy dealing with the facts.

We conduct affairs so that we do have very good arguments

about things, because that's the way we come to conclusions.

I like strong men and strong women about me.

That way we have strong government.

I have nothing like the problems which the Labour Party has.

We have strong policies founded on strong principles, and a record

of success and an international reputation,

and country after country following our policies as they come in

and say to me, "We've tried everything else,

"now we'll try Thatcherism."

And I say to them, "Thatcherism is much older than me.

"It's based on fundamental common sense, the limitation of the powers

"of government and handing more and more powers

"and the fruits of their work back to people."

And it works.

All right... That's what matters.

Yes, I like strong people about me.

Yes, I'm prepared to argue anything.

Yes, I'm prepared to listen.

Why? Because I want the result to be right.

I want the policy to be right.

I want to have all the arguments put,

because if they're not put to me in Number 10

and we don't argue them out,

they'll be put to me in the House of Commons.

And I'm able to face them in the House of Commons,

because we've thrashed them all out in Number 10.

So what you're saying again is nonsense, and you know it

from having talked with me over the years. All right.

Now, I'll come back to that because I think there's a very vital point

involved there, which I really want to put to you.

But let me sum you up so far.

You do not accept blame for the resignation

of the Chancellor of the Exchequer.

You don't know why he resigned.

He is to tell me himself.

You can offer no guidance on that.

And you don't accept that the other resignations from your government,

or the other sackings from your government, have arisen

because you can't handle strong men,

because you like strong men and you like arguing with them.

Let me put this to you, Prime Minister.

It's a point that's always interested me, and I think

it's now politically relevant.

It may be the case that in private you will have a lusty argument

and you will listen to other people's opinions,

and that you're only too happy to accept a suggestion

if it's correct. But you never come over in public like that, ever.

You come over as being someone who one of your backbenchers said

is "slightly off her trolley" - authoritarian, domineering,

refusing to listen to anybody else.

Why? Why cannot you publicly project what you have just told me

is your private character?

Brian, if anyone's coming over as domineering

in this interview, it's you.

It's you.

You think so? Hammering things out instead of just talking them

in a conversational way. Yes.

You're very domineering at the moment.

Now, let's deal with the authoritarian thing quietly.

No government has handed back more powers to the people

than this one, the one I have the privilege to lead.

Taxation.

We've lowered the levels of income tax. That is more power to people

over their own money and earnings.

That I believe in because of incentives.

People work for their families.

So handed power back.

We take less, they have more.

We have cut some of the controls which government used to use

to control the economy -

incomes controls, prices controls,

foreign exchange controls, development certificates -

a factory used to have to get a development as well as a planning

certificate so that they had to be told to develop

where they didn't want to and not where they wanted to.

And that led to trouble. That's gone.

A lot of controls have gone.

We used to have masses of nationalised industries.

Let me give you a steel as an example.

It was losing a billion a year, which had to be met by the taxpayer.

It's now privatised, making a profit of 500 million a year.

We've privatised industry after industry.

Government ought not to control business.

It doesn't know how to do it.

It interferes.

So in all of those things. And in home ownership, we've taken

more power away from councils and let people buy their own houses.

In all of these things, and now in the reform of the Health Service,

in the reforms of education, less powers to government

and local government, and more powers to the people.

The whole characteristic of the government which I lead

has been to limit the powers of government to be very strong

on those things which only government can do, very strong,

and to hand over powers to people.

This is the British character.

It's enterprising. It's responsible.

It will take the initiative.

It wants to look after its own family,

wants to make its own decisions.

Authoritarian.

It is socialism that is authoritarian.

It is socialism that says, "You must conform to the national plan,

"to the government."

I am totally different.

Government is there to serve.

All right. The freedoms of the people under a strong rule of law.

We have handed powers back to the people.

Check the power of government.

Enlarge the powers, the liberties, the income,

the ownership of property,

the choice of the people.

It is the reverse.

What you are saying is the reverse.

Well, actually, I wasn't necessarily denying any of that.

It may be true. It may not be true.

I thought since you thought I was domineering you,

I ought to let you say a lot of it.

But you know what it is that I'm getting at.

You see, you accept in public no blame for anything

that has happened with Lawson,

and indeed not much blame for anything else.

Why? Don't you think that it would be truer

to your own nature if you said in front of the public,

who don't think that you're weak or lack conviction?

That's what they're afraid of.

The reason they might not vote for you is that they think you've got

too much conviction, that you're too dogmatic,

that you won't listen to anybody.

Why don't you say, "Well, all right, I had a quarrel with Nigel,

"perhaps there were faults on both sides,

"I do take a little bit of blame,

"I should have been more sensitive to his worry about Walters"?

Why don't you say that?

Well, none of us is faultless.

None of us is claiming that.

Of course, we have faults.

Of course I take the blame for most things that go wrong,

now and then a little credit for things which go right.

That's life. What's the problem?

Ah. Well, then, what was the blame that you were prepared to accept

for losing Nigel?

Nigel had decided to go.

I tried to keep him.

So you don't accept that? I would still try to keep him.

I would still try to keep him.

But he decided to go, and I had to make my decisions

from that time.

Nigel made his, I made mine.

The idea, you know, that you can have the same government

for ten years, you know, is totally untenable.

You wouldn't have your young people staying.

They've got to see that their ambitions may be fulfilled

and rise from the bottom to the top.

You know full well one has to have reshuffles.

And I've had quite a number.

The reasons for resignations in the past have been totally different.

Michael Heseltine could not accept the collective decision of Cabinet.

You have to. All right. I... We have had several reshuffles.

I regret this resignation.

It has happened. We shall go forward.

And as I indicated yesterday, it will be business as usual.

Nigel is a loss.

He will support this government vigorously, as I have supported him.

I can almost feel the desire to accept some measure of blame

trembling on your lips,

but it can't quite come out.

And as you rightly say, we must get on to the future.

Yes, because... There are economic problems involved.

You are having a highly artificial argument.

Well, no, it's the one the country wants to hear about.

It's the political argument. But after the break... No, no.

You're not having the political argument.

You are having tittle-tattle argument.

Now, let's get on to the political argument. It's not tittle-tattle.

I can assure you that when you get down to the House of Commons

next week, you will hear very little else.

However, I want to come on to the economic argument,

but we must for the moment take a break.

Prime Minister, let us now switch to the economic side of all this,

because one of the unfortunate aspects of Lawson going

is that it has, if anything,

deepened the confusion about your intentions,

and I know you want to clear these up.

Now, you mentioned earlier about the Madrid summit.

One of the problems with that is that practically everybody thinks

that the wording adopted there was a fudge

that both you and Nigel can stand on,

though you actually intended different things.

Similarly, every government minister now says the policies will go on

just as they were before, and I'm sure they will.

But that doesn't help much, because the markets have felt

that there was a division there anyway.

So I want to put it to you what is really, I suppose,

the essential question that the markets will want to hear.

Do you really want to join the European Exchange Rate Mechanism

of the European Monetary System?

We shall join the European Monetary System

on the conditions we laid down in Madrid.

There was nothing fudged about them.

They were quite clear.

Point number one, the various countries

in that particular exchange rate play by different rules.

That is nonsense.

When you join any system, you must all play by the same rules.

At the moment, some have a foreign exchange control, some don't.

Some have freer movement of capital, some don't.

Some have artificial constraints on what their pension funds

and insurance funds can invest in,

which prevent overseas investment or investment in other currencies.

Some don't. Some have a great deal of subsidy to their industry

so that competition is unfair. Some don't.

You just simply can't have a system with a currency like sterling,

which is a big currency, which is a more open currency,

which has London as the most open market, freest market in the world,

playing under that higgledy-piggledy set of rules.

We're way ahead of most other countries in our liberty,

in our freedom, in our openness.

They have to catch up with us. I hope they will.

And so we said quite clearly,

we shall join the exchange rate system

when there are no foreign exchange controls,

when there's freedom of movement of capital,

when their financial services,

like their insurance and pension funds,

are run as openly and as freely as ours are,

And when we have fair competition and the subsidies have gone.

Now, all of that should happen during the first stage,

what is called the Delors first stage,

the first stage coming towards monetary union. I hope it will.

But other countries have to catch up a long way before it happens.

How long it will take is up to them.

France says that she will get rid of her foreign exchange controls,

I think, by July next year.

I'm not sure about Italy or Spain.

I think they might want longer, but then we'll see.

They've got till '92, Spain and Ireland.

Yes, and then we will see... Greece and Portugal till '94!

Yes, well, Portugal has a much smaller currency.

And then we'll see whether the exchange rate can hold

under those circumstances. I hope it does,

but they have to catch up with us.

Shall I tell you what I suspect,

not from my point of view, but from yours, Prime Minister,

might be the trouble with that answer?

It's very clear, it's very logical, And you've always said it.

But especially now Lawson's gone,

there's a slight smell of hostility to the ERM about it.

If you could show some enthusiasm for wanting to get in,

you might cheer the markets up.

Are you enthusiastic to get in?

I have just indicated, I hope that the other countries will catch us up

in free, liberalised markets,

free movement of capital, which is in the Treaty of Rome,

and we are one of the first countries to have it.

Germany has it. Holland has it.

I hope they will catch us up.

When they do, in all those particulars,

and we have free movement, when we have genuine competition,

when they get rid of some of their hidden restraints -

and they have them - and when they're prepared

abide by the rules as we do, and I hope they do.

Well, which way is it in your mind, Prime Minister?

That you are thinking,

"I'm dying to get into this because it will be very good for the pound.

"It will be very good for Britain.

"I do wish these foolish foreigners would hurry up

"and get into a situation where I can join."

Or are you privately thinking,

"I don't reckon these chaps will ever, in the near future,

"get around to doing any of these things, so I'm quite all right.

"We shall never have to join the ERM,

which I don't want to join anyway." Which is it?

I hope they will, and I hope it not only for the exchange rate mechanism

so that we can join, but I hope it on general economic grounds.

We believe in an open economy.

We believe in free and fair trade.

We believe in fair competition.

But they have some artificial and cultural barriers

which are going to be very difficult to get down.

They talk about being European and communautaire. We practise it.

We're much more open than they are,

and they really have to start to do things as well as say them.

It's no earthly good talking about things

unless they're prepared to free up.

The more they free up, the better pleased I shall be,

but they must expect to play fairly.

We wanted... we joined the European Community

for the Common Market. It's one of the things we haven't had.

They've had their barriers up

and there's still many of them have their barriers up.

There are still some of them, which no matter how in theory

you free up contracts will always buy German

or always will buy French, whereas we look at value for money.

But I really can't have Britain worsted by other people

having a different set of rules from the ones we have.

We play fair and we will,

and the more liberal economics they have -

using it with a small L - the better it will please me,

and I shall be delighted when they have it.

All right, Prime Minister, but I still detect

a certain underlying suspicion of these people,

a certain hostility to what they're up to,

a certain feeling that, yes, they've got a lot to change,

and they must mend their ways in many ways,

and you won't go in until they do, will you?

Because it would not be fair to Britain. Why?

It would not be fair to Britain. Just take one example

where we have really to bat extremely hard -

there are more small farms in Germany and France

than there are in Britain,

and they want to fix the Common Agricultural Policy

so that it always favours their smaller farms

and puts our bigger family farms at risk.

It is quite absurd, and we have to fight like tigers

for our bigger family farms. It's not fair.

And of course I fight for Britain, and of course I'm combative.

And of course I fought for Britain over the Common Agricultural Policy.

And I shall go on doing it. But they simply must be fair.

All right, Prime Minister, but on the basis of putting that to me,

there's a lot that they've got to get rid of.

What it means in practice is that

we sha'n't be going into the ERM for quite some time.

That depends on them.

That depends on the gap between what they say and what they do.

I think, don't you, Prime Minister,

that the markets are bound to interpret this to mean

that you have no especial enthusiasm for getting into the ERM as it is,

and you're rather doubtful how long it's going to take them

to get in the position where you can get in. No, Brian, I don't.

You don't think the markets will think that? No,

and I think you're trying to persuade them artificially

into a way which is not justified from what I have just said,

and that is one of the problems we deal with.

Let the markets make their own judgment.

We shall go in when it is fair and under the same rules

and under liberal economics to do so,

and that, Brian, is what the Common Market is all about.

Well, was supposed to be about. It's not keeping... That's right.

It's not keeping constraints.

It's genuinely getting them down

within the Common Market as an example to others,

and I repeat it: we are ahead of others and I hope they catch up.

We are far more communitaire in the way in which we run our trade

and run our finances, and I hope they'll catch up so that we can join

and have... join the Exchange Rate Mechanism.

Don't sound very sure... It's a terrible title, isn't it?

It is. Exchange Rate Mechanism.

And you don't sound very sure about it either, do you?

I am very sure about it. Oh, no, no, no...

But they will catch up. I am very sure about it.

But they will catch up, is what I mean. Well, I hope they will.

Let me knock off Greece and Portugal, because this is a point

that's been put to me several times, and the answers are unclear,

because there's some claim that the Treasury said one thing

and you said another, but I sha'n't pursue that.

Well, they claim that in any case.

Of course, and they may well be... they may be right.

I don't think we could have the identical words...

Been known to happen!

Well, let me ask you on detail.

Greece and Portugal have got until July '94, 1994,

to get rid of their exchange control.

You would expect that. Portugal is a much poorer country.

So that doesn't worry you? She must have.

It's reasonable to have a transition period.

And that wouldn't keep you out? No, it's reasonable for them,

because they're much smaller currencies.

We are a much bigger currency,

a bigger currency than any other except the Deutschmark,

and therefore for us to go in

would be much, much different from Portugal.

The franc and the lira haven't got to get rid of exchange controls,

but Greece and Portugal, you're tolerant of that?

Well, The Holland... Dutch people already have got rid of

their foreign exchange controls, and so has Luxembourg.

So it's not necessarily the size, but Greece joined later.

She's a poorer country. Portugal joined later,

and Portugal will still have a longer transition period,

and so will Spain, because she's got until 1992. All right.

Let me ask you now about the second really crucial issue,

the only other one that basically matters

in terms of market confidence, and that's the value of the pound.

Nigel, persistently, as you know, interfered with interest rates

in order to keep sterling within certain bounds,

in order to support it when it fell,

and sometimes to depress it when it rose.

Is that policy going to be pursued?

I like a strong pound.

Most chancellors and most prime ministers like a strong pound.

You have markets, so the pound goes up and down,

and don't forget, the Exchange Rate Mechanism

applies only to European currencies.

Most of the world's trade is conducted in the dollar and the yen,

and you will have currencies going up and down against

the dollar and the yen, and joining the ERM won't affect that.

You have really only two mechanisms.

That is, one is the interest rates and the other is intervention,

and don't think that going into the Exchange Rate Mechanism

is an easy option.

You could have to swing up your interest rates extremely sharply

because you have no option,

because you're in a fixed particular bracket. Sure.

But I am talking about domestic interest rates.

And what I'm really putting to you is,

if the markets get very jittery next week,

and who knows, they often do,

will you then in fact use interest rates

in order to keep the value of the pound up?

You manage the markets on a day-to-day basis,

and you make your decisions,

and if ever you reveal what your decisions are likely to be,

you are only helping the speculators.

That I will not do, and you would not expect me to do. No.

I like a strong pound. There are only two ways -

One is the... One is the interest rate,

the other is intervention,

and the other is, I think, the general demeanour and politics

and stability of the government.

We've had a strong economy.

We continue to have a strong economy.

We have a strong government and we have a good majority,

and I hope they'll make their judgment

of Britain's strong economy, and also, may I say,

its strong leadership and of a very good team leading

and a united party.

And that has an effect. That has an effect.

There's nothing mechanical about exchange rates.

Prime Minister, I think the impact of the whole interview...

well, of course, it may not - matter of opinion,

you may think differently -

will make many people feel that nothing that has happened

has in any way shaken or chastened you,

and, of course, that will worry some of them.

They will say the Prime Minister remains absolutely unyielding

about everything, and though she might have done a good job,

I think it's time, in fact, that we had someone who was more yielding.

Now, what do you say to that? Oh, nonsense, Brian.

I'm staying my own sweet, reasonable self,

founded on very strong convictions,

which were a combination of reason and emotion.

I feel passionately about personal liberty,

and government's there to serve it.

I feel passionately that it's the right of people

to have more and more choice.

Because I held these passionate convictions

and fashioned our economic policies on them -

reasonably, firmly, strongly.

Prime Minister, I must... I must stop you there.

No, you must not. Thank you v...

I must! Thank you very much indeed.

Strong leadership will continue.