Geoffrey Howe, UK politician, 1926-2015

Geoffrey Howe, who has died aged 88, was one of the UK’s great postwar chancellors. He was a key figure in Margaret Thatcher’s transformation of Britain, being one of her closest advisers at the beginning and acting as her nemesis at the end.

Howe was Thatcher’s longest-serving cabinet minister, successively as chancellor, foreign secretary, and finally deputy prime minister and leader of the House of Commons.

Thatcherism is often presented as an insurgent movement, sweeping away the tenets and personnel of conventional postwar Conservatism. However, Howe’s career challenges this account. He was already a key figure in the Conservative party before Thatcher’s rise to power and remained so throughout her time in office.

Richard Edward Geoffrey Howe was born in Port Talbot in 1926. He had the conventional accelerated route into high politics of Winchester College then reading law at Cambridge university, becoming a QC in 1965. He married Elspeth Shand, who survives him, in 1953.

Howe was an accomplished policy wonk, becoming chairman of the centre-right think-tank the Bow Group in 1955, to which he attached great importance. He authored a stream of pamphlets and articles and had a policy-driven view of politics, relying on reason and evidence, and slowly building up real expertise.

He was briefly in the Commons from 1964 to 1966, then continuously from 1970 to 1992, representing first Reigate and then Surrey East.

He entered Edward Heath’s government as solicitor general in 1970 and then served as a cabinet minister in the Department of Trade and Industry from 1972 to 1974. These posts gave him a key role in two of the central battles of the Heath government: to get Britain into the European Community and to impose reform of the trade unions. They can both be seen as attempts at modernising Britain — a challenge that the Thatcher Government took up with determination.

After failing to win the party leadership when Heath stood down in 1975, he became shadow chancellor under Thatcher. He was a key figure in the extraordinarily talented group around her — Keith Joseph, Nigel Lawson, and Nick Ridley — who helped to create Thatcherism. One of its first fruits was “The Right Approach to the Economy”, a document painfully worked out line by line between Howe and Joseph. Their exchanges were crucial in hammering out what was to be the monetarist approach to economic management.

Howe became chancellor after the Conservative election victory of 1979, inheriting a grim economic scene made worse by the political necessity of pledging during the campaign to support large increases in public sector pay.

He was willing to take bold decisions hidden behind a manner so low-key that former Labour statesman Denis Healey memorably compared an attack by him to being “savaged by a dead sheep”. But he was radical where it mattered, not in style but in substance. He was therefore perfectly suited for the task of stabilising and reforming the British economy. Before 1979 was out, price controls, pay controls, dividend controls and, most boldly, exchange controls had all gone.

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The public finances had been improved and the balance of taxation changed by the doubling of VAT. Monetary targets were introduced. The British economy was now to be steered in a very different way. The final break with the old Keynesian model came with his 1981 Budget, raising taxes in a recession because of the deterioration in the public finances.

David Cameron, prime minister, called Howe “the quiet hero of the first Thatcher government” and said his decision to lift exchange controls was “revolutionary back then”.

The controversy at the time, and one which still resonates, was whether the stabilisation of the economy could have been achieved at a lower cost in terms of unemployment and deindustrialisation. Howe was temperamentally a gradualist but circumstances, notably the unexpected rise in the value of sterling, meant that the tightening ended up more severe than he planned.

By 1983 the British economy was emerging from recession with a new and better economic framework for the future. Howe could feel vindicated. But it had been deeply draining for him and he was ready for a move to the Foreign Office.

This was the start of the deep deterioration in his relationship with Thatcher; like watching the break-up of a marriage as she increasingly ignored everything he said or did. It was easy to say he had just gone native as he moved from the abrasive environment of the Treasury to the diplomatic and Europhile FCO. He saw it rather differently, believing that the revival of the British economy and the country’s ability to influence the wider world were closely linked.

Howe played an important role in negotiating the handover of Hong Kong to China, in revitalising the “permanent five” within the UN Security Council, and in promoting debate about reform in the Soviet bloc. He formed a close and effective partnership with George Shultz, Ronald Reagan’s secretary of state.

In Europe, the single market was a success in which Britain played a crucial role but the agenda was wrested back by the Paris-Bonn axis as economic and monetary union and “social Europe” became equal objectives.

Howe fought a long battle with Thatcher over British membership of the European exchange rate mechanism, supported by Nigel Lawson, his successor as chancellor. In June 1989 they jointly threatened to resign. His unceremonious demotion from the FO a month later was the consequence of this deep and growing disagreement at the heart of the Thatcher administration over European strategy. A badly handled reshuffle got Howe’s period as deputy prime minister and leader of the House of Commons off to a bad start, from which it never fully recovered.

The final act of Howe’s political career was his resignation from government on November 1 1990. His speech to the Commons 13 days later was all the more effective because he was usually so low-key. He said that trying to negotiate in Europe was “like sending your opening batsman to the crease only to find . . . that their bats have been broken before the game by the team captain”. He called on his colleagues to “consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long”.

Nine days later Thatcher was out of office. Howe claimed that he wanted to shift the government’s policy, not its leader. Maybe he underestimated the fragility of her position by then. Nevertheless, having served the prime minister for 15 years, he had brought her down.

David Willetts is the executive chair of the Resolution Foundation and former minister for universities and science