Chapter 33 9.5% Solution for Section 1

Going from government to opposition is never easy.And for a variety of reasons, the Conservatives under Ted Heath were especially confused at this time.First of all, of course, we were expecting to win until the last moment.Regardless of the shortcomings of our government's economic strategy, each sector has well-planned policy plans for future growth.The harsh fact that we have become the opposition forces us to give it all up.Second, Ted himself desperately wanted to stay on as prime minister.He has been rudely kicked out of 10 Downing Street.Homeless, he turned to his longtime friend and parliamentary private secretary, Tim Keeson, to live in his home for a few months.This incident made me resolve after a few years that when I left Downing Street, I would at least have a house where I could live.Ted's strong desire to return as prime minister comes against the backdrop of talk of a coalition government and a government of national unity that has rattled the party.But in a way it also shows Ted's true belief.In fact, the farther the Conservative Party is from Ted's own ideas, the more he wants a coalition government to subdue the Conservative Party.Third, and perhaps worst of all, the poison left over from our 180-degree turn has left us with no solid principles, much less achievements on which we can rely.And for an opposition party, arguments are everything.

For my part, I'm glad that Ted gave me the Environment Department position instead of the Department of Education, which I used to run.I learned in the 1960s when we were last in opposition that it was difficult to attack a program that would be in some sort of gestation in this department.Furthermore, I have felt myself in this election that local taxes and housing, especially the latter, contributed to our defeat.The task of conceiving and proposing sound popular policies in both areas appeals to me. There was some gossip about Ted's position, but it was no more than talk.This is partly because most of us look forward to an early general election that would give Labor a working majority, and it doesn't seem wise to change the party leader now.There were other reasons, of course, and Ted was still able to create an atmosphere of nervousness and even fear among many of his colleagues.In some sense, even those U-turns help create an aura around him.He single-handedly changed Conservative Party policy with almost no public dissent and went a long way.He also worked with his aides to further transform the Conservative Party.Oddly, those who support Ted's approach and those who do not agree with him, such as Keith and I, and many backbench MPs, agree that the current Labor Party's policy of buying votes will Inevitably lead to economic collapse.What the political consequences of that would be is uncertain.But there are many wishful thinking in the Conservative Party, who think that might bring the Conservative Party back to power with a "doctor's mandate", and Ted would undoubtedly have his own medical certificate.

However, Ted did not make the concessions to his critics in the party that he should have.Had he changed his attitude differently, he might have effectively prevented future threats to his position from arising.He could have at least expressed a willingness to admit that the government made mistakes and learned from them.He could have invited talented backbench critics to be his shadow spokesman and help rethink policy.He could have changed the overall appearance of the shadow cabinet to make it more representative of parliamentary views. But he did none of these things, and he replaced Robin Carr with Tony Barber, who had announced his intention to leave the House of Commons, but to remain in the shadow cabinet for the time being, out of office.Robert Carr's more zealous interventionist approach got us into a lot of trouble.That year he promoted to the shadow cabinet MPs whom he saw as his aides, such as Michael Heseltine and Paul Shannon, who did not represent the views of the backbenchers at the time.Only John Davies and Joe Goldberg were not hired, and they were not intellectually unique.In short, he is firmly opposed to any policy rethinking that would mean his government's economic and industrial policies have gone horribly wrong. Keith Joseph was not appointed shadow chancellor, at which point he says he doesn't want to be in office and wants to concentrate. Research on new policy - a matter that would be dangerous for Ted, but at the same time important for the party.Otherwise, they serve as a dead-on "same thing" signal when voters make it clear that new policies are needed.In addition, the rather important Steering Committee of the Shadow Minister was formed in Ted's image.I was not invited to the committee at the time, the only members of which were Keith and perhaps Geoffrey Howe who might have objected to Ted's intentions.

With another General Election expected before the end of the year - October is well on the cards - the Conservative Party has begun an almost frenzied search for attractive policies to include in our next election manifesto.These policies have to meet two criteria: they must be fresh, and they must not call into question the inherent soundness of the policies of the recent Conservative government.I add a third point: the new policy must also be recognized as conservative in my area of ​​responsibility.In order to meet these criteria, we need to rack our brains. During the various elections between February and October 1974, most of my time was spent working on housing and local taxes.I have an effective housing policy group of MPs working with me, Hugh Rossi, a friend and sitting MP, is a fantastic housing expert with local government experience.Michael Lesme and John Stanley are well versed in the construction industry.The newly elected Nigel Lawson is brilliant and always has a point of view.We also get help from building societies and people in the construction industry.I am delighted to lead such a dynamic group.

The political priority is, of course, lowering mortgage rates.The technical problem is how to achieve this without paying subsidies indefinitely.Of course, the purist's point of view is that artificially controlling the borrowing rate for buying a house will definitely backfire.And the purists are right about this, as they often are, that if we had pursued a responsible economic Inflation won't raise mortgage rates either.A stable currency and a policy of providing sufficient land for development are the right ways to ensure an orderly housing market.But of course we have not pursued such a policy.Labor has waged a fight against property development.In this case, keeping mortgage rates below the level determined by the market, or more precisely, by the building societies, makes political sense in the short term.During our administration, we have introduced mortgage subsidy and even discussed the power to control mortgage interest rates.The Labor government quickly came up with a scheme, developed by Harold Lever, to provide building societies with massive low-interest short-term loans.Our task is to develop more attractive policies.

In addition to paying attention to politically attractive policies, I have reason to believe that action needs to be done on mortgage rates, as well as other measures we have in place to help people buy homes.I have always believed in the democracy of home ownership and making home ownership more accessible.At this point, I also deeply feel how miserable the middle class is.The real rate of profitability devalues ​​people's savings because of the inflation that we and Labor have created together.In addition, the value of real estate fell in 1974.The same goes for the stock market: The FT Ordinaries fell to 146 points, its lowest level in 20 years.Trade union power and left-wing socialist forces are on the rise.The increase in taxes has increased the burden on businesses and the common people.

In this case, it may be right to take care of the interests of a country's middle class for a while, on whom the future prosperity of the country depends so much.And helping people buy a house with a mortgage—whether it’s a mortgage rate subsidy or a down payment, or simply a mortgage interest tax deduction—is cheaper than building public housing or buying private housing for the city.I often cite a research report of a housing research foundation, which states: "Each municipal public housing now needs to pay an average of about 900 pounds a year as tax and local tax subsidies (including very old, municipal public housing), while reducing the average Mortgage tax, if you take this as a subsidy, averages around £280 a year."

My housing policy group meets regularly every Monday.Housing experts and representatives of building societies weighed in.I report regularly to the Shadow Cabinet.Without them really agreeing on economic policy, or having a lot of constructive ideas on any other issues, they were all focused on my area of ​​responsibility.It is clear to me that Ted and others are determined to make our proposals on housing, and possibly local taxes, a centerpiece of our next general election campaign, which we hope will take place sooner rather than later.For example, on Friday 3 May we in the Shadow Cabinet discussed the policy aspects of the manifesto throughout the day.I reported on housing issues and was empowered to form a local tax policy group.But the meeting had another significance.At the meeting, Keith Joseph gave a long and futile speech on the use of the new "monarism" approach to inflation.

The local tax issue was more difficult than any one aspect of the housing issue, and a small group with slightly different members helped me work it out.I want to master a lot of technical information.In addition, the reform of local taxes, not to mention its abolition, has had a profound impact on the relationship between the central government and local governments and the work of various departments of local authorities, especially the education sector.I relied on the opinions of the experts—officials from the City Finance Bureau proved to be the best source of information, and they were readily available for technical advice.But I was on a tight schedule and working under the watchful eye of Ted and others.They wanted me to come up with something radical, popular and convincing.My task is by no means an easy one.

Having said that, I think I can say that I understand quite well how critical the politics of the time were.For example, on Tuesday 21st May I met 350 protesters from Northamptonshire, with a representative from each village and town, who were furious over a 30% to 100% increase in council rates.Several factors made this problem politically salient: There was a fundamentally unfair element to the system: a single widow paid the same amount of tax as a family with three adult sons who were already working; The local tax revaluation has led to unbridled local tax rises. 8 Most recently, Labor's local tax subsidy solution has been particularly harsh on county areas.In short, there is a general middle-class resistance to socialism on local taxes as on housing, and it is important to channel this resistance, not to dissipate it.I am determined to do so.

The housing policy group has met seven times, the local tax group started work on June 10th, and the housing group's recommendations are well underway. I know that Ted and his advisers want us to make a firm commitment to eliminate the local tax.But until I figure out what to replace local taxes with, I'm really reluctant to make that kind of assurance.In any case, if there is a general election in the fall, it is now impossible to do more than find a sustainable course to write in the manifesto. Also, throughout the summer of 1974, largely because of our housing policy, I had more media presence than ever before.Some are unintentional.The Housing Policy Group's interim report which I sent to the Shadow Cabinet appeared on the front page of The Times on Monday 24 June.The previous Friday the Shadow Cabinet had spent the morning discussing the first draft of the manifesto, by which time the main elements of my proposed housing policy had been agreed.Lowering the combined tax rate that building societies pay on homebuyers' deposits, thus keeping mortgage rates down to a certain level, in other words subsidized in the form of tax cuts.First home buyers will receive a grant for their deposit deposit.However, no specific figures have been specified.There will be a robust survey of building societies, the idea being to follow the example of the James survey of teacher training.I hope this approach will lead to a long-term solution to the problem of high mortgage interest rates without making us pay subsidies indefinitely. The last point concerns the right of residents to purchase the municipal housing they live in. Of all the proposals we have made, this one has the most widespread and popular impact. The February 1974 election manifesto offered these tenants the opportunity to buy the public housing they lived in, but reserved the municipality's right to appeal against the sale of the public housing, and did not raise the issue of discounts.We all want to go one step further, the question is how far.Peter Walker has been urging the extension of the "right to buy" to public housing tenants at rock-bottom prices.My instinct is to be cautious.It's not that I underestimate the benefits of enabling more people to own property.It's that I'm afraid of alienating families who are already under a lot of stress.The families scrimped to buy a new private property at market value, weathering higher mortgage rates and falling property values.These are the people who are the base of the Conservative vote and I have a natural sympathy for them.I'm afraid they will have a strong dislike for those tenants of public housing who have suddenly received what is actually a large amount of assets from the government at no cost.As a result, we may lose more support than we gain.In retrospect, this argument seems narrow and unimaginative.that's the truth.But it made political sense in 1974 when people's home values ​​fell catastrophically. In the end, we went very far in the direction Peter proposed. The election manifesto in October 1974 stated that residents of public housing for more than 3 years have the right to buy a house at a price lower than 1/3 of the market price.If the resident sells the house again within 5 years, they will have to hand over part of the capital gains.By the time the Manifesto was finalized, we had quantified the amount of assistance given to first-time buyers of a private home or flat, with £1 for every £2 deposit saved, up to a certain limit. (We sidestepped the rent-restriction issue.) However, the question of how much the minimum mortgage rate was promised in the election manifesto became my biggest trouble.While I am convinced that promises in this area are justified for the reasons I have enumerated above, I am acutely aware of how disturbingly rising inflation and interest rates will add to Treasury spending.Ted and those around him seemed to have no such concerns. AUGUST: On Thursday the 1st he called me up from Lamberhurst to a meeting at his new home in Wilton Street with Peter Walker, Ian Gilmour and Robert Carr .The manifesto's reference to fixing mortgage rates at "reasonable" levels has been unanimously agreed.I'm under a lot of pressure to go beyond that statement.Ted They want specific numbers.I vehemently objected, but in the end I had to back down and pledge to keep mortgage rates "under 10 percent."Beyond that, I did not agree to put forward specific figures.I hope things will stop here. However, on Wednesday 28th August, I was driving from London to Tunbridge to record a "Conservative Political Radio Speech" when the pager rang and asked me to call back immediately.Ted obviously had something to say to me.It was Willie Whitelow who answered the phone.It was clear that the two of them, and certainly others from the inner circle, were in a meeting.Ted took the call and he wanted me to announce on the radio how much we were going to lower mortgage rates, as low as I could.I said I could understand the psychological effects of being below 10%.This need can be met with a figure of 9.5%.Really, I can't lower it any further, any lower would be a little too rash, and I'm already worried about future expenses.I don't like the habit of throwing numbers all over the place for momentary political impact, rather than thinking well about what they will do.So I stick with 9.5%. The situation is similar with respect to council tax, which I managed to avoid making any firm commitments when we discussed this at the Shadow Cabinet meeting on Friday 21 June.I think our approach should be that all parties work together on reform through a special committee.I'm the first to admit that this is unlikely to come as a surprise.The problem is more difficult than housing, and it would be unwise to make rash guarantees in this area.Ted didn't accept any of that, and said I should think again.A few days later, a debate on council rates in the House of Commons did show that a clearer package was needed.We advocate fundamental reform, a temporary reduction in local taxes, and a tax rebate for water bills.In my speech I suggested that the central government has the power to limit local government spending and to conduct general surveys of local taxes.But despite my unscathed reputation as an MP, Tony Crossland, the environment secretary, prevailed, arguing for increased central government subsidies to local authorities without major reforms to the system itself.His victory came at a great price.Because the increase in subsidies failed to reduce local taxes, but increased local expenditures.In less than a year, Crossland declared solemnly, "The party is over." In July Charles Bailey of Conservative Research and I worked together to draft the council tax section of the manifesto, and we are still making plans in terms of conducting a survey and temporarily reducing council rates.I went to the Shadow Steering Committee to discuss our proposal.The largest item of local expenditure is teachers' salaries.I advocate for this spending to be shifted to the Treasury Department.The second possibility I propose is to replace local taxes with a blanket appropriation, with local governments also entitled to spend up to the total set by the central government.Neither of the possibilities I mentioned is particularly attractive.But the discussion of these issues at least showed those in attendance that there is a big difference between doing something about local taxes and knowing what to do. On Saturday, August 10th, there was a Candidates' Conference at St. Stephen's Club, and I used my speeches there to promote our policy.I advocate a comprehensive reform of the local tax system that takes into account individuals' ability to pay.To that end, I propose shifting teacher salaries to the Treasury and introducing better temporary tax breaks.This is low news season, a good time of year to roll out new initiatives.So we got some good publicity. I felt at the time as if this proved that we could win the campaign without putting up more specific numbers.In fact, looking back over this period we can see that we were already too specific, because, as I found out 15 years later, measures like "transferring" labor charges from local to central government did not by themselves reduce the cost of local authorities. tax rate. I had wanted to get away from the heat and humidity and the political turmoil of London and go to Lamberhurst for a family holiday for the first time in 3 years.But again not this time.The phone kept ringing, and Ted and the others kept urging me to think more about new options.Then on Friday, August 16th, I was called to Wilton Street for another meeting.Ted, Robert Carr, Jim Pryor, Willie Whitelow and Michael Wolfe of Party Central Headquarters were all there.I quickly understood the purpose of the meeting: they were going to force me to agree to my election manifesto promise to abolish all council taxes during one parliament.I object for the same reason I object to guaranteeing mortgage rates below 9.5%.But Ted and his inner circle were spooked by their unexpected defeat in February.Desperate to win a new round of elections, they are desperate to grab the straw, or, in their jargon, the "golden nugget" of the manifesto. There are various ways to raise funds for local expenditures.We are all concerned about the system in which the central government allocates subsidy packages to local governments.So I told the Shadow Cabinet that I thought property tax reform seemed the cheapest option.But there is another idea in the back of my mind) Supplementing property taxes with local gas taxes.Of course, there are plenty of people who oppose both of these plans, but at least it is better than raising income taxes. In any case, what my colleagues are concerned with, obviously, is to ensure that the local tax is abolished, and Ted insisted on this in the meeting in Wilton Street.I am hurt and angry that I have once again been forced to propose policies that were not thought through.But I figured that if I combined my careful approach to specific issues with my boldness of expression, I could make our local taxes and housing policy a vote-winning vehicle for the party.That's what I was going to focus on doing at the time. A press conference was held on the afternoon of Wednesday, August 28.At this meeting I announced our final plan.Without hesitation, I announced a package of measures—mortgage rates around 9.5 percent, and local taxes abolished.As the seasoned Evening Standard reporter Robert Cavell put it, "the weather-beaten journalists welcomed these measures almost as much as the sherry served at party headquarters".Most of the news in the newspapers is about us.It is widely seen as the biggest boost the party has received since its defeat in February's general election.There is even talk of the Conservatives taking another lead in the polls, which of course is overly optimistic.The Federation of Building Societies welcomes the 9.5% mortgage rate proposal but is skeptical about the size of my proposed fee.In fact, I angrily told them that their calculations were wrong, and they retracted it.People on the right with views on economic issues are understandably critical.Those grassroots members of the Conservative Party that we need to win back welcome our proposal very much.Reassurance about local taxes was also welcomed by them.Labor panicked.Unusually, Tony Crossland of Throwing a Party overreacted, calling our proposal "Margaret's Midsummer Madness".Yet all this publicity is also very beneficial to me personally.Although I didn't know it at the time, the period between then and the end of the election campaign in October 1974 gave me the opportunity to make a good impression on the country and among Conservative Party members in Parliament.Without these, my subsequent career would undoubtedly be different.