Table Of ContentDOWNING STREET
BY THE SAME AUTHOR
DIARY
British Politics and the American Revolution
Herbert Morrison: Portrait of a Politician (with G. W. Jones)
The People into Parliament (with W. T Rodgers)
Prime Minister
The Heat of the Kitchen
Downing Street Diary: With Harold Wilson in No. IO With James Callaghan in No. 10
Bernard Donoughue
Jonathan Cape
London
Published by Jonathan Cape 2008
2 4 6 8 IO 9 7 5 3 I
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Contents
Introduction 1
I James Callaghan Settles In (April-July 1976) 11
II Policy Initiatives, especially on Education
(September 1976--July 1977) 63
III Calmer Waters (August 1977-July 1978) 229
IV Things Begin to Fall Apart (September-December 1978) 351
V Nemesis: The Winter of Discontent Oanuary-May 1979) 409
List of Persons Mentioned in the Diary 505
Index 537
Introduction
T his second volume of my Downing Street Diary covers the premier
ship of James Callaghan from 1976 to 1979 and so completes the story
of the Labour government of 1974-79 as seen from inside No. IO.
Its predecessor, published in 2005, dealt with Harold Wilson's final two
administrations and particufarly retailed the colourful battles and scandals
of the personal team surrounding Wilson. The events described in this
present diary are different in tone and emphasis, reflecting the different
character of the new man in charge, being more concentrated on public
issues. The individuals advising James Callaghan, including the author, are,
as they should be, more often in the background - though not without
their recorded whims, prejudices and influences for good or for ill. The
centre stage is now rightly occupied by the Prime Minister, his Cabinet
ministers and their policies. James Callaghan is seen quickly to establish
greater dominance over his ministerial team than was ever achieved by
Harold Wilson. Callaghan had over the years become tougher, almost intim
idating, taking colleagues and issues head-on, whereas Wilson was ever the
soft manipulator, avoiding confrontation whenever possible.
The location of most of the action described below remains No. IO
Downing Street, always the central theatre of British politics. The atmos
phere of that house stays in the memory of anyone who has worked there
for any significant period of time. But No. IO does not produce an
unchanging performance regardless of the shifting cast of actors present
in office there. This volume demonstrates a different style of conduct of
central government in Downing Street under James Callaghan from that
previously shown under Wilson. The diary of the early days of his premier
ship shows Callaghan clearly feeling for his prime ministerial style, exploring
different rooms in the house from which to conduct his business and ways
in which to process his papers and to handle his ministers and advisers.
He was, however, the most experienced high-level minister in modern
British politics, having uniquely served as Chancellor of the Exchequer,
2 DOWNING STREET DIARY Introduction 3
Home Secretary and Foreign Secretary. He soon established his own natural Irish by descent and his long political memory and private pleasure
style. at cold revenge for long-distant grudges was a very Irish trait.
Above all he used, enjoyed and nourished the traditional Cabinet form He was much more of a family man than Harold. Audrey played
of government to which he and his colleagues were accustomed. These a key role in his life and we always knew that a parliamentary situ
years 1976-79 were probably both the peak and the final performance of ation was serious when he asked her to travel with him in the car
classic British Cabinet government. After Callaghan, Margaret Thatcher over to the Commons from No. 10. We were aware that his children
began the process of bypassing Cabinet, a process which was accelerated and grandchildren mattered greatly to him. On Trooping of the Colour
so spectacularly and possibly damagingly under Tony Blair. day in 1976 - different from our experience the previous year when
Personally, James Callaghan emerges from these pages as a quite different our children were deprived of drinks! - Jim toured the reception
character from Harold Wilson, even though they shared remarkable polit room and talked with each messenger, waitress and child in turn. My
. ical skills. I wrote my conclusions on Callaghan's personality and style, children still remember it with affection. He also had more of the
which dominate these diaries, in my recent memoirs, The Heat oft he Kitchen, common touch than Harold, helped by his tougher upbringing and
(pp. 235-7) and will repeat them here: his time in the navy as well as a trade unionist. He also shared many
of the pleasures of ordinary people, often going to the popular theatre
Watching James Callaghan over the coming months and years, I and watching television, on which he was very knowledgeable about
observed a very commendable man, quite different in style and the various series and the actors who starred in them.
character from Harold Wilson, not just in that he was nearly a foot My observation over the coming three years was that James
taller (and walked with a curious gait, tilted towards one side as if Callaghan had three layers of personality. On the surface was the
compensating for the lurch of one of the ships on which he served familiar bluff and avuncular Jim. Below that was a shrewd, secretive
during the war). Most different from the previous regime was his and even wily politician. And beneath those layers was an authentic
strong sense of values - really like those of a nonconformist and very decent person who really did believe in the straight honest
Victorian, with deep feelings of responsibility towards the under values in life. By comparison, Harold Wilson had only two main
privileged and a strong sense of right and wrong (where Harold layers. On top was Tricky Harold, the clever and devious political
was often ambivalent). manipulator. Below that was a kindly, weak and insecure man. But I
When in the Unit we produced a paper for his first Easter holiday am not sure that there was anything at all beneath that: perhaps just
reading about the restoration of responsible values in our society, a void where Jim had his root values. To me as his personal adviser,
another of my personal concerns, he telephoned me from his farm what mattered most about the Callaghan regime was that it was sane,
to say how much he liked it and asked me to join in the writing of sensible and balanced, with none of the hysteria (though of course
his future speeches to incorporate this dimension. Sometimes these less of the colour and fun) which afflicted the fringes of Wilson's
'values' emerged as a touchingly old-fashioned prudery. He once reign.
cautioned Tom McNally and me not to tell bawdy stories in front of Callaghan's style of working as Prime Minister was quite different
his wife Audrey (not that we had any such intention). He told me from Harold's. He needed a lot of time and space for his working
that he had been totally unaware of homosexuality until well into process. He did not like a crowd of advisers around him, preferring
adult life, adding, 'It all puzzles me. There have always been so many them to approach him singly, by prior arrangement and having sent
pretty girls.' But he was more comfortable in male than female in a paper in advance so that he could prepare mentally. He often
company and was not as good as Harold in promoting women. took a while to return papers - some of mine were found under his
Although apparently an agnostic, his Baptist upbringing showed bed. He told me that he did not like too much sudden pressure and
through when, especially during a crisis, he would suddenly burst that he did not like 'all the problems to come together. I like to take
out singing hymns. Before he left his Commons room for the big issues one at a time.' That may be why he sometimes appeared to be
debate on our pay sanctions policy, he sang to us one of his favourites overwhelmed by the avalanche of problems in the pay crisis in 1979.
- 'We'll meet again with the Lord'. I often heard him humming a In such crises he tended to withdraw into himself and cut off commu
hymn to himself as he set off for a critical meeting. But he was partly nication with his team, instead of involving them even more to share
4 DOWNING STREET DIARY Introduction 5
the burden. That perhaps reflected his insecurities and that he did questions which did not allow for anything but simple and straight
not have a freely outgoing personality. He did not pretend to be 'cosy' answers - which I often did not quite have.
and did not often chat openly as Harold did, disapproving of what He was always nervous before a big speech, telling me that he felt
he saw as 'gossip'. He usually played his cards close to his chest. 'terrible, for two days it is like a big black cloud. I get irritable and
I admired the way that he took serious issues seriously and had an say to Audrey, "I cannot do it. I've nothing to say." But she keeps
acute sense of the likely public and political reaction to any proposal. me at it. Then ten minutes beforehand I feel OK.' In delivering his
He could be extremely severe and I would not have wanted to be on speeches, he was a tr'ue professional, always dominating and yet
the wrong end of one of his critical rebukes. Having been Chancellor, involving his audience. He had a strong and commanding style in the
Foreign Secretary and Home Secretary, he knew how to make House of Commons and it is now often forgotten how he usually
Whitehall deliver. He once told me that he viewed No. IO as an old dominated Mrs Thatcher there. Even in the depths of the Winter of
fashioned railway signal box: he had to pull the right levers to make Discontent he was personally well ahead of her in the polls, when
the policy trains reach the right Whitehall destinations on time. his party trailed the Tories by up to 20%. He told me that from his
He was also skilled at using the appropriate civil servants for the experience of the Commons it was essential 'always to be accurate,
appropriate tasks. On one occasion, I thought that I had a wonderful always understate, never exaggerate. Remember there is always some
idea in the social policy area which would have great political bene body who knows better than you do.' This was typical of his natural
fits. I explained it to Jim on paper and he ticked it and arranged a modesty, shrewdness, prudence and caution. He never wanted to show
meeting in the study to discuss it. When we gathered, I saw that a off or to 'showboat'.
senior civil servant, Ken Stowe, was present. I politely questioned Like Harold Wilson, he grew to dislike Commons Questions. He
this since, although Ken was a good friend, I felt that my proposal said to me, 'This is my worst fifteen minutes of the week. I hate this
was very political and civil servants should not be present. Jim silly game we have to play.' At first he abolished our pre-Questions
disagreed, explaining: 'You see, Bernard, I have been around in govern briefing on Tuesdays and Thursdays, preferring to take his post
ment for a long time and I have been tempted by a lot of very clever prandial nap instead. He said, 'It is better to be well rested than well
political wheezes like yours. Sadly they don't all work as well as it briefed.' But he found that he could not do without his briefings for
looks at first sight. So I have found it is better to have someone present Questions and he soon resumed them. Jim was also good on television
who says "wait.a minute". Ken is my "wait a minute" man.' Ken did in a solid, reassuring and old-fashioned way. Before broadcasting about
indeed say wait a minute to my clever wheeze, spotting a fundamental
the Winter of Discontent in 1979, he asked me, 'What demeanour
flaw, and I was pleased that it was allowed to die without further should I adopt?' I replied, 'Be natural, be yourself.' He said, 'Yes, that
embarrassment. That was the Civil Service at its best - not being is the only way. There is no point in trying to adopt a false style.' That
simply obstructive but detecting a genuine downside in a proposal. was authentically Jim. He was quite unsuited to modern 'spinning' or
Callaghan's personal political style was magisterial (helped by his presentation with a 'celebrity' style. I always liked the fact that he was
height), even authoritarian at times, and his occasional grumpiness just himself
and severity meant that some colleagues and staff could be nervous
in dealing with him. But he was good at handling his ministerial Although the events described in this diary are only a generation ago, many
colleagues and he was not afraid to confront them and their political current media commentators show little interest in and even less. know
problems head-on. He was said to be anti-intellectual (some of his ledge of them. This is sad because that decade of the 1970s contains matters
early political allies were not impressive), possibly arising from having of great significance for our nation's history. Among them, the negotiations
left school in his early teens, being then the only British Prime Minister
over the IMF loan to the UK in 1976 were both a national humiliation and
born in the twentieth century not to have been to university. I like to
a prime example of Cabinet government operating at its best. The 1979
think that he was simply impatient with the pretentious arrogance
Win.tei' <">fDi~Mn.ten.t, when the left-wing trade unions brought this country
with which some self-professed intellectuals surrounded themselves.
to a virtual standstill for many weeks, cutting off transport, heat and water,
.His mind was powerful, based on practicality and honed by very great preventing the sick from entering hospital and the dead from being buried,
experience. He had a devastating capacity for asking simple but central was probably a unique example of modern Britain's social structures in
6 DOWNING STREET DIARY Introduction 7
virtual collapse and its elected government rendered impotent. During that the subsequent 1980s decade of material individualism and extreme ideo
latter dreadful experience citizens realised that the conventions of orderly logical confrontation. This 1976--79 government played - and sometimes
democratic government are a precious national asset which should be valued staggered - on the cusp between the era that was termed 'Butskellism'
and not taken for granted. (indicating the overlap of beliefs between the two main parties and their
The relentless sequence of economic and monetary crises which resound leaders) and the later period often personalised as 'Thatcherism'. Callaghan,
through these pages is a reminder of how weak was the British economy his ministers and his advisers all grew up as 'Butskellites' - basically
at that time - we were viewed from across the Channel as the 'sick man of Keynesian social democrats - always seeking compromise and viewing the
Europe' - and how comparatively easy has so far been the economic life public sector as a prime social 'good'. But by 1976--79 the problems and
in office of Tony Blair and Gordon Brown, benefiting from the radical the political opponents now facing and ultimately defeating them were
reforms of Margaret Thatcher in the 1980s. increasingly of a more extreme kind. The economic problems were not
Inevitably, some of the heated policy battles recorded here have proved to soluble, and sometimes made worse, by Keynesian state intervention and
be of ephemeral interest (and constitute the main part of the cuts made in inflating the public sector. Callaghan's political adversaries were deaf to
editing the diaries). It seems odd today to be reminded that so much Whitehall appeals for social cohesion: the hard left showed no interest in political
time and effort was then devoted to preparing (never implemented) legisla · compromise while the new right wing preferred individual material interest
tion for industrial democracy and on how many trade union officials should to a collectivist common approach. Neither opposing side could be recon
serve on the proposed complex boards of major companies; or that among ciled by the familiar old political formulae. So in these pages we see the
the main focuses of economic policy were giving support to the daily exchange Prime Minister and his colleagues looking bemused as their efforts at
rate of sterling and to protecting our declining manufacturing industries. compromise and conciliation failed. Well before his election defeat, James
Which newspaper today, as often then, has this month's trade balance as one Callaghan looked a sad figure, recognising that there was nothing he could
of its front-page stories? Above all, the government's then obsession with do to control or oppose the 'sea change' which was occurring in British
reducing the rate of inflation through direct state intervention in the intri politics towards Thatcherite individualism.
cate processes of wage negotiations, which runs through these pages, seems The devasting Winter of Discontent in 1979 both reflected and accel
from a different age. erated the geological shift which was occurring in the British political and
Other policy issues described below were, however, of more long-term social landscape, converting many in the electorate to the need for a harsher
consequence: the decisions to offer devolved government to Scotland; to market approach to our economy. But in fact the signs of that transition
continue fighting the IRA in Northern Ireland; to pay child benefits directly are present earlier in these pages. We see increasingly that the previous
to mothers; to remain outside the new European monetary mechanism; to Keynesian model was failing to deliver either sufficient economic growth
rush the exploitation of North Sea oil while neglecting our nuclear power or adequate social services. James Callaghan gave that model its final test.
industry; and especially to focus British school education back on to the Its failure prepared the way for the 'Thatcher revolution'.
basic values of learning. All of these policy decisions were of significance to Not all of the politicians figuring below emerge as major ministerial
Britain's future - as were the government's policy failures: such as the failure figures. The author comments that Callaghan's government, both in Cabinet
I .
to adopt a properly diverse energy policy; failure to invest in the transport f and especially in its middle ranks, contained too many mediocrities -
infrastructure; failure to implement my Policy Unit's proposal to sell council l 'marshmallows' - certainly not of the calibre needed to master the immense
houses to tenants long before Mrs Thatcher took that immensely popular challenges then facing them. The place of some in the government was
initiative; failure to confront the excessive and irresponsible trade union explicable only in terms of being party 'worthies' or as loyal personal
power which ultimately destroyed the Labour government; and above supporters of James Callaghan during his rise to the top of the political
all, the failure to appreciate that the state alone could not solve the basic greasy pole. Such is usually the case with any government-though Wilson's
economic problems of pricing and resource allocation and that the free market, later administrations had been blessed with major figures from the
properly conducted, to a greater extent could. outstanding post-war parliamentary generation. The quality weakness in
Taking a longer perspective, one interesting aspect of the Callaghan govern Callaghan's team was accentuated early in his premiership as the post-war
ment was its historical position as a bridge between the end of the post-war Labour giants began to fall away - either as a sacked enemy, like Barbara
era of collectivism, valuing social cohesion and political moderation, and Castle, or from career choice, as Roy Jenkins move to Brussels, or by death,
-
8 DOWNING STREET DIARY Introduction 9
as with Tony Crosland. They together consituted a deficit of political stature many, including James Callaghan, now sadly dead - so they can no longer
which the new Prime Minister was never able to replace. The pool of polit be affected by what is written. Keeping and publishing diaries is in fact a
ical talent was now more shallow-and at times I felt that James Callaghan's delicate moral process. The other people involved in the events described
personal inclination was to value loyalty above ability. are usually unaware that a record is being kept and so, in a sense, their
Some of Callaghan's colleagues would, however, have shone in any admin confidence and trust is being exploited. They might have spoken and acted
istration. Tony Benn and Michael Foot, from Labour's otherwise dismal differently had they known they were 'on the record'. There is actually no
left wing, displayed remarkable communication skills. The younger right real and total solution to that moral dilemma, unless it is never to keep
wing group contained the most promising ministers: Shirley Williams, Bill diaries - which would leave historians and others interested in life at a
Rodgers, David Owen, John Smith and Roy Hattersley. None was later to particular time very deprived. The traditional compromise, sadly recently
enjoy the full bloom of a political career because Labour soon went into abandoned, was to wait a decent period of time before publication and I
opposition for their prime next eighteen years, while the first three of them have tried to do that. Some three decades seems to me a decent length of
left the party, alienated by what they understandably saw as intolerable time, even though it runs the commercial risk of finding too few readers
left-wing fanaticism. remaining interested in those times a generation ago. I prefer that risk to
Apart from the Prime Minister himself, who stood a tall head and the certainty of giving offence by the discourtesy of instant publication.
shoulders above his Cabinet, its outstanding member was undoubtedly I particularly wish to express gratitude to Sandra Lee and Della
Chancellor Denis Healey. He features combatively throughout this volume Brotherstone for their assistance and discretion in the complex process of
and, representing the Treasury with which my Policy Unit was often in converting my almost illegible diaries into modern word-processing tech
disagreement, is frequently treated unfairly in the battle heat of these nology. I also thank my loyal friend Graham Greene for his unfailing friend
pages. Denis carried for five years an incredible burden. It was a tribute ship and support over this prolonged project. My deepest retrospective
to him that when Callaghan is seen contemplating moving him to the appreciation goes to Carol and my children who put up with a great deal
Foreign Office, the Prime Minister planned to replace him with two minis during the exciting and exhausting years described in this book.
ters at the Treasury, because he knew there was no other colleague who
could carry that burden alone. Denis was a remarkable Chancellor facing
the most difficult, sometimes overwhelming, problems faced by any British
Chancellor since 1950.
This volume follows the format of its predecessor, providing a daily and
continuous narrative of British politics and government during those years
as seen from inside No. IO and usually written on the night or early morning
following the day's events. It is again the single view of one observer from
one privileged position. As with most diaries, it is not written with the
balanced fairness of later hindsight. It is unbalanced, often unfair to indi
viduals and subject to the exhaustions and temporary irritations of the
author on a particular day. Hopefully it also conveys the virtues of imme
diacy and direct personal involvement at the time.
This diary has, unlike its predecessor, been substantially edited for
length. The original typed script (based on scores of handwritten note
books) contained over 1 ,300 pages. That would have been too great a burden
on the reader, For similar compassionate reasons there are no footnotes,
but small biographies of most characters are appended.
Contrary to current fashion, I have delayed the publication of both
volumes of diaries until all the participants have left the public stage -
I
James Callaghan Settles In (April-July 1976)
Tuesday 6 April 1976
J
im Callaghan's" first full day. He had a diary meeting at 9.30 with John
Hunt' and Ken Stowe" [the Cabinet secretary and principal private secre
tary] who complained afterwards that Tom McNally" [Jim Callaghan's political
adviser] had attended. I don't think this was a Civil Service shut-out: just that
Jim does not like many people with him at the same time. On the other hand
his personal aides need to make sure they get in there from the beginning.
I went up after the meeting and said I wanted a formal decision on the
Policy Unit. He did not know the Unit advisers had been officially sacked
when Harold Wilson• resigned. He said, 'I want the Unit to continue. Bring
them back in, double-fast.' So I went off and did that. He later came down
and worked in the Cabinet Room - including seeing Michael Foot· and Roy
Jenkins" (though him in the study I think). Harold Wilson never worked
in the Cabinet Room in my time.
We had lunch in the small state dining room. Back to where we were
two years ago - except no PM and no Marcia [Williams]'. Several times
this morning I walked in to see Tom McNally in Marcia's room, just to
enjoy the pleasure of having a nice person in there.
Jim ate in his study, the same food as us. He has decided to share our
lunches on Tuesdays and Thursdays, and then to have sandwiches on other
days in the study. He doesn't want to pay especially for a cook on other days
- he has a reputation for being 'tight' on money. And he doesn't seem to
want to go to eat in the Commons - which was the only way HW kept in
touch with the Parliamentary Labour Party. Jim also has a sleep every day
after lunch. He said to us, 'Better well rested than well briefed.'
We assembled for Qiestions briefing in his room at the Commons -
the same one Wilson had down the corridor behind the Speaker's Chair.
He arrived around 1 .45. It was a very good session. He brought every
body in, and listened with interest to all suggestions. He admitted to being
bewildered by PM's Questions. As a departmental minister at the Foreign
