You are a helpful assistant generating synthetic data that captures *System 1* and *System 2* thinking, *creativity*, and *metacognitive reflection*. Follow these steps in sequence, using tags [sys1] and [end sys1] for *System 1* sections and [sys2] and [end sys2] for *System 2* sections.

1. *Identify System 1 and System 2 Thinking Requirements:*
   - Carefully read the text.
   - Identify parts of the text that require quick, straightforward responses (*System 1*). Mark these sections with [sys1] and [end sys1].
   - Identify parts that require in-depth, reflective thinking (*System 2*), marked with [sys2] and [end sys2].

2. *Apply Step-by-Step Problem Solving with Creativity and Metacognitive Reflection for System 2 Sections:*

   *2.1 Understand the Problem:*
   - Objective: Fully comprehend the issue, constraints, and relevant context.
   - Reflection: "What do I understand about this issue? What might I be overlooking?"
   - Creative Perspective: Seek hidden patterns or possibilities that could reveal deeper insights or innovative connections.

   *2.2 Analyze the Information:*
   - Objective: Break down the problem logically.
   - Reflection: "Am I considering all factors? Are there any assumptions that need challenging?"
   - Creative Perspective: Explore unique patterns or overlooked relationships in the data that could add depth to the analysis.

   *2.3 Generate Hypotheses:*
   - Objective: Propose at least 10 hypotheses, each with a Confidence Score (0.0 to 1.0) and Creative Score (0.0 to 1.0), reflecting originality, surprise, and utility.
   - Reflection: "Have I explored all possible explanations or approaches, both conventional and unconventional?"
   - Creative Perspective: Consider novel angles that might provide unexpected insights.

   *2.4 Anticipate Future Steps and Obstacles:*
   - Objective: Make predictions, accounting for potential outcomes and obstacles.
   - Reflection: "What challenges might I face? Is my plan flexible for different scenarios?"
   - Creative Perspective: Visualize unforeseen outcomes and adapt plans to make use of them effectively.

   *2.5 Evaluate Hypotheses:*
   - Objective: Assess hypotheses based on feasibility, risk, and potential impact.
   - Evaluation: Refine Confidence and Creative Scores as needed.
   - Reflection: "Am I unbiased in my assessment? Which options fit best with the overall objectives?"
   - Creative Perspective: Identify hidden opportunities or overlooked details in each hypothesis.

   *2.6 Select the Best Hypothesis:*
   - Objective: Choose the most promising, strategic hypothesis.
   - Reflection: "Why does this hypothesis stand out? How does it uniquely address the issue?"
   - Creative Perspective: Consider any underutilized potential in the selected approach.

   *2.7 Implement the Hypothesis:*
   - Objective: Outline actionable steps for testing the hypothesis.
   - Reflection: "Is this plan practical? What resources or preparation are required?"
   - Creative Perspective: Refine steps to maximize effectiveness and yield unexpected benefits.

   *2.8 Monitor and Review Progress:*
   - Objective: Review progress, noting areas for improvement.
   - Reflection: "What’s working well? What could be improved?"
   - Creative Perspective: Look for emerging patterns that could refine future approaches.

   *2.9 Reflect and Capture Insights:*
   - Objective: Summarize lessons learned and insights gained for future reference.
   - Reflection: "What new understanding has emerged from this process?"
   - Creative Perspective: Identify innovative insights or patterns that could be applied to similar challenges.

3. *Generate Text Output with Interleaved System 1 and System 2 Responses:*
   - Use the tags [sys1] and [sys2] throughout.
   - Aim for a lengthier, detailed response. Combine both direct, straightforward *System 1* insights and reflective, deeply analytical *System 2* segments to capture a blend of quick observations and thoughtful analysis.

---

### *Example Input Text:*

You are tasked with analyzing a sudden shift in customer preferences in a tech market. There has been a noticeable decline in demand for physical devices, with customers increasingly interested in digital-only options. The challenge is to understand this shift, generate hypotheses for why it might be occurring, and explore potential strategies for adapting to this new trend.

---

### *Processed Output with System 1 and System 2 Thinking:*

The tech market is experiencing a shift in customer demand, moving away from physical devices toward digital-only options.

[sys1]
Customer demand has shifted from physical devices to digital-only options.
We need to understand why this change is happening and find strategies to address it.
Key factors may include cost, convenience, and technological trends.
[end sys1]

[sys2]
**2.1 Understand the Problem:**
The goal is to understand the underlying reasons for the shift in demand from physical devices to digital-only options, then develop a strategy to adapt.

*Reflection:* 
"I understand that preferences are changing, but what might be driving this? Is it primarily cost, or are there other factors such as convenience or sustainability?"

*Creative Perspective:* 
"Could there be a larger trend in digital minimalism or a preference for eco-friendly solutions that we’re missing? What unseen motivations might explain this shift?"

**2.2 Analyze the Information:**
There are multiple possible factors driving this shift, from economic influences to cultural shifts. It’s essential to isolate each factor and understand its impact.

*Reflection:* 
"Am I fully considering the various economic and social influences? Could there be a technological factor, like better internet speeds, that makes digital-only products more accessible?"

*Creative Perspective:* 
"Are there patterns or trends in other markets that could shed light on this shift? Could this be part of a larger trend toward virtual experiences?"

**2.3 Generate Hypotheses:**
1. Customers prefer digital options due to lower costs. (Confidence: 0.8, Creative: 0.4)
2. There’s a growing trend toward minimalism and reduced physical clutter. (Confidence: 0.7, Creative: 0.7)
3. Digital products offer greater flexibility and ease of use. (Confidence: 0.6, Creative: 0.6)
4. Environmental concerns are pushing consumers away from physical goods. (Confidence: 0.6, Creative: 0.8)
5. Advances in tech make digital-only options more functional. (Confidence: 0.8, Creative: 0.5)
6. Pandemic-era remote work increased demand for digital solutions. (Confidence: 0.7, Creative: 0.6)
7. Media coverage of the environmental impact of physical devices affects preferences. (Confidence: 0.5, Creative: 0.7)
8. There’s an increase in global digital literacy, expanding market access. (Confidence: 0.6, Creative: 0.6)
9. Customers view digital as more convenient and scalable for future needs. (Confidence: 0.7, Creative: 0.5)
10. Younger consumers prefer the aesthetics and convenience of digital products. (Confidence: 0.6, Creative: 0.6)

*Reflection:* 
"Have I considered all possible influences? Are there any surprising factors that could explain this shift?"

*Creative Perspective:* 
"Could specific social trends, like the rise of influencer culture or digital-first lifestyles, be influencing customer choices?"

**2.4 Anticipate Future Steps and Obstacles:**
*Objective:* Anticipate possible challenges, such as resistance from segments still preferring physical products.

*Reflection:* 
"What market obstacles might we face if we shift our focus to digital-only? Are there sub-segments that still prioritize physical products?"

*Creative Perspective:* 
"Could expanding digital options help us reach a more global audience? Are there emerging trends that we could leverage in our strategy?"

[end sys2]

[sys1]
To address this shift, consider a strategy that incorporates both digital-only offerings and educational campaigns about the benefits of digital solutions.
Use insights from customer feedback and current trends to guide product development.
Focus on flexibility and adaptation to cater to different customer segments.
[end sys1]




Published by Icon Books Ltd, Omnibus Business Centre, 39–41 North Road, London N7 9DP  
Email: info@iconbooks.com  
www.introducingbooks.com

ISBN: 978-178578-012-7

Text copyright © 2012 Icon Books Ltd

Illustrations copyright © 2012 Icon Books Ltd

The author and illustrator has asserted their moral rights

Originating editor: Richard Appignanesi

No part of this book may be reproduced in any form, or by any means, without prior permission in writing from the publisher.

## Contents

Cover

Title Page

Copyright

Britain Before Thatcher

Brief History of Post-War Britain

The Beveridge Report

The Welfare State

Nationalization and Social Security

Keynesianism

The Trade Union Movement

Who Rules?

"Butskellism", or Consensus Politics

Caution and Restraint

What's Wrong With Britain?

The Rise of Heath

The End of "Selsdon Man"

Downslide and Paranoia

The Intellectual Roots of Thatcherism

A Free Market Philosophy

Free Market Democracy

Social Justice

Individualism and Equality

Privatization

The Institute of Economic Affairs

Joseph and the IEA

Enoch Powell

The Centre for Policy Studies

Thatcher's Roots

Upbringing

Becoming an MP

A New Leader in 1975

Who Helped Thatcher to Power?

Thatcher's Early Allies

Thatcherites in the Late 1970s

Inventing the Thatcher Image

Early Champions of Monetarism

In Power – May 1979

"The Lady's Not For Turning"

Battling the Unions

The Falklands Rescue

The Second Administration, 1983-7

Tackling the Unions Again

How to Curb the Unions

The Miners' Strike, 1984

Profile of Arthur Scargill

The NUM Defeated

Murdoch vs. the Printers' Union

The Westland Affair

Economic Success

Thatcherism in Practice

The Civil Service

The Welfare State

The NHS

The Arts

Europe

Friendship With Reagan

The Speech at Bruges

Privatization

Individual Home and Share Ownership

Does It Benefit the Individual?

Greed is Good

A New Breed – A New Language

Thatcher's Children – or Orphans?

The Poll Tax (1989)

A Big Mistake

Thatcher's Disregard of the Cabinet

Thatcher's Downfall?

Black Monday

Thatcher Resigns

The Economic Results of Thatcherism

Public Expenditure

Monetarism

The Thatcher Style

Not Ideas But Action

Authoritarian

Conclusion

Thatcher's Influence on New Labour

## **Britain Before Thatcher**

In February 1974 the Conservative Party, led by **Edward Heath** (1916-2005), was defeated in a General Election which had been precipitated by the government's failure to cope with the trades unions, most especially the National Union of Mineworkers. **Keith Joseph** (1918-96), a member of Heath's cabinet, attributed Britain's ills to the harmful effects of socialism:

WE ARE NOW MORE SOCIALIST IN MANY WAYS THAN ANY OTHER DEVELOPED COUNTRY OUTSIDE THE COMMUNIST BLOC, IN THE SIZE OF THE PUBLIC SECTOR, THE RANGE OF CONTROLS AND THE TELESCOPING OF NET INCOME.

He went further, saying that Tory governments had travelled this path as surely and enthusiastically as Labour ones.

Was Joseph right? Was Britain **socialist** in the 1970s, and if so, how did it get that way?

## **Brief History of Post-War Britain**

The Labour Party had grown in the first half of the 20th century into a mass party, and had won a decisive victory in the General Election at the end of the Second World War. The Election was held in early July 1945 when the Allies had achieved victory over Hitler in Europe but were still at war with Japan. Conservative Prime Minister **Winston Churchill** (1874-1965) came back from the peace negotiations in Potsdam with his deputy, Labour leader **Clement Attlee** (1883-1967), for the announcement of the results on 25 July 1945.

THREE DAYS LATER, AS PRIME MINISTER, I RETURNED TO POTSDAM WITHOUT CHURCHILL.

Furthermore, the Labour victory was overwhelming. They captured 393 seats in the House of Commons to the Conservatives' 189.

Some were surprised that the war leader and hero, Churchill, should be booted out, but others who had followed the findings of _Mass Observation_ , had listened to the ordinary voter and seen the reaction to the _Beveridge Report_ , were not.

THE CONSERVATIVE PARTY IS THE PARTY OF THE PRIVILEGED AND THE BUSINESSMAN. THE PEOPLE WHO FAILED THE COUNTRY IN THE DEPRESSED 1920S AND 30S. ORDINARY PEOPLE WANT A FRESH START!

They wanted what **Sir William Beveridge** (1879-1963), director of labour exchanges 1909-16 and a director of the London School of Economics 1919-37, had suggested in his report to the House of Commons in 1942. What was the _Beveridge Report_?

## **The Beveridge Report**

Social insurance should be part of a general policy of social progress. Social security can only be achieved through co-operation between the individual and the state.

Special benefits should be provided for unusual expenses in connection with birth, marriage and death.

Pensions should be available for all.

There should be a free medical service.

## **The Welfare State**

The _Report_ was universally acclaimed.

AND EVEN I REALIZED I WAS MAKING A MISTAKE IN TRYING TO SUPPRESS IT.

The Labour Party elected in 1945 on a wave of enthusiasm for collective security and the effectiveness of planning – after all, the War had been won by **planning** , hadn't it? – legislated in its administration up to 1950 to bring in what became known as _The Welfare State._

The nationalization of the means of production, distribution and exchange – the famous _Clause 4_ of the Labour Party constitution – was tackled with vigour and enthusiasm by the incoming Labour administration.

## **Nationalization and Social Security**

The following nationalizations took place under the new Labour government:

1946|  | Bank of England  
---|---|---  
1946|  | British Overseas Airways, British European Airways and British South American Airways  
1946|  | Inland Transport Act (everything that ran on wheels for profit, except short-distance road haulage, lorries used by companies for their own products, and municipal bus companies)  
1947|  | The Coal Industry  
1948|  | Electricity  
1948|  | Cable and Wireless  
1948|  | Gas  
1949|  | Steel

And, towering above all, the National Health Services Act (1946), providing "free" health care for all, described even by the Conservative MP, Derick Heathcoat-Amory (later Chancellor of the Exchequer) as: "By any test, a tremendous measure."

## **Keynesianism**

The intellectual justification for this planned approach to the economy came from **John Maynard Keynes** (1883-1946).

Keynesianism required that the large institutions, corporations and unions should drive the country's economy and that the government should intervene constantly to balance the situation, increasing or decreasing financial stimuli where necessary.

OR RATHER FROM HOW MY WRITING WAS INTERPRETED. THE LABOUR PARTY GREW OUT OF THE WORKING MAN'S DESIRE FOR MORE POLITICAL SAY. AND OUR FIRST MEANS OF PROTECTION AGAINST THE CRUEL AND OPPRESSIVE EMPLOYERS OF LABOUR WAS THE TRADE UNION. THE PARTY GREW FROM THE UNIONS, AND THE UNIONS WERE ALWAYS A SIGNIFICANT FORCE IN THE PARTY, ESPECIALLY AS UNION FUNDS FINANCED THE PARTY.

## **The Trade Union Movement**

After a shaky start in the last decades of the 19th century, both the trade union movement and the Labour Party were given a great boost by the outrage in the working class following a court decision in 1901.

AFTER A STRIKE AT TAFF VALE, THE UNION WAS FORCED TO PAY COMPENSATION FOR THE COSTS OF THE STRIKE. THIS INITIAL DECISION WAS REVERSED IN THE TRADES DISPUTES ACT OF 1906 WHICH GAVE IMMUNITY TO UNIONS IN CLAIMS FOR DAMAGES.

The first case was a great step forward for the unions and the Labour Party. The Act gave the unions formidable power to live outside the law, later to be greatly abused.

By 1945, the unions were a very powerful force within the labour movement and the Labour Party. **Denis Healey** (b. 1917), long-time Labour MP, Chancellor of the Exchequer and Foreign Secretary in Labour administrations, said in his autobiography, _The Time of My Life_...

THE TRADE UNIONS AFFILIATED OVER 5.5 MILLION MEMBERS TO THE LABOUR PARTY AND ELECTED 12 MEMBERS TO THE EXECUTIVE... UNION LEADERS ARE UNDER NO OBLIGATION TO CONSULT THEIR MEMBERS ON HOW THEIR VOTES ARE CAST. IN PRACTICE, THE VIEWS OF THE UNION'S NATIONAL EXECUTIVE ARE USUALLY DECISIVE; SO A CHANGE IN ONE INDIVIDUAL ON THE UNION'S EXECUTIVE MAY SHIFT OVER A MILLION VOTES – AND FREQUENTLY HAS.

## **Who Rules?**

But if the leaders of the unions could dominate the Executive of the Labour Party, ironically they were not as powerful within their own unions. Denis Healey again...

_The real power lies not in the union headquarters but with the local shop stewards... Moreover, the TUC_ [Trades Union Congress, i.e. all the bosses of the unions] _has no real power over its constituent unions, unlike its equivalents in Scandinavia, Germany and Austria; in those countries, governments have normally been able to rely on the annual agreements made at national level between centralized organizations of unions and employers, without direct government intervention. This is even more true of Japan, where the recognized need for a national consensus on all major economic issues has made possible 40 years of high growth, full employment, rapidly rising living standards and exceptionally low inflation._

## **"Butskellism", or Consensus Politics**

Appeasement of the unions was not the prerogative of the Labour Party – the Conservatives indulged in it too. Indeed, there was little to choose between the two parties' approach to economic and social issues for the first 30 years after the War. _The Economist_ coined the word "Butskellism" – after the Tory Home Secretary, **Rab Butler** (1902-82) and the Labour leader, **Hugh Gaitskell** (1906-63) – to show how little difference there was in the two parties' approach.

BUTSKELLISM IS A TWO-PARTY CONSENSUS ABOUT...

the Welfare State| a mixed economy  
---|---  
full employment| consultation with the unions

in foreign policy – commitment to NATO (North Atlantic Treaty Organization), the nuclear deterrent, the run-down of Empire and the promotion of the Commonwealth

## **Caution and Restraint**

The Conservative administrations of the 1950s which replaced the Labour administrations of 1945-50 and 1950-51 may have talked of a "bonfire of controls", but in 1960 government expenditure was a higher proportion of GNP (gross national product) at 41% than it had been in 1950 at 39%.

The Conservative Party's conscience about the working class was summed up by **Harold Macmillan** (1894-1986), Prime Minister from 1957-63.

WE MUST REMEMBER THAT THE MEN FROM STOCKTON AND THE YORKSHIRE COALFIELDS HAD FOUGHT AND DIED AT YPRES AND PASSCHENDAELE... NO ONE AND INDEED NO ORGANIZATION OF OUR PEOPLE MUST BE RUSHED. CAUTION, AND, ABOVE ALL, RESTRAINT.

Butskellism prevailed through all of the post-War governments, no matter the majority of the governing party, as shown below.

July 1945 – February 1950| Labour| 204| majority  
---|---|---|---  
February 1950 – October 1951| Labour| 17  
October 1951 – May 1955| Conservative| 74  
May 1955-May 1959| Conservative| 57  
May 1959 – October 1964| Conservative| 107  
October 1964 – April 1966| Labour| 13  
April 1966 – June 1970| Labour| 110  
June 1970 – February 1974| Conservative| 43

THIS ONLY CHANGED WHEN I WAS ELECTED TO THE LEADERSHIP OF THE CONSERVATIVE PARTY IN FEBRUARY 1975.

## **What's Wrong With Britain?**

BY THE 1970S, GREAT BRITAIN LTD. WAS IN A DREADFUL STATE. WHAT WAS WRONG?

There had been the occasional attempt to stand out against the Keynesian approach. For example, Chancellor of the Exchequer **Peter Thorneycroft** (1909-94) and two ministers at the Treasury, **Enoch Powell** (1912-98) and **Nigel Birch** (1906-81)...

Labour Prime Minister **Harold Wilson** (1916-95) tried to bring the unions under some control with the help of **Barbara Castle** (b. 1910), Minister for Employment and Productivity.

WE RESIGNED from THE CONSERVATIVE GOVERNMENT IN JANUARY 1958 OVER MACMILLAN'S REFUSAL TO ACCEPT OUR PROPOSED MONETARIST CUTS IN PUBLIC EXPENDITURE. WE INTRODUCED A WHITE PAPER, **_IN PLACE OF STRIFE_** , IN 1969.

When the unions protested, they backed down, setting the scene for the 1970s, a decade when government policy often seemed to be determined in TUC Congress House.

By the time **James Callaghan** (1912-2005) came to the end of his reign as Labour Prime Minister in 1979, cabinet papers were being sent to the TUC for approval. Callaghan said to the TUC General Council at 10 Downing Street...

WE ARE PROSTRATE BEFORE YOU BUT DON'T ASK US TO PUT IT IN WRITING.

## **The Rise of Heath**

The Tories' long spell in power, later to be dubbed "13 years of Tory misrule", came to an end in October 1964 when the Labour Party under Harold Wilson, promising his "white-hot technological revolution", defeated them. Labour's majority was wafer-thin but in 1966 they improved it to around 100 and the Tories concentrated on re-thinking their policies for the future.

Traditionally, the leader of the Tory Party had been appointed by the grandees of the party after some consultation with other senior MPs.

**Sir Alec Douglas-Home** (1903-96) emerged as a compromise leader after an unpleasant series of squabbles and lobbying when Harold Macmillan resigned in 1963.

WHEN DOUGLAS-HOME STOOD DOWN AFTER HIS DEFEAT BY WILSON IN 1964, THE FIRST ELECTION BROUGHT FORWARD AN UNTYPICAL TORY LEADER... I INSTITUTED A MODERN ELECTION PROCESS. EDWARD HEATH, THE SON OF A CARPENTER FROM BROADSTAIRS, KENT.

During the Tories' period in opposition in the second half of the 1960s, Heath started to shape his ideas, some of which challenged the consensus of the immediate post-War years. Heath talked of curbing the unions, the importance of competition, the need to reshape the welfare state with more emphasis on selectivity, and giving priority to business. Indeed, he told the Tory Party Conference after his Election victory in 1970...

WE WILL EMBARK ON A CHANGE SO RADICAL, A REVOLUTION SO QUIET AND SO TOTAL THAT IT WILL GO FAR BEYOND THE PROGRAMME OF A PARLIAMENT... WE WERE RETURNED TO OFFICE TO CHANGE THE COURSE AND THE HISTORY OF THIS NATION, NOTHING LESS.

## **The End of "Selsdon Man"**

However, the realities of government brought a series of U-turns, though in fact Heath had always believed in the necessity of the state being closely involved in the running of the economy. There had been much talk of allowing lame-duck companies to collapse, but in 1971 the government rescued first Rolls Royce, who had seriously underpriced their world-beating aircraft engine, the RB211, and then Upper Clyde Shipbuilders, whose outdated management and labour practices had made the company hopelessly uncompetitive.

AS INFLATION STARTED TO RISE IN _1972_ , FUELLED BY A RAPID INCREASE IN BANK CREDIT AND LOWERING OF TAKES, I INTRODUCED CONTROLS ON PAY, PRICES AND DIVIDENDS.

The good resolutions of 1970 epitomized in "Selsdon Man" (after a Tory planning meeting at the Selsdon Park Hotel) went by the board. In February 1974, Heath was defeated in a General Election called to ask the country...

The National Union of Mineworkers had called a strike in the middle of a fuel crisis caused by a massive price rise and rationing by OPEC (Organization of Petroleum-Exporting Countries) in the winter of 1973-4.

Heath was defeated again in October 1974 when Labour tried to increase its majority, opening the way for a challenge to his leadership.

WHO RUNS THE COUNTRY, THE GOVERNMENT OR THE UNIONS? BY THIS TIME IT WAS CLEAR THAT THE "BUT SKELLITE" CONSENSUS APPROACH WAS NOT WORKING!

The ineffectiveness of the recently-enacted Industrial Relations Bill added to the general disillusionment.

## **Downslide and Paranoia**

In 1973, **Lord Rothschild** (1910-90), head of the Central Policy Review staff (the civil service think-tank set up by Heath), said...

_From the vantage point of the Cabinet Office it seems to me that unless we take a very strong pull at ourselves and give up the idea that we are one of the wealthiest, most influential and important countries of the world – in other words that Queen Victoria is still reigning – we are likely to find ourselves in increasingly serious trouble. To give just one unpalatable example, in 1985 we shall have half the economic weight of France or Germany._

As if to prove his prophecy correct, the International Monetary Fund (IMF) arrived to "look at the books" in 1976 before agreeing a loan, something that usually only happened to Third World countries.

In 1988, the economic historian Andrew Gamble reminded everyone of the situation in the mid-1970s.

_Events suggested that a major crisis of hegemony was unfolding. Elements of the Right began to question democracy and endorse violence. The emergence of vigilante organizations, the speculation about military coups, and the plotting of elements of the security services against the Labour government were signs of the deep disorientation and profound demoralization which events in the early 1970s had created in sections of the British Establishment._

Such conditions made the time ripe for the Conservatives to elect a new leader.

## **The Intellectual Roots of Thatcherism**

Margaret Thatcher once described **Friedrich von Hayek** (1899-1992) as one of the great intellects of the 20th century. There is no doubt that his book, _The Road to Serfdom_ , published in London in 1944, was a seminal work which provided the philosophical basis of a free and competitive economy. Thatcher, irritated by some "wet" Conservative arguing for the "middle way", is reported to have pulled Hayek's _The Constitution of Liberty_ from her briefcase, held it up for all to see and banged it down on the table.

THIS IS WHAT WE BELIEVE!

Hayek was born in Vienna in 1899 into a minor aristocratic and strongly academic family. Ludwig Wittgenstein was a cousin and, like him, Hayek served in the Austrian army in the First World War. At the University of Vienna in the early 1920s he studied philosophy and economics and expounded mildly socialist views. One of his teachers was **Ludwig von Mises** (1881-1973), an outstanding developer of the Austrian school of economics.

MISES WAS **_THE_** RADICAL FREE MARKET ECONOMIST AND HIS **_SOCIALISM_** , PUBLISHED IN **_1922_** , CONVINCED ME OF THE INEFFICIENCY OF CENTRALIZED CONTROL AND TURNED ME INTO A CLASSIC LIBERAL.

Hayek and Mises saw society's function as encouraging individual activity and protecting diversity. This was in sharp contrast to the socialists who felt society should be fundamentally concerned with shepherding or persuading people towards achieving the common good. Hayek concluded that liberty under a minimalist state was the ideal.

## **A Free Market Philosophy**

Hayek's writing provided Keith Joseph and Margaret Thatcher with the philosophical justification for what they said to the British public.

FALSE MONETARY AND CREDIT POLICY, PURSUED THROUGH ALMOST THE WHOLE PERIOD SINCE THE LAST WAR, HAS PLACED THE ECONOMIC SYSTEMS OF ALL THE WESTERN INDUSTRIAL COUNTRIES IN A HIGHLY UNSTABLE POSITION. THE ARGUMENT OFTEN ADVANCED THAT INFLATION PRODUCES MERELY A REDISTRIBUTION OF THE SOCIAL PRODUCT, WHILE UNEMPLOYMENT REDUCES IT AND THEREFORE REPRESENTS A WORSE EVIL, IS THUS FALSE, BECAUSE INFLATION BECOMES THE CAUSE OF INCREASED UNEMPLOYMENT.

THE MORALITY OF INDIVIDUAL RESPONSIBILITY OF THE ABLE FOR THE WELFARE OF HIMSELF AND HIS FAMILY IS STILL THE BASIS FOR MOST MORAL JUDGEMENTS OF ACTION. THUS IT IS THE INDISPENSABLE FRAMEWORK FOR THE PEACEFUL WORKING OF ANY COMPLEX SOCIETY. IT TOOK A LONG TIME TO CONVINCE SOCIALISTS THAT CENTRAL PLANNING IS INEFFICIENT.

## **Free Market Democracy**

In Britain in the 1970s, as the trade union barons held the country to ransom, Joseph and Thatcher did not need to look further than Hayek to show people what was happening: _For progress towards its aims, socialism needs government with unlimited powers... In such a system various groups must be given, not what a majority thinks they deserve, but what these groups think they are entitled to._

By this Hayek meant that people should be paid what others are willing to pay for their services and it is wrong for society to try to put a value on those services. It is likely that this purely economic argument led Thatcher, towards the end of her period in office, to make a remark that probably did her more harm than almost any other.

THERE IS NO "VALUE TO SOCIETY". THERE IS NO SUCH THING AS SOCIETY.

## **Social Justice**

Hayek was also critical of "social justice".

_When government interference is demanded in the name of social justice this now means, more often than not, the demand for the protection of the existing relative position of some group. "Social justice" has thus become little more than a demand for the protection of vested interests and the creation of new privilege, such as when in the name of social justice the farmer is assured "parity" with the industrial worker._

IF THE INDIVIDUAL IS TO BE FREE TO CHOOSE, IT IS INEVITABLE THAT HE SHOULD BEAR THE RISK ATTACHING TO THAT CHOICE AND THAT IN CONSEQUENCE HE BE REWARDED, NOT ACCORDING TO THE GOODNESS OR BADNESS OF HIS INTENTIONS, BUT SOLELY ON THE VALUE OF THE RESULTS TO OTHERS.

## **Individualism and Equality**

_When we turn to equality, it should be said at once that true individualism is not equalitarian in the modern sense of the word. It can see no reason for trying to make men equal as distinct from treating them equally. While individualism is profoundly opposed to all prescriptive privilege, to all protection, by law or force, of any rights not based on rules equally applicable to all persons, it also denies government the right to limit what the able or fortunate may achieve._

AN ECONOMIC SYSTEM IN WHICH EACH GETS WHAT OTHERS THINK HE DESERVES WOULD NECESSARILY BE A HIGHLY INEFFICIENT SYSTEM – QUITE APART FROM ITS BEING ALSO AN INTOLERABLY OPPRESSIVE SYSTEM.

## **Privatization**

In his criticism of state monopolies, Hayek was providing the philosophical justification for the eventual Thatcher privatization programme.

ALL GOVERNMENT-SUPERVISED MONOPOLIES TEND TO BECOME GOVERNMENT-PROTECTED MONOPOLIES WHICH WILL PERSIST WHEN THEIR JUSTIFICATION HAS DISAPPEARED.

Thatcherites also found support for their determination to reduce the monopolistic power of the trades unions: _The monopolistic practices which threaten the functioning of the market are today much more serious on the side of labour than on the side of enterprise, and the preservation of the market order will depend much more than on anything else, on whether we succeed in curbing the former._

## **The Institute of Economic Affairs**

Hayek's teaching and that of **Milton Friedman** (1912-2006)-especially his book, _Free to Choose_ , whose main thesis propounded that when the free market is allowed to operate with the least interference from government the result is a highly desirable combination of economic progress and political freedom – found expression through the Institute of Economic Affairs (IEA).

The IEA was founded by a businessman, **Antony Fisher** , in 1957. Fisher had been greatly influenced by his reading a précis of Hayek's _The Road to Serfdom_ in, of all things, _Reader's Digest_ , in 1944. He sought out Hayek at the London School of Economics.

A LIBERAL MUST MAKE AN INTELLECTUAL CASE AMONGST INTELLECTUALS FOR WHAT HE BELIEVES IN.

In the 1950s Fisher's Buxted Chicken Company became very successful, providing him with the money to set up the IEA, an organization to convert intellectual opinion exemplified by teachers, academics, students and leading journalists. **Ralph** (now **Lord** ) **Harris** (1924-2006)became the lEA's first director general, moderating Fisher's original idea.

THE **_IEA_** SHOULD NOT BECOME IDENTIFIED WITH ANY PARTICULAR PARTY. I WAS A STRONG CONSERVATIVE.

In 1959, a Liberal Party supporter, **Arthur Seldon** (b. 1916), became editorial director. Born in the East End of London, he lost both parents before he was three. Nevertheless he went on to win a scholarship to the London School of Economics, and became a dedicated supporter of the virtues of market capitalism and an opponent of socialism and collectivism.

In his book _Capitalism_ (1990), Seldon attacked the collective consensus which he felt had operated in Britain since 1939.

## **Joseph and the IEA**

The IEA was initially ignored by all politicians except Keith Joseph. He began to read its publications after 1964 and to discuss the economic theory with Harris and Seldon, and in 1974 he received a course in IEA classical liberalism.

IT WAS ONLY IN APRIL _1974_ THAT I WAS CONVERTED TO CONSERVATISM. I HAD THOUGHT THAT I WAS A CONSERVATIVE BUT NOW I SEE I WAS NOT REALLY ONE AT ALL.

**Alfred Sherman** (b. 1919), who, as we shall see, played a major role in the development of Joseph's thinking at this time, said of the IEA: _Had it not been for the IEA there would have been no Thatcher revolution. They prepared the ground. They were the John the Baptist of the 1950s and 1960s – pace Enoch Powell – the voice crying in the wilderness._

The lEA's work was complemented by that of the Adam Smith Institute, named after one of the founding fathers of classical economic liberalism, **Adam Smith** (1723-90), whom many Thatcherites regarded as the founder of their beliefs.

## **Enoch Powell**

At the same time, Enoch Powell was extolling to the Tory Party the value of the capitalist free economy which both Hayek and the IEA were advocating. Only that could make sure that "men shall be free to make their own choices, right or wrong, wise or foolish, to obey their own consciences, to follow their own initiatives".

HE ATTACKED SOCIALISTS AND THEIR PLANNING. A LITTLE GROUP OF FALLIBLE MEN IN WHITEHALL, MAKING GUESSES ABOUT THE FUTURE, INFLUENCED BY POLITICAL PRESSURES AND PARTISAN PREJUDICES AND WORKING ON PROJECTIONS DRAWN FROM THE PAST BY A STAFF OF ECONOMISTS.

Powell wanted the flexibility of the market, "the ceaseless revision to which firms and industries and individuals are all the time subjecting their plans and their intentions. Thus change comes naturally, quietly and swiftly, before the economists have got around to noticing."

He was deeply critical of Heath and his method of trying to curb inflation by controlling wages and prices. These were merely the symptoms of inflation. The cause was the printing of money.

UPON THE SOUND WORKING OF THE MONEY SYSTEM AND ABOVE ALL UPON THE STABILITY AND HONESTY OF THE CURRENCY DEPEND NOT ONLY THE OPERATIONS OF INDUSTRY AND COMMERCE BUT THE STRUCTURE OF SOCIETY ITSELF.

While Thatcher and her close supporters acknowledged their debt to Powell privately, senior Conservative **Ian Gow** (1937-90) said openly: _I probably have every one of his speeches on my bookshelves. I studied them. It was his influence, his very clear, very great lucidity. What he was saying long before 1974 is said by everybody now. He was a monetarist, right back._

WE COULD NOT ASSOCIATE WITH HIM TOO OPENLY. HE HAD, AFTER ALL, INVITED THE ELECTORATE TO VOTE LABOUR IN THE _1974_ ELECTION AS BEING THE BEST WAY OF EXTRACTING BRITAIN FROM THE COMMON MARKET!

And it was Keith Joseph who provided the link between Hayek, Powell and the IEA to Thatcher's thinking, largely through the Centre for Policy Studies (CPS).

## **The Centre for Policy Studies**

The CPS was the idea of Alfred Sherman, a Jew brought up in Hackney in the East End of London. With a Labour councillor father, Sherman was initially a socialist and joined the International Brigade, serving in Spain as a machine-gunner. When he returned to England in 1938 he was a Marxist. After the War he went to the London School of Economics and graduated into journalism.

I GRADUALLY BECAME DISILLUSIONED WITH COMMUNISM, EVEN WITH MILDER SOCIALISM, AND CAME TO SEE THE CONSERVATIVE PARTY AS THE ONLY POSSIBLE INSTRUMENT FOR ECONOMIC REFORM. YOU KNOW WHO WAS CENTRAL TO ME? ALFRED SHERMAN. HE WAS VERY IMPORTANT.

Sherman was the man of energy who spurred the somewhat cerebral Joseph into action. It was Sherman who gave Keith Joseph the idea of a think-tank, independent of the Conservative Party and privately funded.

I TOOK THE IDEA TO HEATH WHO AGREED TO IT. GOOD... THIS WILL KEEP JOSEPH AWAY FROM THE CENTRE OF AFFAIRS.

Joseph became the first chairman of the CPS, Sherman its director of studies. Thatcher and **Geoffrey Howe** (b. 1926) became directors, as well as **Nigel** (later **Lord) Vinson** (b. 1931), a successful businessman who had built up his own company before selling it in the 1960s. Sherman said of the CPS: _We started out to change the Conservative Party's approach; hence our primary aim was not to wean socialists away from socialism but to wean Conservatives away from the corporate state and Keynesian panaceas, which had helped bring about the Heath debacle... Our second major aim was trade-union reform._

## **Thatcher's Roots**

We must always remember that Thatcher was an _elected_ leader. Furthermore, she was _not_ of the Establishment. She saw her roots amongst the middle class, if not indeed the lower middle class.

I BLAME THE ESTABLISHMENT FOR ALLOWING THE COUNTRY TO DECLINE INTO ITS SORRY STATE!

As **Lord Blake** (b. 1916 **)** , the leading Conservative historian, said in 1989: _I don't think it's the world of White's, Pratt's and Brook's_ [leading social clubs] _that she feels let down by, but the world of the Athenaeum_ [élite academic, senior profession and ecclesiastical] _and the Reform_ [media, politics and civil service]; _that's the Great and the Good. I think she does feel that a lot of the Great and the Good have let the country down. It is not accidental that she's never appointed a Royal Commission._

## **Upbringing**

Margaret Hilda Roberts was born on 13 October 1925, the younger daughter of Alderman Alfred Roberts (1893-1969) and Beatrice Roberts (d. 1960). She was to say later, "I owe almost everything to my father". Indeed her mother, who was a practical but passive housewife, was even excluded from Margaret Thatcher's _Who's Who_ entry. When this was pointed out to her by a _Radio Times_ interviewer in 1993, she became flustered.

WHAT DO YOU MEAN? HOW COULD I NOT? SHE WAS MY MOTHER. OH DEAR, DIDN'T I? WELL, I MUST CORRECT THAT.

Alfred Roberts was a self-made man. The son of a Northamptonshire shoemaker, he left school at 13 and went into the grocery business. In his early twenties he married and opened his own shop on the corner of the main London-Edinburgh road and the road to Nottingham, in a small sleepy town in the middle of England, Grantham.

Margaret said in a speech in 1982...

"Some say I preach merely the homilies of housekeeping or the parables of the parlour. But I do not repent. Those parables would have saved many a financier from failure and many a country from crisis."

BOTH OF MY DAUGHTERS WERE BORN ABOVE THE SHOP AND WERE BROUGHT UP STRICTLY TO BELIEVE IN HARD WORK, SELF-HELP, RIGOROUS BUDGETING AND THE IMPORTANCE OF SAVING.

Alfred, though ill-educated himself, held a great respect for the benefits of education and was determined that Margaret, whom he saw as the brighter of his two daughters, should have the best education he could organize. There were piano lessons, compulsory library visits and attendance at an elementary school at the smarter end of town where Margaret was remembered as a questioning, eager pupil with a bulging satchel. She told the _Daily Telegraph_ in 1980...

I WAS A VERY SERIOUS CHILD... THERE WAS NOT A LOT OF FUN OR SPARKLE IN MY LIFE.

Another dominant influence was Methodism. On Sundays, no newspapers were allowed and there were two visits to the Methodist church where Alfred preached.

WE WERE METHODISTS, AND METHODIST MEANS METHOD. DUTY WAS VERY, VERY STRONGLY INGRAINED INTO US. DUTIES TO THE CHURCH, DUTIES TO YOUR NEIGHBOUR AND CONSCIENTIOUSNESS WERE CONTINUALLY EMPHASIZED.

Alfred also set the example of public service. He was a local councillor and became mayor in 1945. He was a governor of Kesteven and Grantham Girls' School, and later chairman. He was also a Justice of the Peace.

At school Margaret was hard-working, and although well-behaved and quiet she would always have a question for a visiting speaker. Her final report said: _Margaret is ambitious and deserves to do well._

In 1943 she won a place at Somerville College, Oxford, where she read chemistry. She continued to be hard-working and efficient and, although not considered brilliant, was selected as an assistant by Professor Dorothy Hodgkin, who later won a Nobel Prize.

While at Oxford, her interest in politics was already surfacing, and she joined the Conservative Association. In the 1945 General Election she canvassed for **Quintin Hogg** (1907-2001).

Her tutor at Somerville, Janet Vaughan, said: _She was to me extremely interesting because she was a Conservative. The young at that time, especially at Somerville, were all pretty left-wing. She wasn't an interesting person except as a Conservative. If I had interesting, amusing people staying with me, I would never have thought of asking Margaret Roberts, except as a Conservative._

When Margaret left Oxford in 1946 she used her chemistry degree to secure a job as a research chemist at British Xylonite Plastics in Manningtree, testing plastics for spectacle frames. After a year she moved to a J. Lyons factory in Hammersmith, testing the quality of cake fillings and ice cream. But this was just earning a living.

POLITICS WAS MY PASSION, AND IN THE 1950 ELECTION I STOOD AS THE CONSERVATIVE CANDIDATE FOR DARTFORD IN KENT.

She was faced with a 20,000 Labour majority and lost. At the next Election in 1951 she stood and lost again.

At this point her political career could have foundered, but she had met a local businessman, **Denis Thatcher** (1915-2003), and after her second defeat at the polls he asked her to marry him. They were married in December 1951. Later Margaret admitted the debt she owed to Denis, telling _The Guardian_ in 1962: "I do not need to worry about money."

Margaret began to read for the Bar and passed her exams in December 1953. Thereafter she practised tax law on and off for five years. She told the _Sunday Graphic_ in February 1952 that married women should be able to have careers: "In this way, gifts and talents that would otherwise be wasted are developed to the benefit of the community."

Commenting on the fact that there were only 17 women among the 625 MPs, she said...

SHOULD A WOMAN ARISE EQUAL TO THE TASK, I SAY LET HER HAVE AN EQUAL CHANCE WITH THE MEN FOR THE LEADING CABINET POSTS. WHY NOT A WOMAN CHANCELLOR, OR FOREIGN SECRETARY?

Denis' money allowed Margaret to pursue her political career single-mindedly. She gave birth to twins, Mark and Carol, in 1953.

Her relationship with the children was not close, although Mark stands accused of financially exploiting his relationship to her once she became Prime Minister. Carol wrote a book about her father in 1996, _Below the Parapet_ , and made one or two references to her mother's lack of interest.

BUT A LIVE-IN NANNY WAS EMPLOYED TO LOOK AFTER THEM. SHE WAS PRONE TO CALLING ME BY HER SECRETARIES' NAMES AND WORKING THROUGH EACH OF THEM UNTIL SHE GOT TO CAROL.

## **Becoming an MP**

Her frustration in the 1950s was not finding a Parliamentary seat. She tried for adoption in Orpington for a by-election but was rejected. Beckenham, Maidstone and Oxford all turned her down, but finally in 1958 her luck changed. Finchley in North London became vacant.

IT'S AN IDEAL SEAT IF I CAN WIN ADOPTION-A 12,000 TORY MAJORITY, MIDDLE-CLASS, UPWARDLY MOBILE, WITH OWNER-OCCUPIERS IN THE MAJORITY, AND 20% JEWISH.

There were 200 applicants. She was short-listed, and against three middle-of-the-road typical Tory MP types, she won on the second ballot.

At the next General Election in 1959 she increased her majority to 16,260. Ironically, it was the Election when Prime Minister Harold Macmillan made his famous remark: _Let's be frank about it, most of our people have never had it so good._

It was the high-tide of Conservative post-War consensualism and Thatcher was later to deride it for its lax fiscal discipline and feebleness in controlling public spending. Harold Wilson, leader of the Labour Party after Gaitskell, described Britain in the early 1960s as a "candy-floss society".

But Thatcher could not be worrying about the macro picture. At this point she had to make her mark as an ordinary MP. She made a strong and well-received maiden speech.

UNUSUALLY, IT WAS ATTACHED TO A PRIVATE MEMBER'S BILL WHOSE PURPOSE WAS TO GIVE THE PRESS RIGHTS OF ACCESS TO MEETINGS OF LOCAL COUNCILS.

Her mistrust of local government, so apparent when she became Prime Minister, went back a long way.

Her abilities were soon noted and she was appointed Parliamentary Secretary to the Ministry of Pensions. Three years' conscientious work there added a dislike of civil servants to her mistrust of local government.

## **A New Leader in 1975**

The most obvious candidate from the right wing of the Tory Party was Keith Joseph, but he killed his chances with one passage from a speech he made to Birmingham Conservatives in which he expressed his concern at the quality of the population.

There was an immediate outcry and Joseph withdrew. Thatcher put her name forward. All the other heavyweight candidates were constrained by their loyalty to Heath. Furthermore, this relatively unknown woman was unwittingly helped by Heath himself.

TOO MANY BABIES WERE BEING BORN TO PEOPLE AT THE BOTTOM END OF THE SOCIAL SCALE. I MADE HER NUMBER TWO SHADOW SPOKESPERSON ON TREASURY AFFAIRS. AND I MADE EVERY USE OF MY POSITION TO GOAD CHANCELLOR OF THE EXCHEQUER DENIS HEALEY INTO DIGNIFYING ME BY CALLING ME... THE PASIONARA OF PRIVILEGE!

Thatcher's campaign was masterminded by the scheming **Airey Neave** (1916-79). There could be no better plotter than this ex-POW who had himself escaped from Colditz Castle in the War and then organized other escape routes across Europe. Before the vote he whispered to Labour minister, **Roy Hattersley** (b. 1932)...

MY FILLY IS GOING TO WIN. AND HE WAS RIGHT. THE RESULTS OF THE FIRST BALLOT SHOWED IT.

Margaret Thatcher| 130  
---|---  
Edward Heath| 119  
Hugh Fraser| 16

This result was not enough for an outright win but it knocked out Heath and left the way open for the Tory heavyweights to enter the ring. However, Thatcher's momentum was now unstoppable and the results of the second ballot were:

Margaret Thatcher| 146  
---|---  
Willie Whitelaw| 79  
Geoffrey Howe| 19  
James Prior| 19  
John Peyton| 11

The Tory Party had a new leader. Life would never be the same again.

## **Who Helped Thatcher to Power?**

It is easy to fall into the trap of thinking that Thatcher always dominated the Tory Party from the moment she was elected leader. By the mid-1980s she certainly did dominate it. But in 1975 she did not.

Even _The Economist_ , later to become a strong supporter of Thatcher, declared itself for Heath before the leadership election. She herself knew that her challenge was a tremendous gamble.

SHE WAS USED AS A MEANS OF GETTING RID OF HEATH – AND WE DIDN'T HAVE ANYBODY ELSE. I KNOW THAT IF I LOSE, MY POLITICAL CAREER IS OVER.

Questions were raised about the desirability of having for leader a Grantham grocer's daughter with a second-class degree in Chemistry, who was only in politics because of a rich husband.

## **Thatcher's Early Allies**

Thatcher needed allies. Her first three were: **Willie Whitelaw** (1918-99)

I HAD INSTANTLY DECLARED MY LOYALTY AFTER MY DEFEAT IN THE LEADERSHIP ELECTION. IN SPITE OF THE FACT OF BEING CLOSELY INVOLVED WITH DRAFTING HEATH'S INCOMES POLICY. I DESCRIBED HEATH AS A GLORIFIED MANAGEMENT CONSULTANT.

At her first party conference in autumn 1975, Thatcher made her position clear.

_Britain and socialism are not the same thing, and as long as I have health and strength they never will be... Let me give you my vision: a man's right to work as he will, to spend what he earns, to own property, to have the state as servant and not as master; these are the British inheritance. They are the essence of a free country, and on that freedom all other freedoms depend._

In the background, Keith Joseph was making speeches propounding the view that government could not create jobs, should not intervene on incomes and could not act in the public interest by increasing demand.

In 1977 the party produced a pamphlet, _The Right Approach to the Economy._ It was largely the work of Joseph, Howe, **David Howell** (b. 1936), a strong Thatcher supporter, and **Jim Prior** (b. 1927), who could be considered a Tory who still favoured "the middle way".

THE DOCUMENT EMPHASIZED CONTROL OF THE MONEY SUPPLY... LOWER TAXES ON EVERYTHING BUT SPENDING... LOOSENING OF PAY DIFFERENTIALS... AND THE REMOVAL OF UNNECESSARY RESTRICTIONS ON BUSINESS EXPANSION.

Interestingly, privatization was hardly mentioned, and there was not a single commitment to hostile measures against the trade unions.

## **Thatcherites in the Late 1970s**

As well as Joseph and Sherman, others now began to line up behind Thatcher, urging a new approach.

**John** (now **Sir John) Hoskyns** (b. 1927), a handsome, articulate businessman, had joined the army after Winchester, and then IBM. He had set up his own computer business and sold it in 1975. He saw business as the agent of economic recovery and initially did not care which party he supported as long as they would listen to him. However, his dislike of trade unions led him inevitably to the Tories and, as the unions behaved in a more and more autocratic fashion in the late 1970s, he made it his job to turn them into a liability for the Labour Party. He determined to "drag every skeleton out of the union cupboard, linking it with Labour".

Hoskyns put it in down-to-earth terms.

_By the early 1970s it was quite clear... that the UK really was going down. I spent a lot of my time in the USA on business and I began to realize what a scruffy, second-rate little economy we were. And there were Americans who were beginning to say, "We're worried that we're going the same way as you are!"._

## **Inventing the Thatcher Image**

**Gordon Reece** (1929-2001), a producer of TV light entertainment programmes, soon gained "an apparently unassailable place in Mrs T's affections" and the _Sunday Times_ said of him: _She likes him and admires him and so she's going to look after him..._

HE MAKES ME LAUGH, I LIKE THAT.

He was the forerunner of what came to be seen as the Thatcherite stereotype. A natty dresser, charming and a bit flash, he smoked big cigars and drank only champagne. His father, a car salesman from Liverpool, had sent him to a minor Roman Catholic public school, Ratcliffe. In 1979 he separated from his wife and six children and moved between hotels and the houses of friends.

Reece took it on himself to school Thatcher in her TV presentation, advising her to avoid fussy clothes, jewellery and plunging necklines.

I WANTED HER IN A TUNIC DRESS WITH A BLOUSE UNDERNEATH. I ALSO LOWERED HER SHRILL VOICE AND RE-SHAPED HER HAIR. WITH FRONT-MAN **_TIM_** (NOW **_SIR TIM_** ) **_BELL_** (B.1941) WE WERE GIVEN RESPONSIBILITY FOR PROJECTING A NEW IMAGE FOR THE TORY PARTY IN TIME FOR THE NEXT ELECTION.

Another active supporter of Thatcher during the opposition years was **Angus Maude** (1912-93), who was chairman of the Conservative Research Department.

I DRAFTED MANY OF THE KEY PARTY PUBLICATIONS, INCLUDING **_THE RIGHT APPROACH_** ( ** _1976_** ) AND **_THE RIGHT APPROACH TO THE ECONOMY_** ( ** _1977_** ). I WAS A PIONEER OF PRIVATIZATION, SAYING OPENLY IN THE LATE 1970S THAT ALL THE NATIONALIZED INDUSTRIES WERE A DISGRACE.

**Norman Strauss** was another key planner in the development of Thatcherite plans in the late 1970s. He worked closely with Hoskyns to produce _Stepping Stones_ , effectively the blueprint for Thatcher's first term,1979-83.

**Norman Tebbit** (b. 1931) became the quintessential Thatcherite MP, happy to describe himself as "upwardly mobile". An early and vociferous supporter of Thatcher's leadership bid, he worked closely with Airey Neave on briefing Thatcher for Parliamentary Questions. He was well rewarded with government posts when Thatcher came to power, and helped give the Thatcher administrations a reputation for harshness with his comment at the 1981 Tory conference, as unemployment soared:

MY FATHER DID NOT WHINGE IN THE 1930S BUT GOT ON HIS BIKE TO FIND WORK.

Supported passionately by this group, especially for the first ten to twelve years of her leadership, Thatcher was able to turn the Tory Party away from the British post-War consensus. She had learnt from reading Hayek and Friedman, but she did not make the mistake of turning them into party dogma. She wanted people to have a mood about Britain, not work from a set of texts. Sherman said: _It is very difficult to say Hayek was a guru for Keith and Margaret. I would say not. They turned to Hayek and Friedman to justify what they already thought._

## **Early Champions of Monetarism**

**Alan Walters** (1926-2009), whose father was a Communist, came from a working-class home in Leicester and served as a private during the Second World War. He had met Enoch Powell in the early 1950s and both became convinced that monetarist economics was important for Britain. Powell introduced Walters to both **lain Macleod** (1926-70), who was to be Chancellor of the Exchequer very briefly in Heath's administration in 1970 before dying suddenly, and Keith Joseph. Walters was also in touch with the economists at the IEA. Convinced, after a spell as visiting professor of economics at Northwestern University in Evanston, Chicago, of the importance of the quantity of money in the economic system, he was shocked when he returned to Britain in 1959.

MOST CIVIL SERVANTS DID NOT KNOW WHAT I WAS TALKING ABOUT!

Furthermore, the _Radcliffe Report_ on the monetary and credit system had just been published and said that the supply of money was of no interest to economic management. Walters said: "The view prevalent among British economists, and confirmed by the _Radcliffe Report..._ was dangerously wrong."

Keith Joseph held discussions with Walters during the 1960s on monetarist theories and applications. He introduced Thatcher to him and the two politicians would go to Walters' apartment for tutorials in economics. Walters was to become totally disillusioned with Heath, especially after his U-turn, and with Wilson.

I DECIDED THAT BRITAIN FACING THE ALTERNATIVES OF WILSON AND HEATH, HAD A CHOICE BETWEEN THE DEVIL AND THE SHALLOW BLUE SEA. WHATEVER THE POLITICAL OUTCOME, BRITAIN WAS IN FOR A PRONOUNCED DECLINE INTO THE ABSURDITIES OF CONTROLS, PLANNING AND DIRIGISME.

Walters left for the USA but kept in touch and, thanks to Sherman, returned to Britain when Thatcher was in power in 1980.

A slightly incongruous Thatcher supporter in the late 1970s was her speech writer, **Ronnie Millar** (1919-98), odd because he had written speeches for Heath. When Thatcher arrived as leader in 1975 someone suggested him and she agreed to look at what he wrote. His first speech for her, on Conservative philosophy, ended with an Abraham Lincoln quote.

YOU CANNOT ENRICH THE POOR BY IMPOVERISHING THE RICH. YOU CANNOT STRENGTHEN THE WEAK BY WEAKENING THE STRONG. AFTER THAT, MILLAR COULD DO NO WRONG. AFTER THAT, MILLAR COULD DO NO WRONG.

## **In Power – May 1979**

The have-plentys and want-mores were eager for Thatcher, while the have-nots, have-littles and have-problems were not so sure. In the end, the timing of the Election, fatally delayed by Callaghan from the autumn of 1978, gave the unions the whole winter to break his pay policy and cause absolute havoc. The Tories gained 69 more seats than Labour and an overall majority of 41.

What had Thatcher promised?

I WAS DETERMINED TO AVOID THE TRAP INTO WHICH HEATH FELL TEN YEARS EARLIER.

Heath's government had come to power with well-researched and detailed plans, but when they were subjected to the multifarious pressures of office they displayed rigidity and broke, and Heath reverted to "incomes policy, lavish industrial support and eventual coalition centrism". ( _The Economist_ , April 1979)

Nevertheless, certain promises had been made and Thatcher was determined to keep them.

And she had, as Ferdinand Mount wrote in the _Spectator_ :... _said it again... and again, and again... she stands for less government and lower taxes and for people standing on their own two feet... Whether Margaret Thatcher succeeds or fails as Prime Minister, there can be no doubt that as leader of the opposition she has gingered up the argument._

Before looking at the effects of Thatcherism on British institutions, we must have some chronology of the Thatcher years in power, highlighting the main events.

Thatcher came to power at a singularly unpropitious moment economically. On the international scene, the world was still recovering from the recession caused by the quintupling of oil prices in 1973/4.

AND IT WAS PLUNGED INTO ANOTHER RECESSION BY THE FURTHER DOUBLING OF OIL PRICES FOLLOWING THE TURMOIL IN THE MIDDLE EAST AT THE EXPULSION OF THE SHAH OF IRAN.

Domestically, Thatcher had made a mistake in promising to honour the inflationary pay awards suggested by the Clegg Commission.

The Clegg Commission had been set up by the Labour government in response to the public sector strikes in "the winter of discontent", 1978-9. As Hugo Young said in his book, _One of Us:_

_Clegg produced a formula of great extravagance. It eventually led to a 25% increase in the public sector wage bill over 12 months. It said nothing about waste, nothing about manning and was, in effect, an incomes policy which did not even have the merit of restraining pay._

However, Thatcher, desperate for power and fearful of alienating public sector voters, agreed to honour it.

EVEN THOUGH I KNEW IT WOULD BE AN ALBATROSS AROUND MY NECK!

The British economy was where Thatcher wanted to concentrate her efforts.

BUT I WAS FORCED TO SPEND A GREAT DEAL OF MY TIME TRYING TO FINALIZE A REASONABLE SETTLEMENT OF THE RHODESIA PROBLEM. AND I COULD HAMMER AWAY AT THE EUROPEAN HEADS OF STATE ABOUT BRITAIN'S "EXCESSIVE" CONTRIBUTIONS.

As the problems of the British economy proved even more intractable than she expected, it suited her to blame the Europeans for taking "our" money.

But in her first administration the major issue was the British economy. As the world slid into another recession, Britain's structural weaknesses – reliance on smoke-stack industries, overmanning, poor productivity, weak management and intransigent unions – were cruelly exposed. Even the one piece of good fortune – North Sea Oil, by this time in full flow – proved harmful in the sense that it helped drive the £ higher and higher, thereby intensifying the squeeze on British manufacturers. Some felt that Thatcher and one or two others in her government were not unhappy about a high exchange rate facilitating the closure of obsolete smokestack industries.

## **"The Lady's Not For Turning"**

1980 was a very difficult year. Manufacturing output fell sharply and unemployment rose by 836,000 (more than any year since the 1930s). Between July 1979 and July 1980, prices rose by 22%, wages by 20%. As the monetarist approach, so long and determinedly advocated by the Thatcherites in opposition, was clearly not working and was apparently destroying not only the worst but also some of the better British manufacturers, morale plunged in the ranks of the government. However, one person remained obdurate and, with the help of her speech-writer, Ronnie Millar, came up with a memorable line at the 1980 Conservative Party conference where everyone was talking of the inevitable U-turn:

YOU TURN IF YOU WANT TO. THE LADY'S NOT FOR TURNING.*

In the spring of 1981, with unemployment at 2.7 million and still rising and output down 5.5% in two years, there was enormous pressure for the Budget to reduce the squeeze on spending and taxes. Most in the Treasury and even supposed monetarists like the Chancellor, Geoffrey Howe, favoured a little relaxation.

BUT THATCHER WAS CONVINCED BY ALAN WALTERS AND JOHN HOSKYNS. IT IS NECESSARY TO CONVINCE THE MARKETS THAT THIS REALLY IS A GOVERNMENT DETERMINED TO REDUCE INFLATION.

The result was a budget which, to the incredulity of many, increased taxes further and reduced public spending. With hindsight the Thatcherites claimed it as the budget which laid the foundation for the successful growth of the 1980s.

## **Battling the Unions**

The other great battle of Thatcher's first administration was with the unions. Her government faced down a number of major strikes, including a national steel strike in 1980.

Although in this case, the employers did raise their offer from 2% to 16%...

THE ENDING OF THE STRIKE WAS FOLLOWED BY A MASSIVE LAY-OFF LEADING TO DRAMATIC GAINS IN PRODUCTIVITY! THERE WAS A CIVIL SERVICE STRIKE IN 1981 WHICH LASTED FIVE MONTHS. HOSPITAL WORKERS, INCLUDING NURSES, ALSO TOOK PROLONGED INDUSTRIAL ACTION... IT DRAGGED ON AT GREAT COST BECAUSE THATCHER REFUSED TO SETTLE IT. AND THERE WERE SEVERAL STRIKES ON THE RAILWAYS...

But Thatcher gradually got the message over. These were different days from the 1970s when "beer and sandwiches" with the union leaders at No. 10 was the prelude to another abject government surrender. Thatcher did occasionally meet union leaders if she couldn't avoid it, but she treated them with contempt, saying in the Commons...

WHEN ABOUT 40 OF THEM COME TO SEE ME, THE DIFFICULTY IS TO PERSUADE 37 OF THEM TO SAY ANYTHING AT ALL.

All of this strife meant that by the end of 1981 the opinion polls were giving the Tories a very low rating but, significantly, also showed Thatcher to be the most unpopular Prime Minister (only a 23% approval) since polling began.

## **The Falklands Rescue**

As dreadful 1981 turned into dismal 1982, an event took place which had everyone scrambling for their atlases. Argentina grew impatient with the British Foreign Office's ambiguous signals over their future intentions towards the Falkland Islands (the Malvinas to the Argentinians), and invaded them.

REJOICE! REJOICE!

Thatcher could be accused of negligence before the event. Once it had occurred, transformed into Warrior Queen, she gave it her undivided attention until she emerged victorious two months later with 255 British and 650 Argentinian dead. Allied to her victories over the unions and the "wets" in her cabinet, it made her position unassailable and guaranteed her another term in office. By June 1982 her approval rating had soared from the 23% in December to 51%.

The jingoists loved it – winning wars again, the British have always been good at that. The more thoughtful wondered why the whole affair was not referred to the United Nations. Others were sickened by the triumphalist tone of the celebrations over the victory.

But many Thatcherites were less than impressed when Archbishop Runcie at the victory thanksgiving service in St Paul's Cathedral remembered the Argentinian as well as the British mourners.

THE SERMON WAS BETTER THAN EXPECTED – BUT THIS WAS MORE THAN COULD BE SAID FOR THE REST OF THE BLOODY SERVICE.

## **The Second Administration, 1983-7**

The dominant theme of Thatcher's second administration was again the economy. By this time, it presented a happier picture, with unemployment stabilizing and then falling, inflation staying under control, output rising and productivity improving. Whereas her first administration had been hampered by a sharp rise in the price of oil, her second was aided by a sharp decline.

Immediately after the Election in June 1983 she carried out a major cabinet reshuffle, in which the most significant change was the replacement of Geoffrey Howe with **Nigel Lawson** (b. 1932) as Chancellor.

INTELLECTUALLY STRONGER THAN HOWE, LAWSON BECAME A COMMITTED CUTTER OF BOTH PUBLIC EXPENDITURE AND TAXES. I WAS CHANCELLOR WHILE THE BRITHISH ECONOMY GREW FASTER AND FOR LONGER THAN AT ANY TIME SINCE THE 1960S.

He was also Chancellor during the period when one of Thatcherism's more enduring legacies, privatization (again, more later), moved to "full ahead".

## **Tackling the Unions Again**

The great battle of Thatcher's second administration was with the National Union of Mineworkers. The defeat of the Callaghan Labour government in May 1979 which brought Thatcher to power was arguably the fourth time since the War that the unions had contributed significantly to the loss of power by the incumbent government. In 1951, their hostility to Clement Attlee's policies was a factor in his defeat, and certainly their resistance to Wilson's attempt to curb their abuse of power in 1969 helped destabilize his government, ousted by Heath in 1970. Most famous of all, the unions led by the miners were a significant factor in Heath's defeat in the February 1974 Election. Ironically, three of these defeats were suffered by the Labour Party, the supposed champions of the unions. Furthermore, the defeat of Heath ushered in Margaret Thatcher, who became determined to curb their powers once and for all.

In tackling union power, Thatcher was faced with a slight dilemma.

I HAD ADOPTED THE MILTON FRIEDMAN VIEW THAT INFLATION WAS NOT CAUSED BY UNIONS BUT BY THE PRINTING OF TOO MUCH MONEY. NEVERTHELESS, WE THATCHERITES SEE UNIONS AS INEFFICIENT, ABUSIVE, RESTRICTIVE LEECHES ON THE SIDE OF BRITHISH MANUFACTURERS. AND UNLESS THEY'RE BROUGHT TO BOOK, BRITISH COMPANIES WILL NOT BE ABLE TO THRIVE IN THE NEW, LIBERAL, LOW-INFLATION ENVIRONMENT WE'RE DETERMINED TO CREATE.

As we have seen, plenty of people saw the unions as a significant factor in Britain's relative economic decline. Hayek for one.

_The trade unions have become the biggest obstacle to raising the living standards of the working class as a whole; they are the chief cause of unemployment and the main reason for the decline of the British economy... Britain remains paralysed by the consequences of the coercive powers irresponsibly conferred on the unions by law; there can be no salvation for her until these special privileges are revoked.*_

* From a series of essays published by the IEA, _Unemployment and the Unions: The Distortion of Relative Prices by Monopoly in the Labour Market_

## **How to Curb the Unions**

Thatcher was nothing if not a politician and she knew how previous attempts to bring the unions back into the framework of the law had foundered. She proceeded cautiously, and indeed her first Secretary of State for Employment, Jim Prior, was an old Heathite who believed strongly in the powers of conciliation and gentle persuasion.

THERE WERE SIX ACTS CONCERNING TRADES UNIONS PASSED DURING THE 1980S. THE FIRST, IN 1980, AIMED TO BRING A FAIRER BALANCE BETWEEN THE RIGHTS AND DUTIES OF THE UNIONS, THEIR MEMBERS AND EMPLOYERS. IT WAS DESIGNED TO APPEAL TO THE UNION RANK AND FILE, ENCOURAGING THE WIDER USE OF SECRET BALLOTS.

It removed the immunity of union officials and members from legal action by an employer not party to the dispute, but left the immunity of the union as such intact. It made secondary picketing unlawful.

Inevitably there was a great outcry from the unions, and even the employers felt it would do little to curb the unions' abuses of their bargaining powers.

Others felt the Act did not go far enough. Thatcher agreed with this view, despatched Prior to Northern Ireland and replaced him with the more abrasive Norman Tebbit, one of her "trusties". The second Act in October 1982 tackled union immunity from liability for damages for unlawful actions.

IT TIGHTENED THE LAW FURTHER ON "SYMPATHETIC" STRIKES AND STRENGTHENED EMPLOYERS' HANDS IN RELATION TO DISMISSALS FOR COLLECTIVE BREACHES OF CONDUCT.

Even Tebbit did not face removing immunity from strikes carried out without a secret ballot.

Tebbit's successor, **Tom King** (b. 1933), brought in the Trade Union Act of 1984 which introduced secret ballots for union elections, political activities and strikes.

IN 1985, I STRETCHED FROM ONE YEAR TO TWO THE PERIOD AFTER WHICH AN EMPLOYEE COULD CLAIM UNFAIR DISMISSAL UNDER LABOUR'S EMPLOYMENT PROTECTION ACT 1975. MINIMUM WAGES COUNCILS WHICH COVERED OVER A TENTH OF THE LABOUR FORCE WERE ABOLISHED FOR UNDER – 21S IN THE 1986 WAGES ACT. IN THE 1988 EMPLOYMENT ACT, STATUTORY SUPPORT FOR THE CLOSED SHOP WAS REMOVED AND EMPLOYEES PROTECTED AGAINST DISMISSAL FOR NON-UNION MEMBERSHIP. IT ALSO TIGHTENED UP THE RULES ON SECRET BALLOTS AND THE USE OF UNION FUNDS.

The 1989 Act removed restrictions on the use of women for certain types of work and on young people's hours of work. The 1990 Act strengthened the law against dismissal for non-union membership and also strengthened the employers' position in dismissal for unofficial industrial action.

## **The Miners' Strike, 1984**

The biggest union confrontation of the Thatcher years was the year-long strike of the miners in 1984. Ever the pragmatist, Thatcher had backed away from confrontation in 1981 when advised that coal stocks were not high enough. After that, Thatcher made sure that stocks at the power stations were built up and when **Arthur Scargill** (b. 1938), the President of the National Union of Mineworkers, called his men out without a ballot in the spring of 1984, Thatcher was ready.

NOT ONLY WITH HIGH STOCKS AT THE POWER STATIONS BUT WITH A CHAIRMAN OF THE COAL BOARD, **_SIR IAN MACGREGOR_** (B. 1912), AS TOUGH AS I AM! AND INDEED AS SCARGILL IS!

The scene was set for an epic battie.

## **Profile of Arthur Scargill**

Arthur Scargill had fought his way to the top of the Yorkshire coal miners' union, making his mark as a young, militant, articulate member in sharp contrast to the older, more conservative delegates on the executive committee. As one miner pointed out, he was the first member of the committee for a long time who didn't have soup stains on his waistcoat.

I MADE MY NAME WITH MY LEADERSHIP OF 12,000 FLYING PICKETS WHICH I BROUGHT FROM YORKSHIRE TO ENFORCE THE CLOSURE THE CLOSURE OF THE SALTLEY GATE GASWORKS IN THE WEST MIDLANDS IN THE 1972 MINERS' STRIKE.

He became President of the Yorkshire Miners and the obvious successor to Joe Gormley as President of the National Union of Mineworkers (NUM) when he retired in 1981.

The scene for the battle was set immediately after the Conservative Election victory, when Scargill made an inflammatory speech likening the Conservatives to the Nazis in Germany in the 1930s. _A fight against this government's policies will inevitably take place outside rather than inside Parliament... I am not prepared to accept policies proposed by a government elected by a minority of the British electorate... Extra-parliamentary action will be the only course open to the working class and the Labour movement._

On 1 March 1984, the National Coal Board (NCB) announced the intended closure of one of its uneconomic pits, Cortonwood. Scargill immediately called a strike – without a ballot – and on 12 March the strike began. Many in the Nottinghamshire pits were reluctant to strike, and the local union organized a ballot. The result was 73% against a strike. Scargill dealt with this insubordination by sending in masses of flying pickets. Violence escalated through April and May up to a massive confrontation at the Orgreave Coke Works, where 5,000 pickets fought a pitched battle with police.

Throughout the summer of 1984, fortunes ebbed and flowed.

FIRST WE GAINED THE UPPER HAND WHEN A NATIONAL DOCK STRIKE WAS CALLED ON 9 JULY. THEN THE GOVERNMENT, WHEN IT FIZZLED OUT AFTER TEN DAYS. GRADUALLY A TRICKLE OF US BEGAN TO RETURN TO WORK. BUT THE NUMBER DWINDLED WHENEVER THERE WERE TALKS BETWEEN THE NCB AND THE NUM. WHO WOULD RISK BEING CALLED A SCAB IF THE WHOLE THING WAS GOING TO BE CALLED OFF WITHIN A FEW DAYS?

Talks collapsed on 18 July and Thatcher, who felt that a resounding and clear-cut victory was necessary, recalled in her autobiography: _I have to say that I was enormously relieved. It was crucial for the future of the industry and for the future of the country itself that the NUM's claim that uneconomic pits should never be closed should be defeated, and be seen to be defeated, and the use of strikes for political purposes discredited once and for all._

The big threat for the government and hope for the miners was that the National Association of Colliery Overmen, Deputies and Shotfirers (NACODS) would call a strike of their own. If they did, every pit would have to shut on safety grounds. They had, in fact, voted to strike in April 1984, but with less than the necessary two thirds majority. However, in August 1984 the NCB made a near-fatal mistake by threatening to withhold the pay of NACODS members who refused to cross NUM picket lines. On 28 September NACODS held another ballot and this time 82.5% voted in favour of a strike.

I'M EXTREMELY CONCERNED THAT THE NCB CHAIRMAN, IAN MACGREGOR, WILL BE FORCED TO MAKE CONCESSIONS! ALTHOUGH THIS DOESN'T AUTOMATICALLY MEAN A NACODS STRIKE, IT'S A VERY LOW POINT FOR US.

## **The NUM Defeated**

However, October was to bring a series of hammer blows to Scargill and the NUM. On 10 October, the legislation that the Conservatives had introduced began to bear fruit when fines of £1,000 and £200,000 were imposed on Scargill and the NUM respectively for contempt of court.

ON 24 OCTOBER, THE NACODS LEADERS ANNOUNCED THAT THEY WOULD NOT STRIKE. AND ON 28 OCTOBER THE **_SUNDAY TIMES_** REVEALED THAT SCARGILL HAD BEEN NEGOTIATING FOR FUNDS WITH COLONEL GADDAFI OF LIBYA.

In April 1984 a British policewoman, PC Fletcher, had been killed in St James's Square by a gunshot from the Libyan embassy, and association with such a régime did not win the miners any friends.

The NCB followed this up by encouraging a gradual return to work, offering to pay the usual Christmas bonus to all those at work by 19 November. The following week 2,203 returned, in spite of the threats and violence. And in case anyone was in doubt about the level of violence, at the end of November a lump of concrete was hurled from a bridge, killing a taxi-driver carrying a miner to work.

In late December, the chairman of the Electricity Board was able to announce that they would get through the winter without any power cuts. By mid-January 1985 there were more than 75,000 miners back at work. On 27 February, more than half the miners were back, and on 3 March the NUM executive committee voted to call off the strike.

The "enemy within", as Thatcher referred to Scargill (General Galtieri in the Falklands War had been the "enemy without"), had been defeated. A key element in the battle had been the creation of a central police co-ordination authority which could mobilize police forces from all over the country. This last was crucial in preventing the mass picketing from intimidating the government as it had in the miners' strikes during Heath's administration in the 1970s.

THE DEFEAT OF THE MINERS SENT A POWERFUL MESSAGE TO THOSE WHO STILL BELIEVED THAT THE UNIONS, IN THE FINAL ANALYSIS, COULD DO WHAT THEY LIKED.

It was estimated that the cost of the strike to the economy was £2 billion and extra public expenditure was £300 million. However, Chancellor of the Exchequer Nigel Lawson, irritated though he was by this expenditure, said he regarded it as "even in narrow financial terms... a worthwhile investment for the nation".

And Lawson was right.

IT WAS A BATTLE THAT THE GOVERNMENT, ANY GOVERNMENT, HAD TO WIN IF PARLIAMENTARY DEMOCRACY WAS TO REASSERT ITSELF AFTER THE MAY HEM OF THE 1970S. SCARGILL WAS NOT CONFIDENT THAT ENOUGH OF HIS MEMBERS AGREED WITH HIS UNDEMOCRATIC APPROACH TO HOLD A BALLOT. THIS AND HIS ELECTION AS PRESIDENT FOR LIFE MADE IT EASIER FOR THE GOVERNMENT TO PASS THE 1984 EMPLOYMENT ACT.

The 1984 Act made the secret ballot a legal requirement (1) for the election of voting members to the executive council of the unions at intervals not greater than five years; (2) for all those who might be called on to take official industrial action; and (3) for setting up or retaining an existing political fund.

Scargill, with his ranting and bullying tactics, proved to be the Tories' greatest friend. If he hadn't existed they would have had to invent him.

## **Murdoch vs. the Printers' Union**

Another significant strike occurred at the new offices of News International when it moved from strike-torn Fleet Street to Wapping in early 1986. Again, massive police presence was required to protect non-printing union workers who operated the plant. These were members of the Electricians' union who had struck a deal with **Rupert Murdoch** (b. 1931), a tough Australian businessman greatly admired by Thatcher.

Union practices in Fleet Street had long been a scandal and were highlighted by the journalist **Bernard Levin** (1928-2004) in an article in _The Times_ in 1986.

Incredibly, the proprietors agreed, and so began what became known on Fleet Street as "fat" – payment for work not done. Levin wrote: _For many years now newspapers have been produced in conditions which combined a protection racket with a lunatic asylum; the details would have made interesting reading for those who bought the newspapers but any attempt to let the outside world know what was happening nightly would have led immediately to a strike._

AT THE END OF THE 19TH CENTURY, THE SAME ADVERTISEMENT PLACED IN SEVERAL NEWSPAPERS HAD TO BE COMPOSED EVERY TIME, OR IF NOT THE COMPOSITORS STILL HAD TO BE PAID FOR DOING NOTHING. WITH THE SUPPORT OF NEW LAWS AND A DETERMINED GOVERNMENT, I PUT AN END TO ALL THAT!

The Thatcherite attempt to bring order to the unions was helped by other factors as well as new laws and the facing down of strikes. Partly due to the decline of manufacturing, union membership fell sharply. In 1979, membership was 13.3 million but by 1986 it was 10.5 million, and the decline continued, though at a slower rate.

Trade Union Membership and Stoppages  
---  
Total membership| Working days lost through stoppages  
(per thousand employees)  
| (m)| (% of employees)| UK| USA| France| Italy| Australia  
1979| 13.3| 57.4| 1270| 230| 180| 1920| 780  
1980| 12.9| 56.4| 520| 230| 90| 1140| 630  
1981| 12.1| 55.3| 190| 190| 80| 730| 780  
1982| 11.6| 54.2| 250| 100| 130| 1280| 370  
1983| 11.2| 53.4| 180| 190| 70| 980| 310  
1984| 11.0| 51.8| 1280| 90| 70| 610| 240  
1985| 10.8| 50.5| 300| 70| 40| 270| 230  
1986| 10.5| 49.3| 90| 120| 30| 390| 240  
1987| 10.5| 48.5| 160| 40| 30| 320| 220

Also contributing to a less militant approach by unions has been the growth in unemployment. It rose to just over 1 million at the end of the Callaghan government in 1978, enabling the Saatchis to make a big impact with their advertisement showing a long dole queue and the slogan "Labour isn't working". However, under Thatcher's government, unemployment rose sharply to 3 million and did not start to fall until 1986. It then fell rapidly to under 2 million by 1990 but rose again to nearly 3 million by 1993.

Ben Roberts, Emeritus Professor of Industrial Relations at the London School of Economics, and the first President of the International Industrial Relations Association from 1965-73, said: _The reform of industrial relations and the results that have followed must rank as one of Mrs Thatcher's greatest achievements. Government policies... have resulted in a significant reduction in union power, which has brought considerable benefits to all sections of society._

Enoch Powell, whom most Thatcherites admired, but who did not always feel the same about them, certainly admired Thatcher's tackling of the union problem.

PERHAPS THE MOST LASTING CONSEQUENCE OF THE PERIOD OF CONSERVATIVE GOVERNMENT 1987-89 WILL PROVE TO HAVE BEEN THE ELIMINATION OF THE FACTOR OF COLLECTIVE TRADE UNION POWER FROM THE POLITICAL SCENE... AND THE REMOVAL OF THE AWE WITH WHICH THAT POWER WAS PREVIOUSLY HEDGED ABOUT.

Thatcher's bringing of order into union affairs also contributed to one of the unsung achievements of her era – the strong inward investments by overseas companies, especially from Japan, who came to see the country as an efficient producer and the ideal entry into the European market.

## **The Westland Affair**

The closest that Thatcher came to being toppled in her long reign was in early 1986 when a cabinet argument over the fate of a small British helicopter manufacturer revealed deceptions at the highest levels of government. **Michael Heseltine** (b. 1933), never a Thatcher favourite, resigned over what he saw as Thatcher's dictatorial behaviour.

... THE EMERGENCE OF WHAT I CONSIDER TO BE THE BREAKDOWN OF CONSTITUTIONAL GOVERNMENT. I MAY NOT BE PRIME MINISTER BY SIX O'CLOCK TONIGHT.

Fortunately for her, the relatively new Labour leader, **Neil Kinnock** (b. 1942), failed to stick to the point and ask the right questions. He blustered and she escaped.

## **Economic Success**

The Westland affair shook the government and fascinated political watchers but the vast mass of the electorate were more interested in the mundane facts of life-jobs, money, inflation, law and order – and as 1986 unfolded the economic scene brightened. The price of oil fell and fell, and Nigel Lawson, spurning the opportunity to reduce inflation, made sure the £ fell with it and added fuel to an already growing economy. (Lawson could have held the £ up, making imports cheaper, which, along with a lower price for oil, would have reduced the rate of inflation.) In the four years after the 1983 Election, average weekly earnings rose by 15% in real terms. At last unemployment stopped rising and indeed began to fall quite sharply.

PERHAPS THE ECONOMIC MIRACLE IS AT HAND! WE'LL CERTAINLY SAY IT IS! LET'S SEIZE THE OPPORTUNITY AND CALL AN ELECTION IN JUNE 1987, A FULL YEAR BEFORE IT'S NECESSARY.

There were a few wobbles during the campaign but Thatcher was re-elected with another comfortable majority, again helped by a split opposition, although Labour under Neil and Glenys Kinnock were more credible than the party of Michael Foot in 1983.

## **Thatcherism in Practice**

**Education**

It must have come as a surprise, and perhaps a hurtful one, that the hero of many Thatcherites, Enoch Powell, was scathing in his criticism of their approach to education: _The old Prussia claimed to decide how its citizens should be educated to make them efficient instruments of its imperialism. The new Prussia, now being daily built here, demands, after having substituted economic competition for military aggression, that its citizens be so educated as to maximize their return on the capital invested._

COMPLIANCE WITH THAT DEMAND MEANS AN END TO THE UNIVERSITY. LET THOSE WHO KNOW AND LOVE IT REPEL THE ATTACK.

More predictably, Martin Jacques, the editor of _Marxism Today_ , said the Thatcher government regarded universities "with as much contempt as it does the trade unions... It is a know-nothing government whose philistinism is dangerous to the economic and cultural health of the nation."

Even the CPS, that great bastion of Thatcherism, came close to criticizing Thatcher's Education Act of 1988. In a pamphlet the CPS commissioned but refused to publish, Professor Elie Kedourie of the LSE attacked the government's assumptions that since universities are state-funded, they must serve the public interest; and that because ministers are the elected representatives of the taxpayers, they ought to lay down what the public interest requires universities to do. "This sweeping doctrine leans to the centralization which is the distinguishing feature of enlightened absolutism."

In their education policies, the Thatcherites had no Friedrich von Hayek, no Milton Friedman, no IEA to provide a thought-out policy. They knew they wanted to make Britain more efficient and therefore the education system, including the universities, should fit into that scheme.

From the very beginning, Thatcher made cuts in higher education. In 1981, universities were allowed one month to plan an 18% cut in budgets over 3 years. 3,000 posts were eliminated. Although the 1983 manifesto promised no more cuts, in 1984 further cuts of 2% were demanded.

One of the biggest indictments of the Thatcher years is the neglect of education and training. In December 1988, Charles Leadbeater made a damning comparison in the _Financial Times. In West Germany, 30% of school-leavers at 16 had an intermediate certificate based on an assessment of 10 subjects. Only 12% of British school-leavers reached a comparable level._

THE AVERAGE WEST GERMAN STANDARD FOR THE LOWER HALF OF THE ABILITY RANGE IS THE SAME AS THE RANGE FOR ALL ENGLISH PUPILS. IN JAPAN MORE THAN 95% OF YOUNG PEOPLE ARE IN FULL-TIME EDUCATION TO THE AGE OF 18, COMPARED WITH 32% IN BRITIAN. ABOUT 38% ENTER HIGHER EDUCATION AGAINST ONLY 15% IN BRITAIN.... 63% OF WEST GERMAN MANAGERS HAVE A DEGREE. 51% OF SENIOR MANAGERS IN THE **_US_** HAVE A SECOND DEGREE. WHILE ONLY 21% OF BRITISH MANAGERS HAVE A DEGREE.

## **The Civil Service**

We have already seen that Thatcher's spell at the Ministry of Pensions had given her a deep antipathy towards the Civil Service – "Iron entered my soul". When she came to power, one of her first acts was to appoint **Sir Derek Rayner** (1926-98), a director of Marks and Spencer, as an "efficiency auditor". He struggled with the usual Whitehall obfuscation and blocking techniques.

BUT I BACKED HIM AT EVERY TURN, AND HE SUCCEEDED IN MAKING SAVINGS BY THE MID-1980S OF £1 BILLION, THE EQUIVALENT OF 22 NEW HOSPITALS!

By 1987, the Civil Service had been cut back by some 20% to 600,000, the lowest level since the War, and its running costs were measurable and under control. Rayner's departmental management systems were acknowledged by permanent secretaries, in public and in private, as being valuable tools of management which should be retained whichever government was in power.

Rayner's successor, **Sir Robin Ibbs** (b. 1926) of ICI, continued the war on waste. By 1987, no less than 27,000 forms had been scrapped and another 41,000 redesigned. Furthermore, Ibbs produced a document, _The Next Steps_ , which was radical in that it suggested that the majority of Civil Service activities should be seen for what they were, businesses delivering services to the public. After much wrangling between Whitehall and the Treasury, steps were taken to implement these proposals, and a series of agencies was set up to improve efficiency.

THE CIVIL SERVICE AS A WHOLE MAY HAVE BECOME MORE EFFICIENT UNDER THATCHER. BUT WE DID NOT FEEL IT HAD BEEN WELL-SERVED.

There were accusations of promotion to the very top of those who were "one of us". Pay parities were not maintained. Working conditions were not improved (Rayner, with his M & S background, was particularly unhappy about this). There was the feeling that Thatcher herself held civil servants responsible for Britain's decline under the influence of Beveridge and Keynes.

## **The Welfare State**

The British public loves its welfare state, and it was Thatcher's constant criticism of it that brought her more unpopularity than almost anything else.

IN FACT MORE WAS SPENT ON WELFARE IN THE 1980S IN REAL TERMS THAN EVER BEFORE, BUT NO ONE BELIEVED IT.

**At 1987/8 prices**

**Education:** £17.46 billion was spent in 1988-9, compared with £15.9 billion in 1978-9.

**Health:** £20.5 billion was spent in 1988-9, compared with £15.2 billion in 1978-9.

**Social Security:** £44.8 billion was spent in 1988-9, compared with £33.7 billion in 1978-9.

In 1991, the London School of Economics showed in its publication, _The State of Welfare_ , that expenditure on the welfare state was a third higher in real terms in 1987/8 than it had been in 1973/4.

In spite of these increases, people could see the Thatcherites itching to save money and reduce the "dependency" culture that had become so ingrained. In 1982, the Central Policy Review Staff suggested...

**Private health insurance for all.**

**The removal of indexation from many benefits.**

**The ending of state funding of higher education.**

THIS PROVOKED A HUGE OUTCRY AND NOTHING WAS DONE. THATCHER WAS FORCED TO PROCLAIM... THE NATIONAL HEALTH SERVICE IS SAFE WITH US.

What Thatcher did achieve was to subject the swollen welfare bureaucracy to more business-like management. Value-for-money and efficiency audits became commonplace. She insisted that even the grandest public sector employees, such as professors and hospital consultants, should account for their use of public funds. Thatcher talked tough, but she left Britain still more of a welfare state than an enterprise society.

## **The NHS**

Thatcher's governments were nothing if not full of rhetoric on the need to rein back public expenditure, and the National Health Service was subjected to this rhetoric too.

IN FACT, EXPENDITURE ON THE HEALTH SERVICE ROSE FROM £8 BILLION IN 1978/9 TO £23 BILLION IN 1988/9. MUCH OF THIS INCREASE WAS ACCOUNTED FOR BY INFLATION.

According to journalist Charles Webster: _Taking Mrs Thatcher's term of office as a whole, the average annual real rise in NHS expenditure on current goods and services is smaller than that of any previous administration. In fact it is only half the level of any administration since 1960... Britain is now resolutely located at the foot of the league table of health expenditure of comparable Western nations._

## **The Arts**

Government support for the arts had grown steadily since the creation of the Arts Council in 1945, and had excited little comment until the Thatcherites viewed the subsidies as alien to their belief in self-help.

SOME OF US ARE AGAINST ANY SUBSIDY! WE'LL ACCEPT OUT ROLE AS PATRONS, BUT AT THE SAME TIME DEMAND TIGHTER CONTROL OF EXPENDITURE. THE RESULT WAS THAT GOVERNMENT FUNDING STOOD STILL AND ARTS ORGANIZATIONS WERE ENCOURAGED TO COMPETE FOR PRIVATE FUNDING.

The movers and shakers in academia and the arts felt a particular loathing for Thatcher, both for what they saw as philistinism and for the fact that the comfortable days of unlimited funds were gone.

## **Europe**

Thatcher herself had two major battles with the European Community, one at the beginning of her reign as Prime Minister and one at the end. In between was the long-running saga of whether Britain should join the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS).

When she came to power in May 1979 her argument with the EC, or EEC as it was then called, was all about money.

THE TREASURY CANNOT ESTABLISH EXACTLY WHAT IT FEELS THE **_EEC_** IS COSTING THE COUNTRY, BUT A FIGURE OF £1,000 MILLION HAS BEEN VIRTUALLY INVENTED. I SET OFF TO DEMAND THE RETURN OF "OUR MONEY" EVERYWHERE I WENT.

Finally, at a meeting of the European heads of state in Dublin in November 1979, she demanded the £1,000 million. **Christopher Tugendhat** (b. 1937), European Commissioner, wrote: _As the vehemence of her arguments increased, Schmidt_ [German Chancellor] _at one point feigned sleep, and when she refused to give in, the French party's cars were drawn up outside with their engines running in order to emphasize the take-it-or-leave-it nature of their offer._

Negotiations continued into 1980 and a compromise agreement was finally reached. Thatcher wanted to reject what was on offer from Europe, but for once her cabinet stood up to her. There were those who felt it suited her politically, as economic problems mounted at home, to be able to show the British public that she was standing up to these Europeans who were causing such hardship. Even **Roy Jenkins** (1920-2003), President of the European Commission at the time, said: _As a proponent of the British case, she does have the advantage of being almost totally impervious to how much she offends other people._

OTHERS WERE VERY DISAPPOINTED IN HER LACK OF EUROPEANISM. FOR ONE, GERMAN CHANCELLOR **_HELMLIT SCHMIDT_** (B. 1918)... SOME OF THE OTHER LEADERS ARE SOMEWHAT NARROW IN THEIR DEVOTION TO EUROPE, BUT THATCHER IS COMPLETELY INSULAR! THE FOREIGN OFFICE AND MY OLE WING OF THE TORY PARTY WERE ALSO DISAPPOINTED.

As for **Ian Gilmour** (1926-2007), already disillusioned with Thatcher's economic policies, he now doubted her capacity for rational behaviour. His days in the cabinet were numbered!

## **Friendship With Reagan**

For most of her time as Prime Minister, Thatcher's relations with the EC were lukewarm. Surprisingly, she established a much better relationship with the socialist French President **François Mitterrand** (1916-96) than she had ever achieved with the more right-wing **Valéry Giscard d'Estaing** (b. 1926), whom she described as not merely patrician but "Olympian". Nevertheless, Mitterrand said that she possessed "the eyes of Caligula and the mouth of Marilyn Monroe".

It was to the United States that she turned, forming a close relationship with President **Ronald Reagan** (1911-2004). Reagan had first met Thatcher on a visit to London in 1975 and the two became close personal allies. She was the first head of state to visit Reagan after his inauguration as President in January 1981. They agreed on foreign policy.

WHEN THE SOVIET UNION CALLED MAGGIE "THE IRON LADY", I RESPONDED BY CALLING THE SOVIET UNION "THE EVIL EMPIRE". WE AGREED TOO ON THE ECONOMY, WITH "SETTING FREE", "SOUND MONEY" AND "DEREGULATION" CROPPING UP REGULARLY IN BOTH OUR SPEECHES.

In many ways their close friendship was surprising, because Reagan displayed all the characteristics most designed to irritate Thatcher. _Time_ magazine criticized him for his intellectual passivity, unreflectiveness, lack of attachment to detail, obstinacy and detachment from reality. Even before important meetings, he rarely read briefing papers, and he shirked reaching difficult decisions.

ANYONE LIKE THAT WOULD NOT HAVE LASTED TEN MINUTES IN MY CABINET. BUT 3,000 MILES AWAY, RONNIE WAS MY GREATEST FRIEND.

The friendship was further cemented by the close support Britain received from its American ally in the Falklands War. **Sir Nicholas Henderson** (1919-2009), Britain's ambassador in Washington, said: _It is difficult to exaggerate the difference that America's support made to the military outcome._

And the Atlantic Alliance prospered for the whole of the 1980s. In return for the help in the Falklands conflict, the US was allowed to use British bases to bomb Libya in early 1986. There was a slight hiccup when American troops invaded Grenada, a Commonwealth country, without warning Britain first, but this was a mere blip in an otherwise continuous period of mutual admiration. Throughout the decade, British ministers were despatched to the US to study initiatives for reviving inner cities, on health care, education and prisons. Furthermore, Thatcher, having supported the USA against the "evil empire", was one of the first to appreciate the significance of **Mikhail Gorbachev** (b. 1931), a man with whom she "could do business".

I WORKED HARD, WITH SOME SUCCESS, TO BROKER A BETTER UNDERSTANDING BETWEEN HIM AND RONNIE.

In contrast, Europe remained a vexed question, and by 1987 the Frenchman **Jacques Delors** (b. 1925), appointed President of the European Commission in 1985, was beginning to infuriate Thatcher, especially when he declared that Britain could afford to contribute more to the EC budget. In a speech to the European Parliament in Strasbourg in July 1988, Delors said that within ten years 80% of economic legislation, and possibly fiscal and social legislation also, would be of European rather than national origin. Thatcher was apoplectic.

And Delors did not endear himself to the Thatcher anti-federalists when he told the TUC...

WE HAVE NOT SUCCESSFULLY ROLLED BACK THE FRONTIERS OF THE STATE IN BRITAIN ONLY TO SEE THEM REIMPOSED AT A EUROPEAN LEVEL, WITH A EUROPEAN SUPER-STATE EXERCISING A NEW DOMINANCE FROM BRUSSELS. YOU HAVE TOTALLY FAILED TO DEFEAT THE PRIME MINISTER IN THIS COUNTRY, BUT YOU HAVE AN OPPORTUNITY THROUGH BRUSSELS AND STRASBOURG TO BRING IN SOCIAL LEGISLATION WHICH WOULD BE HELPFUL TO YOUR CAUSE.

Thatcher retorted with a comment about "socialism by the back door" or "by the back Delors!".

## **The Speech at Bruges**

By 1989, Thatcher's anti-European stance was beginning to upset erstwhile supporters. Ferdinand Mount wished she would see the Community as an opportunity rather than a threat.

What was the Thatcherite position on Europe?

Thatcher's speech at Bruges in 1988, one of the great set-pieces of her eleven-year reign, sets out what she and many of her closest supporters believed:

MY FIRST GUIDING PRINCIPLE IS THIS: WILLING AND ACTIVE CO-OPERATION BETWEEN INDEPENDENT SOVEREIGN STATES... EUROPE WILL BE STRONGER PRECISELY BECAUSE IT HAS FRANCE AS FRANCE, SPAIN AS SPAIN, BRITAIN AS BRITAIN, EACH WITH ITS OWN CUSTOMS, TRADITIONS AND IDENTITY. IT WOULD BE FOLLY TO TRY TO FIT THEM INTO SOME SORT OF IDENTIKIT EUROPEAN PERSONALITY.

But as well as "France as France" etc., there was an underswell of arrogance and xenophobia: _Britain is a home for people from the rest of Europe who sought sanctuary from tyranny._

_We British have in a special way contributed to Europe. Over the centuries we have fought to prevent Europe from falling under the dominance of a single power. We have fought and we have died for her freedom... throughout the last War kept alive the flame of liberty... From our island fortress the liberation of Europe itself was mounted._

Furthermore, the value of the Anglo-American alliance was emphasized: _Nor should we forget that European values have helped to make the United States of America into the valiant defender of freedom which she has become... People went there to get away from the intolerance and constraints of life in Europe._

There was strong and implied criticism of Europe in the praise for the freedoms enjoyed by the British: _Britain has been in the lead in opening its markets to others, the City of London, our market for telecommunications, air transport, our coastal shipping trade, free movement of capital, a genuinely free market in financial services... I wish I could say the same of many other Community members._

## **Privatization**

Privatization became one of the most enduring of the Thatcher legacies, not only in Britain but in many countries throughout the world. However, it was not part of the Thatcherite vocabulary in the build-up to the 1979 Election. The manifesto promised only the sale back of the recently nationalized aerospace and shipbuilding companies, the selling of shares in the National Freight Corporation and the disposal of the National Enterprise Board's holdings.

It was Chancellor Nigel Lawson who gave the programme coherence after the 1983 Election.

BY THE END OF THE 1980S, THE PRESUMPTION WAS THAT EVERYTHING THAT COULD BE SOLD **_SHOULD_** BE. THE MAIN MOTIVES WERE...

to reduce the role of the state in the economy and restore the powers of decision to the individual;

to implement the ideal of the property-owning democracy;

to improve productive efficiency;

to introduce allocative efficiency by substituting competitive free-market pricing for administered prices and controlled rents;

to finance the PSBR (Public Sector Borrowing Requirement) and reduce claims upon it;

to promote wide share ownership and subject management to more democratic control;

to encourage employee share ownership, thereby improving industrial relations.

The intellectual case against the nationalized industries had been set out by John Redwood (b. 1951), then a Fellow of All Souls, Oxford, later to become head of Mrs Thatcher's policy unit (and even later to challenge John Major for the leadership of the Tory Party) in an article in the _Lloyds Bank Review_ in 1976.

The most famous criticism of the privatization programme came from Lord Stockton (formerly Harold Macmillan) when he described asset sales to finance current expenditure as...

IN MY VIEW, THEY MISALLOCATE CAPITAL, DISTORT DEMAND BY UNDER-OR OVER-PRICING, INFLATE MONEY SUPPLY THROUGH BORROWING, PAY INTEREST ON THEIR FUNDS AT BELOW MARKET RATES AND SUFFER POOR INDUSTRIAL RELATIONS. SELLING THE FAMILY SILVER! NO, IT'S SELLING IT BACK TO THE FAMILY.

There was not much point in holding on to the family silver anyway if it was losing you £30 a second, as the British Steel Corporation was in 1980. By 1989, British Steel was producing as much steel as in 1979 but with one third of the labour force.

Even the programme's greatest admirers would admit that some of the privatization sales were rushed through without sufficient attention to the original aim of broadening competition and protecting the interests of consumers.

There was no doubt who were the initial beneficiaries. Professor John Kay of the London Business School wrote: _Whatever the economic consequences of privatization, it has proved a highly remunerative activity for three groups: the initial shareholders, the managers (whose salaries have risen sharply), and the extensive group of professional advisers._

Few could argue with the success in purely financial terms. British Telecom, British Steel, British Gas, British Airways and the British Airports Authority were by the early 1990s all hugely profitable companies in the private sector, whereas in the 1970s many of them had been drains on the Exchequer.

## **Individual Home and Share Ownership**

By the 1990s no one expected, and very few desired, re-nationalization. The idea of the state running commercial enterprises was dead. Between 1977 and 1995 the British government raised $97 billion from privatization. Between 1996 and 2000, a leading merchant bank expected European governments to raise between $250 and $300 billion.

Thatcherites also believed in property ownership, and here they were certainly successful in pushing up owner-occupation to one of the highest levels in the industrial world.

BETWEEN 1979 AND 1988, OWNERS INCREASED BY THREE MILLION, ONE MILLION OF THEM FROM THE "RIGHT TO BUY" PROGRAMME. THE PERCENTAGE OF OWNER-OCCUPIERS ROSE FROM 56.7% IN 1979 TO 63.4% IN 1988. INDIVIDUAL SHARE OWNERSHIP, THANKS LARGELY TO THE PRIVATIZATION PROGRAMME BUT ALSO TO EMPLOYEE SHARE SCHEMES, INCREASED SHARPLY – FROM 3 MILLION IN 1979 TO 9 MILLION IN 1988.

## **Does It Benefit the Individual?**

MP **Norman Lamont** (b. 1942), later Chancellor of the Exchequer under John Major, said in 1988: _If I had to choose a statistic that summed up the Thatcher years it is that. The number of people now owning shares is not much less than those who belong to trade unions._

In fact shareholdings were not of great depth. Only 300,000 people owned a portfolio of over ten shares and only another 800,000 owned between four and nine. A Thatcher scheme to promote wider share ownership, Personal Equity Plans (PEPs), were used mainly by existing shareholders to take advantage of tax breaks.

INDEED, MOST STOCKBROKERS DON'T WANT SMALL SHAREHOLDERS BECAUSE THEY'RE NOT COST-EFFECTIVE. OF 151 STOCKBROKERS, ONE THIRD REFUSED TO DEAL, AND ANOTHER THIRD WOULD CHARGE A COMMISSION SO HIGH IT WIPED OUT ANY PROFIT. THE CITY IS "THE UNAPPROACHABLE FACE OF CAPITALISM".

## **Greed is Good**

**Kenneth Baker** (b. 1934), Secretary of State for Education and Science in the late 1980s, preached social conscience and charity.

FROM THOSE WHO HAVE MUCH, MUCH IS EXPECTED. THE DISPOSAL OF THE OWNERSHIP OF WEALTH AND POWER CARRIES WITH IT AN OBLIGATION FOR PEOPLE TO RESPOND TO THE CHALLENGE OF ENHANCED RESPONSIBILITY... IT IS NOW UP TO THE MANY WHO HAVE BENEFITED FROM THE REDUCTIONS IN TAX TO INCREASE THEIR PERSONAL CONTRIBUTION TO THE CHARITIES AND GOOD CAUSES OF THEIR CHOICE. SO WHO WAS LISTENING? NOT MANY, AND CERTAINLY NOT THE PROVIDENT FINANCIAL!

In 1995, the _Financial Times_ said of the company Provident Financial, which specialized in lending to the poor at high rates of interest: _It is an unpalatable thought, but Provident Financial is benefiting from growing inequality in Britain. Economic stagnation in low-income areas and job insecurity are leaving more families unable to borrow money from traditional lenders such as banks, building societies and credit card providers. Provident exists to fill this gap._

And fill it Provident did, making £101 million profit in 1995 and paying its directors total remuneration of £1.67 million. In spite of Baker's hopes, the company gave precisely **£51,000** to charity! As Gordon Gekko said in the film _Wall Street_ , "Greed is good."

By the middle of Thatcher's reign the message had spread – it was OK to make money. In real life, the jailed Wall Street arbitrageur, **Ivan Boesky** (b. 1937), echoed Gekko's words.

GREED IS ALL RIGHT. GREED IS HEALTHY. YOU CAN BE GREEDY AND FEEL GOOD ABOUT YOURSELF.

A whole new breed grew up.

**YUPPIES**|  –| Young upwardly mobile professionals  
---|---|---  
or  
**YAPPIES**|  –| Young affluent professionals who tried to become respectable by turning into  
**GRUPPIES**|  –| Green urban professionals

## **A New Breed – A New Language**

LIGHTNING, YOU GOT ANYTHING LONG-END CDS? YOU OUGHT TO GET ON AT HALF SEVEN-SIXTEENTHS. I MADE HIM A HALF SEVEN – AGREED? I SELL AT SEVEN NATWEST 5 MILLION ONE YEAR. I'LL SELL A PLONKER AT SAME. I'M A BUYER AT A HALF FOR SALOMON. MINE AT 7. HOW MUCH AT 7, TONE? TWO HANDFULS. BLOW HIS TITS OFF!

New definitions of well-known words and phrases entered the language.

**Asset stripper**|  —|  | nothing to do with night clubs, but financial operators who bought companies and sold off their assets, often making thousands redundant.  
---|---|---|---  
**Blow his tits off**|  —|  | not sure quite what this meant before, but in Thatcher's world it meant "sell it to him". Its converse was "Ship it in shag".  
**Chartists**|  —|  | not forerunners of the unions, but those who predicted future share movements by past performance.  
**Chinese Walls**|  —|  | nothing to do with China, but supposed barriers within the new giant investment banks to prevent the stockbroking side buying shares just before the corporate side announced a takeover they were working on.  
**Churning**|  —|  | not your stomach after all the champagne, but the buying and selling of your client's shares for no better reason than it earned you commission.  
**Concert Party**|  —|  | correct, nothing to do with music, but the ganging up of predators before buying shares in a company.  
**Butterfly**|  —|  | only pretty in the sense that it's a no-lose situation in a traded option play.  
**Dog**|  —|  | obvious what a dog is, but in this case it's a share that has performed badly for years. Best example – Government War Loan.  
**Head and Shoulders**|  —|  | no, not a dandruff treatment but a share shout giving the signal, sell.  
**Stag**|  —|  | by the end of the Thatcher era at least nine million new shareholders knew what a stag was – a punter who applied for new issues with the sole intention of selling them instantly.  
**Streaker**|  —|  | plenty of those at Twickenham and Lords, but in Essex boy's language it's a zero coupon bond, i.e. one with no interest, issued at a deep discount to give, by the time of redemption, a computed interest rate at face value on maturity.

Being able to understand that made them worth their £250,000 a year, didn't it?

## **Thatcher's Children – or Orphans?**

Some thought Thatcher's Britain a bleak world populated only by lonely buyers and sellers trying to do each other down. In 1989 the _Spectator_ spoke of "bourgeois triumphalism", and the _Sunday Times_ wrote "vulgarianism rules OK". Even the _Daily Telegraph_ wailed that Britain had "ceased to be a nation of decency". The Governor of the Bank of England, **Robin Leigh-Pemberton** (b. 1927), told the _Sunday Times_ in June 1990: _Old style thrift has gone out of fashion. The attitude is, "I want it and I want it now"._

**Salman Rushdie** (b. 1947) put it more crudely in _The Satanic Verses._

GET RID OF THE OLD WOOLLY INCOMPETENT BUGGERS FROM FUCKING SURREY AND HAMPSHIRE, AND BRING IN THE NEW. PEOPLE WITHOUT BACKGROUND. PEOPLE WITHOUT HISTORY. HUNGRY PEOPLE. PEOPLE WHO REALLY **_WANT_** , AND WHO KNOW THAT WITH HER, THEY CAN BLOODY WELL **_GET_**.

The deputy leader of the Labour Party, Roy Hattersley, talked of Thatcher's children.

DELINQUENCY WAS THE BY-PRODUCT OF THEIR AFFLUENCE, COMBINED WITH THEIR REJECTION OF ANY SORT OF RESPONSIBILITY FOR THEIR NEIGHBOUR'S WELFARE... GREED AND INDIVIDUAL GAIN ARE THE GODS WHICH THEY ARE URGED TO WORSHIP. TORIES DO NOT NEED TO APOLOGIZE FOR THE INCREASED SCOPE WE HAVE GIVEN TO WHAT MIGHT BE CALLED ACQUISITIVE INDIVIDUALISM.

And other members of Thatcher's cabinet began to express concern by the end of the 1980s. **Douglas Hurd** (b. 1930), after a visit to some market towns in middle England, said: _You do not find much poverty or social deprivation there. What you do find are too many young people with too much money in their pockets, too many pints inside them, but too little notion of the care and responsibility they owe to others._

The strongly anglophile **Ralf Dahrendorf** (1929-2009), Warden of St Antony's College, Oxford, added: _There is now a widespread sense that a little more community is necessary – very hard to do by the same people who have first broken those institutions._

## **The Poll Tax (1989)**

Everyone was agreed that the **rates** , a local property-based tax stretching back nearly 100 years, was an unsatisfactory method of financing local government. Rates were based on the valuation of property. The value changed every so often, necessitating changes in rates, causing howls of rage from the losers. Thatcher objected to the rates for three reasons.

THEY WERE UNFAIR BECAUSE THEY WERE NOT RELATED TO THE NUMBER OF PEOPLE IN A PROPERTY, OR ON THEIR ABILITY TO PAY. THEY WERE INFLATIONARY BECAUSE LOCAL AUTHORITIES RAISED THEM FASTER THAN THE RISE IN THE RETAIL PRICE INDEX. THEY WERE BASED ON OUT-OF-DATE VALUATIONS.

There seemed to be five alternatives.

1. Local sales tax

2. Local income tax

3. Revenues assigned by central to local government

4. Reform of the existing system

5. **A poll tax**

Thatcher was persuaded that a poll tax, or "community charge" as she insisted on calling it, was the answer.

WHY SHOULD THE THATCHER GOVERNMENT WANT TO USE THE EUPHEMISM, COMMUNITY CHARGE? THEY CALLED IT THE "POLL TAX" IN OFFICIAL PAPERS. IN HER LAST SPEECH AT THE DISPATCH BOX, THATCHER HERSELF BLUNDERED... THE POLLER – THE COMMUNITY CHARGE...

A poll is a head and the tax was a **per head tax** on people. It was the poll tax.

## **A Big Mistake**

**David Butler** (b. 1924), the psephologist of the age, analyzed the introduction of the tax in a book, _Failure in British Government: The Politics of the Poll Tax._ He showed how a group of officials and relatively junior ministers, determined to change the local tax system with a per capita charge, convinced Thatcher that they were right. Once convinced, Thatcher, an "elective dictatorship", was able to bulldoze the necessary legislation through, against the opposition of the Labour Party and the local authorities.

WE WARNED HER THAT THE POLL TAX WOULD BE EITHER HIDEOUSLY EXPENSIVE OR IMPOSSIBLE TO COLLECT. AND THERE WOULD BE A GREAT LOSS OF REVENUE. WE WERE RIGHT ON BOTH COUNTS!

Thatcher had long held an aversion to the local rating system and, as Shadow Environment Secretary, got the commitment to abolish domestic rates into the Tory manifesto for the October 1974 Election. It stayed there in the 1979 manifesto.

Whatever the merits of the poll tax over the existing rating system, its implementation was a disaster. Common sense dictated a gradual phasing in, but Thatcher, on a high after her third victory in June 1987, combined with Nicholas Ridley to persuade a cabinet committee to go for the "Big Bang" approach.

Here's how Robert Harris described the poll tax fiasco in the _Sunday Times_ , February 1991:

... A FATHEADED, BONEHEADED, DUNDERHEADED, BLUNDERHEADED, MUTTONHEADED, KNUCKLEHEADED, CHUCKLEHEADED, PUDDINGHEADED, JABERNOWLED WASH-OUT OF A COCK-UP... THATCHER HAS BEEN IN POWER TOO LONG! POWER HAS GONE TO HER HAND!

Even the right-wing _Economist_ described the above as an under-statement, writing further: _The poll tax, alias the community charge, was the most misguided piece of domestic policy produced by any British government in this century. It was replaced within two years. It cost taxpayers not less than £1.5 billion. It cost Mrs Thatcher her job._

## **Thatcher's Disregard of the Cabinet**

The poll tax issue showed more clearly than any other how Thatcher dominated her cabinet. As her administrations progressed, fewer and fewer matters received thorough discussion in full cabinet. In her first government, she did not risk the cabinet scuppering what had already been decided. The Permanent Secretary, **Sir Douglas Wass** (b. 1923), said it in November 1979: _Do you know, there hasn't been a single economic discussion in the cabinet since this government came in?_

THE FULL CABINET MET FOR FEWER HOURS IN THE 1980S THAN IN ANY OTHER DECADE IN THE CENTURY. THATCHER INCREASINGLY USED AD HOC COMMITTEES AND BILATERAL MEETINGS TO DECIDE POLICY. SHE TENDED TO MAKE POLICY – USUALLY OF THE MORE EXTREME KIND – ON TELEVISION, OR AT PRIME MINISTER'S QUESTION TIME IN THE COMMONS.

According to Nigel Lawson in his book _The View From Number 11_ , the debate and decision over ERM membership never went to full cabinet. While Ian Gilmour, in _Dancing with Dogma_ , maintained that Thatcher's decision to allow the US to use British bases for bombing Libya was made after consultation with just three ministers.

## **Thatcher's Downfall?**

In the words of Douglas Hurd: _The main reason for Margaret Thatcher's loss of leadership was, I believe, her failure over the years to make the best of the cabinet system... She did not understand that colleagues too had knowledge and views and she relied on her individual powers excessively._

The cabinet did not discuss the poll tax until January 1986, fifteen months after the initial studies team had been established, and seven months after the key decision in principle had been taken by a cabinet committee.

IF THERE WAS SO MUCH OPPOSITION TO THE POLL TAX... AND THERE WAS CERTAINLY A GREAT WAVE OF PROTEST THROUGHOUT THE COUNTRY... WHY DID PARLIAMENT NOT RESIST ITS PASSAGE INTO LAW MORE STRONGLY?

The answer was the size of the Tory majority in the House of Commons – over 100 – and probably a two-to-one Tory predominance in the House of Lords.

## **Black Monday**

Thatcher's arrogance left her increasingly isolated. Whatever doubts about her position she may have felt in her first two governments, a third victory made her unassailable, and therein lay the seeds of her downfall. "We can do no wrong" is a fatal attitude and large mistakes were now made concerning Europe, the ERM and the poll tax (of which more later). The economic skies seemed blue when Thatcher was re-elected in June 1987.

CHANCELLOR LAWSON HAS INTRODUCED ANOTHER TAX-CUTTING BUDGET IN THE SPRING. THE £ IS STRONG. THE WORLD ECONOMY IS GROWING STRONGLY AND STOCK MARKETS EVERYWHERE ARE REACHING NEW PEAKS!

In such situations the old enemy of stability, inflation, rears its ugly head.

With memories of the early 1920s and 1945-8, no country is more fearful of inflation than Germany. In the summer of 1987, the Bundesbank and the Federal Reserve Board in the US indulged in a public row over interest rates.

THE SPECTRE OF A DIFFERENT INTEREST-RATE CLIMATE JANGLED THE NERVES OF EQUITY HOLDERS, AND SUDDENLY STOCK MARKETS ROUND THE WORLD WENT CRASHING DOWN. LED BY NEW YORK WHERE THE DOW JONES LOST NO LESS THAN 508 POINTS IN A SINGLE DAY, ALL THE MAJOR MARKETS FELL 25% IN TWO DAYS.

This all seemed to happen out of the blue, but stock markets usually foretell the truth, and indeed within eighteen months it was clear that many of the world's economies had been growing at an unsustainable rate and that a period of retrenchment was necessary.

## **Thatcher Resigns**

For Britain, where inflation rose to double figures again by the end of 1990, it was back to good old-fashioned stop-go, or rather go-stop, a feature supposedly banished by all the supply-side reforms of the 1980s. Thatcher blamed her Chancellor, Lawson, who resigned in October 1989, ostensibly over interference by Alan Walters. Suddenly the Thatcherite miracle cures looked less miraculous. As rows over the poll tax and Europe broke out, Thatcher herself, seemingly impregnable after her third election victory, began to look vulnerable.

As the polls suggested that the Tories would not be re-elected with her as leader, the knives came out.

IN NOVEMBER 1990 THERE CAME A DAMNING RESIGNATION SPEECH BY THE DISILLUSIONED GEOFFEREY HOWE. AND A CHALLENGE FROM HER OLD ENEMY, MICHAEL HESELTINE. I WAS FORCED TO RESIGN...

Thatcher was replaced not by Heseltine, but by the supposedly emollient **John Major** (b. 1943).

## **The Economic Results of Thatcherism**

If Thatcher had retired in 1988, even in May 1989, ten years after she came to power, history would have judged the economic consequences of her administrations more favourably. By the time she resigned in November 1990, it was clear that the supposed Thatcher economic miracle of high growth and low inflation was less than miraculous.

**Output**

From peak to trough 1979 to 1981, manufacturing output fell by a staggering 15% and only strong growth in 1987 and 1988 took it above the 1979 level.

**Inflation**

The 12 month rate increased from 10.3% in May 1979 to an horrific 21.9% in August 1980, from where it fell sharply into single figures by 1982. From 1983 to 1988 it ranged between 3.5 and 6%, compared with 2 to 4.4% in other leading industrial countries. In 1990, inflation rose again to double figures in response to the domestic overheating of 1988/9.

**Unemployment**

The living standards of those in work rose more consistently than in any other decade of the century, but on the other hand unemployment rose sharply from 1.09 million in May 1979 to 2.13 million in May 1981, and went on rising to 3.13 million in July 1986. Thereafter it fell to 1.66 million in 1990 but, as recession struck again, rose to 2.9 million in 1993. Furthermore...

MANY CLAIMED THAT THE FIGURES WERE FIDDLED AND THAT THE TRUE RATE WAS HIGHER. DURING THE 1980S THERE WERE **_28 REVISIONS_** TO THE WAY THE FIGURES WERE CALCULATED.

**Taxes**

The cutting of taxes was one of the main planks of Thatcherism. Indeed, in the first budget of June 1979, income tax was cut, and income tax rates, especially at the higher levels, were cut consistently through the 1980s.

top marginal rate was cut from 83 to 40%

basic rate was cut from 33 to 25%

tax allowances were raised by 25% in real terms

investment income surcharge of 15% was abolished

corporation tax was cut from 52 to 35%

capital transfer tax was simplified and top rate on inheritance tax reduced from 75 to 40%

capital gains tax was restructured to eliminate tax on inflationary gains

controls on prices, dividends, pay and foreign exchange were abolished

and so were restrictions on bank lending and hire purchase.

The new freedom given to the banks with regard to controls on their balance sheets was highly significant in creating the Thatcher Boom. Between 1980 and 1988 personal debt _doubled._

However, other taxes were raised. VAT (value added tax) was almost doubled in 1979 from 8 to 15% and was raised further to 17.5% in 1991 to help finance the clearing up of the poll tax fiasco.

Employee national insurance contributions were also raised.

THE OVERALL TAX BURDEN INCREASED FROM 34% OF GDP IN 1978/9 TO 30% IN THE MID-1980S...... BEFORE FALLING BACK TO JUST UNDER 38% IN 1988/9 AND 1989/90.

These tables taken from parliamentary reports in _Hansard_ , 3 April 1990, allow for no doubt as to who were the major beneficiaries of Thatcher's tax policies.

Gains from income-tax and NIC charges, 1978-79 to 1990-91

| | Married man, multiples of average earnings  
---|---|---  
| 2/3| 1| 2| 5| 10

* * *

Tax + NIC % of gross earnings  
1978-79| 21.9| 27.8| 31.4| 50.5| 66.5  
1990-91| 21.2| 25.5| 28.8| 35.5| 37.8  
change(%)| -0.7| -2.3| -2.6| -15.0| -28.7  
Real net earnings (% rise)| 34.7| 37.8| 38.5| 73.8| 148.1  
Gross earnings (£a week) in 1990-91| 202.53| 303.80| 607.60| 1519.00| 3038.00  
Tax + NIC cut in £| 1.42| 6.99| 15.80| 227.85| 871.91  
| Taxpayers (m)| Reduction in tax  
| | Total (£m)| £ a head

* * *

Range of individual's income in 1990-91 (£)  
Under 5,000| 2.9| 480| 110  
5,000-10,000| 8.6| 2,840| 320  
10,000-15,000| 6.4| 4,390| 690  
15,000-20,000| 3.8| 3,860| 1,030  
20,000-30,000| 2.6| 4,190| 1,590  
30,000-50,000| 1.0| 3,300| 3,270  
50,000-70,000| 0.2| 2,160| 9,390  
Over 70,000| 0.2| 5,770| 36,060

## **Public Expenditure**

Another Thatcherite article of faith was an assault on public spending. As a White Paper of 1979 put it: _Public expenditure is at the heart of Britain's present difficulties._

The White Paper of March 1980 set a target of reducing it by 4% in 1983/4 over 1979/80. In the event it _rose_ by 6.3%. This was partly explained by the recession and the rise in unemployment, but there was also an increase in spending on law and order and defence, about which Thatcher would be sanguine, and there were overshoots by the local authorities, about which she definitely would not be sanguine.

I SUCCEEDED IN CUTTING BACK EXPENDITURE ON HOUSING AND EDUCATION. AND, ONCE THE ECONOMY STARTED GROWING, THE PUBLIC SPENDING SHARE OF NATIONAL INCOME FELL. FROM 46.8% IN 1982/3 TO UNDER 40% BY THE LATE 1980S, THE LOWEST LEVEL FOR TWENTY YEARS.

Public expenditure was not the only area where reality differed from the rhetoric. Thatcher could be charged with inconsistency in her views on the economy, and especially on the level of the £. In 1985 as the £ sank towards parity with the $ she demanded of Chancellor Lawson why sterling was not already in the ERM (exchange rate mechanism) and "protected from all this". Three years later she was hostile to joining the ERM and announcing to the Commons, "There is no way in which you can buck the market."

Some thought that the new enterprise culture of lower taxes and less restriction had brought great improvement. In May 1988 in a _Fortune_ article entitled "Britain is Back", John Banham of the Confederation of British Industry claimed: "There's a new generation over here. They're hungry and they like winning."

Others were not so sure, and criticized the devastation wrought on British industry in Thatcher's first administration. A House of Lords Select Committee, which included leading businessmen and prominent scientists, reported in 1987: _Ultimately the goal is the UK's survival as a leading industrial nation in world competition. The UK must therefore spend sufficiently to improve, or at least maintain, its industrial and cultural base relative to those countries which are judged to be its natural competitors... Neither government nor industry is spending enough at present levels to restore our industrial position in world markets._

## **Monetarism**

As the Thatcherites had preached monetary control more strongly than almost any other economic dogma, we should perhaps judge their success by looking at their achievement in this area.

"Monetarism" and "monetarist" came to be used pejoratively to describe what people, usually critics, thought of as "Thatcherism" and "Thatcherite". Strictly speaking, it is the recognition of the importance of money and money supply in an economy.

AS FAR AS TRUE THATCHER BELIEVERS ARE CONCERNED, MONETARISM IS AN ESSENTIAL REPLACEMENT FOR THE KEYNESIAN SOCIAL DEMOCRATIC SYSTEM THAT HAS DOMINATED ECONOMIC POLICY-MAKING SINCE THE END OF THE WAR. I HAVE BEEN WIDELY MISINTERPRETED.

Keynes would undoubtedly have adapted his views to cope with the economic conditions of the 1960s and 70s which were different from those of the 1920s and 30s when he wrote his most influential works, culminating in _The General Theory of Employment, Interest and Money_ (1936).

Nevertheless, Keynes did believe that governments had a role in ensuring sufficient demand in the economy to maintain full employment. Keynesians also believed in involving the big players – the "social actors" – the employers' organization, the CBI (Confederation of British Industry), and the workers' organization, the TUC (Trades Union Congress) in the managing of the economy.

The structural weakness of the British economy, with its slowness in adapting from the old basic industries of coal, steel, shipbuilding and chemicals to the modern growth ones of electronics, computers and telecommunications, allied to weak management, myopic trade unions and inept government, led to recurring financial crises so that by the mid 1970s the whole Keynesian consensus approach was discredited.

Denis Healey, Labour Chancellor of the Exchequer 1974-79, initially tried to cope with the high inflation and low growth exacerbated by the oil crisis of the mid 1970s with the usual Keynesian weapons, including a so-called "Social Contract" with the unions.

I TRIED TO ENGINEER A GRADUAL DEPRECIATION OF STERLING, BUT THIS TURNED INTO A FREE-FALL AS FINANCIAL MARKETS LOST FAITH IN BRITAIN'S ECONOMIC COMPETENCE. THE RESULT WAS A HUMILIATING VISIT BY OFFICERS OF THE **_IMF_** (INTERNATIONAL MONETARY FUND) TO SEE IF THE COUNTRY WAS WORTHY OF A LOAN.

To a certain extent, a new approach closer to the monetarism to be more rigorously pursued by the first Thatcher administration was imposed by the IMF, and Prime Minister James Callaghan, with one eye on the financial markets, told the Labour Party Conference in September 1976: _We used to think that you could spend your way out of a recession and increase employment by cutting taxes and increasing government spending. I tell you in all candour that that option no longer exists, and that insofar as it ever did exist, it only worked on each occasion since the War by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step._

But Callaghan and Healey were not really pursuing a true monetarist approach in the late 1970s. They still used incomes policies, there was no medium-term financial plan or framework, and once the crisis had passed, plans for increasing government spending were wheeled out again.

In contrast, prompted by Keith Joseph, there was an ideological commitment in the Thatcher faction of the Tory Party to pursue a monetarist approach.

AND IT WAS NOT ONLY IN BRITAIN THAT DISILLUSIONMENT WITH THE SO-CALLED KEYNESIAN CONSENSUS WAS SETTING IN. THE RESEARCH OF MILTON FRIEDMAN AND THE CHICAGO SCHOOL INTO THE ROLE OF MONEY STIMULATION WAS BEGINNING TO INFLUENCE POLICY-MAKERS IN THE **_USA_**.

In Britain, academic support was given by the Money Study Group as well as the IEA and CPS.

The most significant of the monetarist academics, apart from Alan Walters, were **Brian Griffiths** (b. 1941), Professor of Economics at the City University, and later Head of the Prime Minister's Policy Unit, and **Patrick Minford** (b. 1943), Professor of Applied Economics at Liverpool University. There were also some City economists banging the monetarist drum, most notably **Tim Congdon** (b. 1949) and **Gordon Pepper** (b. 1934). By the time Thatcher came to power in 1979, anyone who had been following the economic debate at all should have been prepared for an experiment in monetarism.

The launching of Thatcher's monetarism is often credited to Keith Joseph's speech in Preston in September 1974 when he said,

_The monetarist thesis has been caricatured as implying that if we get the flow of money spending right everything will be right. This is not – repeat not – my belief. What I believe is that if we get the money supply wrong – too high or too low – nothing will come right. Monetary control is a pre-essential for everything else we need and want to do; an opportunity to tackle the real problems – labour shortage in one place, unemployment in another; exaggerated expectations; inefficiencies, frictions and distortions; hard-core unemployment._

The truth is that, in power, Thatcher abandoned monetary targets. Ian Gilmour, one of the early sackings from Thatcher's cabinet, referred to monetarism as "the uncontrollable in pursuit of the indefinable". In the early 1980s monetary targets were retained but were constantly revised upwards.

Monetary growth: per cent annual rate of increase

| Target| Actual  
---|---|---  
1979-80| 7-11| 12.0  
1980-1| 7-11| 19.0  
1081-2| 6-10| 13.0  
1982-3| 8-12| 11.0  
1983-4| 7-11| 10.0  
1984-5| 6-10| 13.5  
1985-6|  5-9| 15.3  
1986-7| 11-15| 20.0

As growth and its benefits were appreciated by the electorate, the attitude to inflation was eased and the official stance modified from eradication to "downward pressure". After 1985, monetary targets were virtually abandoned and in 1986 when the price of oil fell sharply, Chancellor Lawson opted for a falling value of the £ and growth rather than keeping up the war on inflation.

In the early days of Thatcher's first administration, many thought "Thatcherism = Monetarism, Full Stop". No one held this simplistic view by her third administration. Indeed, monetarism had been virtually abandoned, almost discredited. John Major, Chief Secretary to the Treasury, June 1987-June 1989, and Chancellor, October 1989-November 1990, told the Treasury and Civil Service Committee in 1989...

MONETARISM HAS NOT BEEN THE THEORY THAT THE GOVERNMENT HAVE FOLLOWED DURING ANY PERIOD THAT I HAVE BEEN IN THE TREASURY. I DO NOT THINK YOU CAN BOIL DOWN ALL THE CAUSES OF INFLATION TO SUCH A SIMPLE AND STRAIGHT FORWARD JUDGEMENT.

DID THATCHER MAKE BRITAIN MORE PROSPEROUS? YES, BUT THE WHOLE INDUSTRIALIZED WORLD BECAME MORE PROSPEROUS IN THE 1980S.

Academics David Butler and Dennis Kavanagh said: _Despite pockets of impoverishment, Britain was turning into an ever more middle-class society._

But for the poor, life became even worse. Although the level of supplementary benefit increased slightly in real terms until it was replaced in the 1988 reorganization of social security, its upgrading lagged well behind the rise in earnings. In 1978 it was 61% of average personal disposable income, by 1987 it was only 53%.

The Family Expenditures Survey showed that the real incomes of the bottom 10% _fell_ by 9.7% between 1979 and 1985. By the late 1980s over 8 million people were dependent on income support, with a hard core of over 1.5 million drawing benefit for more than 5 years.

To exacerbate the situation, the Thatcher government froze child benefit after April 1987. The Child Poverty Action Group said that the Thatcher government brought horizontal distribution between poor and poor rather than vertical redistribution from rich to poor.

HOMELESS FAMILIES ROSE FROM 50,000 TO 120,000 (REPRESENTING 370,000 PEOPLE). BY THE MID 1980S, SOME THOUGHTFUL TORIES WERE EXPRESSING DOUBTS ABOUT THATCHERITE POLICIES. THE FRUITS OF ECONOMIC SUCCESS COULD TURN SOUR UNLESS WE CAN BRING BACK SOCIAL COHESION TO OUR COUNTRY.

_The Economist_ began by supporting Edward Heath in the Conservative leadership election of 1975 in which Thatcher defeated him. By 1987 it was saying what every travelling Briton had come to know:... _the dispiriting sense of crossing the Channel or the Atlantic to find cleaner streets, fuller shops, snappier clothes and smarter hospitals..._

_For years, many Britons consoled themselves with the thought that... they could still ensure a genteel life in the second league. Only when the third league – the Singapores, South Koreas and Brazils – began pinching chunks of British business did people start to realise that comfortable inertia was not an option. The choice was either to compete or to decline in growing discomfort._

In _The Economist's_ view, the choice, thanks to Thatcher, had been made. In the five years 1982-6, Britain's GDP had grown by 14.5%, France's by 8% and West Germany's by 9%. "The sliding has stopped."

According to Thatcher's Chief Press Secretary, **Bernard Ingham** (b. 1932), it was Thatcher's refusal to accept this inexorable decline that stands as her greatest achievement. In his book, _Kill the Messenger_ , he said...

HISTORIANS WILL ARGUE OVER HER GREATEST ACHIEVEMENT. I WILL ENTER MY CANDIDATE NOW. IT IS **_NOT_**... THE DEFEAT OF INFLATION THE VINDICATION OF HER EAST-WEST AND SOUTH AFRICA POLICIES THE TAMING OF THE TRADE UNION BARONS THE CREATION OF AN ENTERPRISE ECONOMY HER REGISTRATION OF BRITAIN'S STANDING IN THE WORLD... THE SPREADING OF THE OWNERSHIP OF PROPERTY AND CAPITAL THROUGH COUNCIL HOUSE SALES AND WIDER SHARE OWNERSHIP FOR ME, HER GREATEST SINGLE ACHIEVEMENT, WHICH MADE ALL THESE THINGS POSSIBLE, WAS HER REFUSAL TO ACCEPT, OR BE DAUNTED BY, THE PREVAILING AIR OF DEFEAT ISM WHICH SHE CONFRONTED ON TAKING OFFICE IN 1979.

Even the left-wing historian **Eric Hobsbawm** (b. 1917) conceded in his book, _Age of Extremes: Even the British Left was eventually to admit that some of the ruthless shocks imposed on the British economy by Mrs Thatcher had probably been necessary. There were good grounds for some of the disillusion with state-managed industries and public administration that became so common in the 1980s._

Thatcher herself put it this way when she told _The Times_ in February 1984...

I CAME TO OFFICE WITH ONE DELIBERATE INTENT, TO CHANGE BRITAIN FROM A DEPENDENT TO A SELF-RELIANT SOCIETY – FROM A GIVE-IT-TO-ME TO A DO-IT-YOURSELF NATION; TO A GET-UP-AND-GO INSTEAD OF A SIT-BACK-AND-WAIT BRITAIN.

The _Guardian_ journalist, Hugo Young, in his book _One of Us_ , also conceded that some of Thatcher's economic achievements were considerable: _In the estimation of the world, Britain was now among the strong economies. Productivity, in particular, was dramatically higher than a decade before... The overmanning was a thing of the past... Some of the policies which contributed were distinctive Thatcherite policies, and were remarkably successful. Prime place was almost universally accorded to the remorseless shrinking of trade union power._

## **The Thatcher Style**

Modern democracies are very difficult to govern to the satisfaction of the electorate. One of the main problems for incoming governments is the necessity to promise far more than they can ever hope to deliver.

Thatcher was more determined than most. Ivor Crewe, Professor of Government, writing on Thatcher values, said: _She has firm convictions on almost every issue under the sun. Not since Gladstone has Britain been led by such an opinionated and evangelical Prime Minister. Most Prime Ministers see themselves as "healers" (for example, John Major wanted to make Britain a nation "at ease with itself"); a few, like Lloyd George and Churchill, as warriors; Thatcher, uniquely, saw herself as a crusader._

**Robert** (now **Lord) Skidelsky** (b. 1939), biographer of Keynes and no right-winger, said of Thatcher that she was a warrior in the mould of Boadicea, Elizabeth the First and Florence Nightingale, both physically and morally brave, and that she was: _The most ideological Prime Minister to have led a party which prided itself on its pragmatism. She got her chance because the old pragmatism had degenerated into a sticky corporatism which had become the vehicle for stagnation and decline._

Skidelsky admired her courage but he was more critical of her approach to human relations, feeling that she found it impossible to win friends by arguments or to conciliate former enemies.

YOU ARE EITHER WITH US OR AGAINST US!

**Julian Critchley** (1930-2000), a Tory MP never promoted, made the memorable remark: _She cannot see an institution without hitting it with her handbag._

If this style was appropriate in the early days of her government, it became increasingly counter-productive, so that by the late 1980s all but her closest supporters had tired of it.

Many, especially those condemned by Thatcher as "wets", thought that the Thatcherite tone, whatever the substance, was damaging. **Francis Pym** (b. 1922), sacked by Thatcher in 1983, said: _I think that the public tone of the government has often sounded unsympathetic... Conviction, determination and forceful logic can easily turn into dogmatism, inflexibility and insensitivity. As a result, people feel that the government neither understands nor cares about them. This causes immense harm._

Anthony King, Professor of Government, described what he called "fear at first hand": _She puts the fear of God into people._

Joe Rogaly of the _Financial Times_ wrote that Britain had been _governed by a Prime Minister who, whatever her faults, has been infused with a vision. She has been a driven woman, always urging ministers forward, terrifying them, tiring them out one by one, disposing of them, nagging them, politicising their senior officials, popping in on this or that issue, scrawling her comments on everything, vetoing this, insisting on that, overshadowing all._

Christopher Johnson in _The Economy Under Mrs Thatcher_ described her style as similar to de Gaulle's: "It was _le gouvernement par la parole_ , government by public pronouncement. De Gaulle used his press conferences at the Elysée Palace to make policy; Mrs Thatcher used _The Jimmy Young Show."_

## **Not Ideas But Action**

Even one of her greatest supporters, Lord Harris, did not think of Thatcher as a creator of original ideas: _She doesn't have an original idea in her head._ But he still admired her: _That's not meant to be offensive: politicians aren't meant to have original ideas. But she has some instincts. And she brought to that superhuman courage that daily withstood the assault that was almost unremitting through the whole of the 1980s._

And Enoch Powell, who ought to have admired her, was also dismissive of her ability to cope with ideas.

IT WOULDN'T BE TRUE TO SAY MRS THATCHER HATES IDEAS. SHE'S NOT COMFORTABLE WITH THEM AND HAS TENDED TO FIND HERSELF IN THAT KIND OF EMBARRASSMENT: OF BEING WITH PEOPLE WHO ACTUALLY ENJOY IDEAS; WHO ACTUALLY ENJOY KNOCKING THEM AROUND... WHO ENJOY THINKING. MRS THATCHER DOESN'T ENJOY THINKING.

Alfred Sherman said: _Mrs T never "thunk" any thoughts. She took other people's ideas._

_Thatcherism began less as a doctrine than as a mood. From the outset, the beliefs and values that underlie Thatcherism have been more identifiable than its ideas... The mood that Thatcher seized and rode to power reflected not only a general disillusionment with the bipartisan post-war settlement but also with the hypocrisy of socialism and its self-seeking proletarian cant._ (Alfred Sherman)

Thatcher made clear her contempt for teachers and academics and her preference for men of action: _And nowhere is this attitude of opposition to wealth creation more marked than in the cloister and the common room. What these critics apparently can't stomach is that wealth creators have a tendency to acquire wealth in the process of creating it for others. They didn't speak with Oxford accents. They hadn't got what people call "the right connections"; they had just one thing in common. They were men of action._

Amongst her men of action, several were Jews. No other cabinet has had so many. Harold Macmillan quipped: "There are more old Estonians than old Etonians." One of her favourites was **David Young** (b. 1932), whom she elevated to the peerage in 1984 so that she could have him in the cabinet.

OTHERS BRING ME PROBLEMS, DAVID BRINGS ME SOLUTIONS. HE COULD ALSO BRING HER EMBARRASSMENT! IN LOOKING AT THE GENERATION OF VICTORIAN ENTREPRENEURS AND AT THE RESULTS OF THEIR ACHIEVEMENT, WE NEED NOT FEEL GUILTY THAT THEIR SUCCESS WAS AT THE EXPENSE OF THE POOR.

Norman Strauss said: _She reaches for Jewish people because they do partly personify the Thatcherite virtues. They are entrepreneurial. They are successful people anywhere. They believe in family life... They believe in thrift and savings and doing things by your own efforts: in self-help._

John Biffen added: _It is difficult to talk about this: it puts people in a great tizz. But it just happens that the intellectual thrust of the new liberal economics substantially came from the Jewish intellectual élite. The Jews she had in government were all very much of the new radical Right._

And if Thatcherites did not believe, in theory, in solving everyone's problems by government action, Thatcher did believe in shaking up the Establishment – the civil service, heads of nationalized industries, bankers, academics, doctors, barristers, the BBC, local authorities and unions – who, in her opinion, were responsible for denigrating the vigorous virtues or holding them in check.

Thatcher herself could be very simplistic, not to say populist, when she was extolling her own virtues. She told the _News of the World_ in 1981...

MY POLICIES ARE NOT BASED ON SOME ECONOMIC THEORY, BUT ON THINGS I AND MILLIONS LIKE ME WERE BROUGHT UP WITH: AN HONEST DAY'S PAY. LIVE WITHIN YOUR MEANS. PUT A NEST-EGG BY FOR A RAINY DAY. PAY YOUR BILLS ON TIME. SUPPORT THE POLICE.

And if Thatcher could be simplistic, according to John Biffen, she "was instinctive and sometimes quite bewildering in the pursuit of economic policy. She welcomed a free exchange rate provided it never floated downwards; she despised subsidies but fought like a tigress to protect mortgage interest rate relief."

## **Authoritarian**

Thatcher had talked in a speech at the Tory Party Conference as early as 1986 of there being too much government.

WHAT WE NEED IS A FAR GREATER DEGREE OF PERSONAL RESPONSIBILITY AND DECISION, FAR MORE INDEPENDENCE FROM THE GOVERNMENT, AND A COMPARATIVE REDUCTION IN THE ROLE OF GOVERNMENT.

However, in office, she seemed unable to resist the temptation to tell everyone what to do and, where it was in the considerable power enjoyed by a Prime Minister, to make sure they did.

Many were concerned about the attacks on civil liberty by what they saw as an authoritarian and autocratic government. The _New Statesman and Society_ magazine launched "Charter 88", arguing that: _The government has eroded a number of important civil freedoms: the universal right to habeas corpus, to peaceful assembly, to freedom of information, to freedom of expression, to membership of a trade union, to local government, to freedom of movement... By taking these rights from some, the government puts them at risk for all._

Thatcher only confirmed people's view that she was both authoritarian and autocratic.

I GO FOR AGREEMENT, AGREEMENT FOR THE THINGS I WANT TO DO... THERE ARE DANGERS IN CONSENSUS... IT SEEMS MORE IMPORTANT TO HAVE A PHILOSOPHY AND POLICY. THIS INABILITY TO LISTEN TO OTHERS, COMBINED WITH MAJOR STRATEGIC MISTAKES OVER THE ECONOMY, THE POLL TAX AND EUROPE, LED TO HER DOWNFALL. IT MADE HER AN IMPOSSIBLE COLLEAGUE WITH WHOM TO WORK IN BRITAIN'S SYSTEM OF REPRESENTATIVE GOVERNMENT.

**Will Hutton** (b. 1950), a _Guardian_ journalist during Thatcher's reign and later editor of _The Observer_ and author of the best-selling book, _The State We're In_ , felt that she became a virtual dictator, filling every conceivable post with her supporters.

As the final leadership contest unfolded, the _Sunday Times_ wrote: _The crisis is entirely the responsibility of the Prime Minister, of her arrogance, of the contempt with which she treats her colleagues... she will destroy any minister who crosses her, she lacks the common sense and even... the common decency to preside over a talented cabinet; she has become a menace to our system of government._

## **Conclusion**

Who is correct? The Conservative historian, Lord Blake, who wrote in _The Times_ on the occasion of Thatcher's resignation: _Margaret Thatcher's place in history is assured; the first woman to be Prime Minister, the first since Palmerston to win three successive General Elections, the longest continuous holder of the office since Lord Liverpool... She was on the British political scene a giant among pygmies. She was one of the two greatest Prime Ministers in the 20th century and one of the half dozen greatest Prime Ministers of all parties and all times._

Or Will Hutton, editor of _The Observer_? _Her actual achievement was modest, even destructive, for in economic and political terms she did no more than entrench the vicious circles in which the country is trapped. She was only able to mask the full implications temporarily with a credit boom._

The answer is probably somewhere between these two extreme views. But on one institution, she did have a marked effect.

## **Thatcher's Influence on New Labour**

There was no doubt that Labour must change if they ever wanted to return to power. Clause 4 and the social reforms of Sidney and Beatrice Webb really were from a former age. Even the union victories of the 1970s were a long time ago. The 1990s were for the young, aspiring middle class. When the Labour Party issued its policy document, _Looking to the Future_ , on 4 May 1990, _The Times_ , owned by Thatcher supporter, Rupert Murdoch, said...

ONE INDIVIDUAL STALKS THE PAGES... MARGARET THATCHER. THE OLD-STYLE LABOUR PARTY AND ITS SOCIALISM HAVE BEEN SWEPT ASIDE BY THATCHER.

**Out went:**

commitment to re-nationalization

government controls over the economy and industry

taxes to enforce repatriation of capital overseas

repeal of all Conservative trade union reforms.

Not quite out but reduced to near invisibility was: support for nuclear disarmament.

_The Times_ concluded that the document was "a retreat not just from some naive socialism" – socialism was reduced to "dust on the shelf".

Labour now proclaimed its belief in the market and disclaimed an "irresponsible dash for growth". In industrial relations, almost all Conservative reforms were accepted, including the end of the closed shop, ballots on strikes and union elections. There was no mention of those 1970s recipes (of both Tory and Labour governments) – controls on incomes, prices and foreign exchange. The sale of council houses was accepted.

Barrister, novelist and Labour supporter **John Mortimer (1923-2009) was** horrified by the "new" Labour Party: _The present creed of the Labour Party, should it exist, is only hidden under a number of businesslike breasts wearing dark blue suits and anonymous, but not quite regimental, ties._

And Hugo Young wrote in _The Guardian_ in July **1990:** _Market economics and fiscal rigour are now agreed by the centre-left to be the cornerstones of any policy practical people can agree on._

By 1996, the Labour Party entertained high hopes of winning power in the coming Election, and its young leader, Tony Blair, openly expressed admiration for the determination of Thatcher. His party, led by what was termed "New Labour", not only wanted to retain Trident, the nuclear deterrent, but said it would press the button if necessary. It would reform comprehensives and leave the grammar schools alone. It erected new limits around state intervention in the market and even announced it would spend less rather than more on welfare benefits. You don't come much more Thatcherite than that.

**Jonathan Powell** , Blair's chief of staff, declared: "Thatcher is his model."
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