New PM Major told: ‘Don’t make the same mistake as Churchill’

MARGARET THATCHER warned John Major that he was in danger of making a “historic error” with his handling of the economy, only weeks after she had backed him to be her successor, records show.

The ex-prime Minister told her former protégé he risked repeating Winston Churchill’s mistake of keeping the level of the pound too high and would drive the country into recession.

Notes disclosed among Cabinet Office files just released by the National Archives shed more light on how quickly the views of Mrs Thatcher and Mr Major diverged after he replaced her – and the forthright advice she felt able to offer.

A record of a meeting from early January 1991 in his room in the House of Commons reveals an apparently lengthy debate over the economy and the poll tax, around six weeks after Mrs Thatcher had been forced from No10.

A minute from the Jan 4 meeting records that, “Mrs Thatcher said conditions in the economy were very tough indeed, and she urged early and large cuts in interest rates.”

She said one per cent would not be enough, and there was a danger of creating a recession based on high interest rates from targeting exchange rates.

‘[Thatcher] said conditions in the economy were very tough indeed and she urged large cuts in interest rates’

Mrs Thatcher believed “there was a danger of repeating Winston Churchill’s historic error of fixing the parity of the pound at too high a level”.

Churchill’s decision as chancellor in 1925 to return Britain to the gold standard led to deflation, mass unemployment and the General Strike of 1926.

Mr Major defended himself, saying that the current situation “was not remotely comparable”.

Although the Major government did go on to cut interest rates by three percentage points during the course of 1991, it was not enough to avert the eventual recession.

The files also reveal internal deliberations over what role Mrs Thatcher should play in the 1992 election campaign. A letter dated Feb 5 from Chris Patten, the Conservative Party chairman at the time, suggested she should appear at the start of the campaign rather than at the climax.

It said: “I understand that Margaret’s entourage are letting it be known that if she were not invited to the final rally she would be ‘hurt’. It may be that by inviting her to a rally at the beginning of the campaign, as we are proposing, will get around this difficulty.

“For the time being I would want to avoid any commitment about the final rally, which I think should be as forward-looking as possible.”