Heseltine’s second ministry opened auspiciously with a sudden stock market crash, “Black Monday” in October 1987. From then on, the economy entered a prolonged period of economic recession culminating in Black Thursday and the realignment crisis. Until this culmination in September 1992, the economy would continue to suffer, with the spectre of stagflation having returned. The early 1990s recession hit the middle classes hard, and it hurt those who had directly benefited from the economic growth of the late 1980s. Whilst calling it the 'white-collar recession' is a misnomer, the harm caused to the government's popularity from these once-loyal voters is hard to understate.
Heseltine also struggled with his backbenchers, who grew increasingly agitated at government policy, despite ‘red-meat’ bills like the
Local Government Act 1987 which both abolished the Greater London Council and contained the socially conservative and anti-gay Section 28. Compounding this agitation was Norman Tebbit leaving Cabinet in 1989, meaning these agitated backbenchers soon gained a leader with a national profile.
A brief respite for Heseltine came with European integration slowing after the election of Jacques Chirac as French President and Delors’ departure as EC Commission President. Yet, the Florence Treaty which modified the European Community into the European Union proved a bitter pill for backbenchers to swallow. Alongside negotiations towards the creation of a ‘common currency’ progressing, which Heseltine refused to rule out British entry of, forceful criticism from euroskeptics like Tebbit and Norman Lamont did little to help Heseltine's position.
Labour, meanwhile, had spent its time in opposition wisely. The party which was both modernizing and growing in popularity, proven by both a failed leadership challenge from Tony Benn in 1988 and the presence of Bryan Gould as Chancellor (who had replaced John Smith after his fatal heart attack in the same year), started to seem like a real threat to the Conservatives.
The SDP-Liberal Alliance saw Steel and Jenkins retire on a high, merging the two parties into one - the Alliance. Paddy Ashdown was elected as its first leader but could never match the highs of past leaders and past results. Struggling from internal divisions caused by David Owen, alongside Ashdown himself having been caught in a lurid sex scandal with his secretary, was an ill omen for the Alliance.
It seemed from the outset that Heseltine would delay holding an election until 1992, with the economy in the midst of a biting recession and a consistent polling lead for Labour. Then Saddam Hussein invaded Kuwait. President Gary Hart, a committed internationalist met force with force and sent US troops to liberate Kuwait. Heseltine, seeing an opportunity to revitalise the Anglo-American relationship, pledged support, sending British troops to assist. Despite predictions of the war being long and drawn-out, Iraq was quickly repelled, and Saddam humiliated.
Compared to the abject failure of the Falklands, British military might and prestige had been vindicated and so, once British troops returned home in April 1991, Heseltine called a snap election for June. The feel-good spirit which followed the war was ruthlessly exploited by the Conservatives, especially when compared to Kinnock’s personal and past advocation for unilateral disarmament (despite Labour policy against such a move). The right-wing press also ran a ruthless media campaign against Kinnock, with the Sun tabloid famously stating “
Vote Neil, get Kinnfocked” in its editorial. These short-term advantages contrasted to the long-term weakness of the Conservatives who marked their 12th year in office in 1991, fighting a confident Labour party, in a country marred by recession.
The exit poll predicted a Labour majority, but as the votes were counted it seemed that the Conservative vote share was holding steady, even if Labour was gaining seats at their expense. By 1:00AM, it was clear that the Conservatives had hung on, even if Britain had elected a hung parliament, the first since 1974.
Heseltine quickly pressed the advantage: by being both the incumbent and by leading the largest party in Parliament. In talks with the Ulster Unionist Party, Heseltine negotiated a loose confidence and supply deal which would see him remain in Downing Street as Prime Minister. Kinnock having come so close to victory and dejected by his second consecutive loss against Heseltine, resigned shortly thereafter as Labour leader.