The Thatcher response: 1979-90

• Margaret Thatcher


  - conservative pm 1979-90 (first woman)

  - won elections in 1979 against heath ,83 and 87

  - her politics made her more of a traditional liberal than a conservative

  - believed in reducing power of the state and giving greater opportunity for people to live their lives without government interference as well belief in the nation's paying its way and balancing the books

  - against keynesian economic policy which believed in government intervention in order to improve the economy
• thatcherism


  - example of conviction politician (someone with strong opinions who acts out of principle rather than political expediency- acting out their morals)

  - attacked consensus politics and believed it would be better to have a philosophy and policy which appealed to a majority than satisfying people with no views

  - thatcher took inspiration in belief that the proper role of the state was not to involve itself in the welfare of its citizens and allow individuals to make their own free choices

  - believe in free market (economic system operate naturally without regulation by government) and was against trade unions as it regarded it as a direct cause of unemployment and destroyer of democratic freedoms
• 1979 election


  - conservatives won 43 majority allowing thatcher to embark a policy of radical change

  - against heath and thatcher criticised him for pushing britain further towards socialism than even labour had

  - thatcher believed consensus politics which allowed britain to play too large a part in people's lives harmed britain

  - thatcher's state believed half hearted and the incompetent should no longer be rewarded
• the new right


  - thatcher's government part of the new right

  - ended the consensus politics (regarded as socialism) which had operated since 1945 in belief that it leads to inefficiency and low growth

  - believed that conservatives fell into labour's trap of leaving the free market, subsidising private and public companies and permitted the growth of excessive trade union influence

  - thatcher was angry at heath for abandoning his new right policies and falling trap to labour's views
• thatcher's economic revolution


  - wanted to end consensus politics which allowed britain to slip into harmful social and economic habits and identified the most serious problems as:

  - high levels of government spending leading to excessive taxation and inflation

  - unnecessary government interference in the running of the economy

  - combination of weak managements and powerful unions resulting in increase in wages and salaries but a decrease in productivity leading to inflation

  - wanted to restore economic free market and end keynesian system

  - thatcher was strict in terms of paying subsidies as she criticized heath's gov for this as she believed since it came from public money, other areas would be deprived of resources to pay for the failing ones
• monetarism


  - aim was to decrease inflation as it was believed root cause of inflation was gov spending

  - in order to control inflation, gov had to restrict the amount of money in circulation and reduce public expenditure

  - gov cut gov spendings in hopes to reverse position in which PSBR was always in deficit

  - interest rates kept high to deter excessive borrowing and keep the pound strong in international financial markets

  - inflation rate decreased from 19% to 5% in the same year

  - though decreasing inflation rate was successful, unemployment rose in disturbing figures after 1980- could've been prevented if inflation decrease was accompanied with economic growth that created new jobs
• social unrest


  - reaction to economic recession (falling orders for manufactured goods had been seen as start of the recession) caused disturbances in english cities

  - in 1981 london, hundreds of people ran riot, burning shops and looting property= police with great difficulty finally stopped them

  - similar violence occurred in bristol, liverpool and manchester
• factors that caused troubles (social unrest)

  - local conditions contributed to the reasons for the disturbances that were a result of the gov tough monetarist policies which led to increased unemployment

  - poor job prospects in deprived inner city areas which affected afro- caribbean communities

  - alienation of young black people whose perception was that the police discriminated against them on racial grounds e.g. police used the sus law (allowed police to stop and search people suspected of criminal behaviour) against more than 1000 people which majority were black

  - high incidence of unemployment among school leavers -> overall unemployment 13%, unemployment for ethnic minorities 25% and black youths in particular 55%
• social unrest and its relations to the government

  - gov believed it was deliberately started by political troublemakers and that rioters weren't helpless victims of social and industrial change

  - norman tebbit supported thatcher and told her not to let these disturbances divert her attention away from economic policies

  - by 1982 the social and economic problems had begun to threaten thatcher's continuance in office and her popularity had hugely declined which made the conservatives doubt if they'd win the next election -> was reversed when britain went to war with argentina over the falkland islands
• falklands war reflection on thatcher

  - revealed a part of her character that would've been hidden otherwise= outstanding war leader

  - her commanding conduct and demeanor during the conflict added to her reputation and regained popularity which enabled her to stay in office until 1990
• reasons for the falklands conflict

  - legal ownership had been disputed for a long time and britain's position was that the falklands had legally been a british dependency since 1833

  - 98% of the island's population wished to remain under the british flag in 1982 which was constantly emphasised by thatcher justifying that "sovereignty isn't negotiable"

  - british gov had been first willing to discuss a compromise in which argentine, minister at foreign office, proposed a leaseback agreement in which britain whilst maintaining sovereignty over falklands would allow argentina to administer the region as its own

  - this agreement was destroyed when argentinean dictator decided to attempt to take the islands by force

  - 4000 troops invaded and overcame the resistance of 80 royal marines
• thatcher's response to the falklands conflict april-june 1982


  - argentine attack condemned by all british parties but labour wanted the response to be through the UN making it formally condemned, which thatcher refused claiming it was britain's thing to resolve, leading to the conflict

  - air strikes began 1 may against Argentinian forces and was recaptured by britain

  - 200 mile exclusion zone set up around the island by britain to start their naval campaign which caused a lot of controversy and the argentine cruiser belgrano was sunk by britain

  - opponents of the war accused britain of torpedoing the belgarno even though it was sailing out of the exclusion zone at the time= done to stop the negotiated settlement by the UN

  - thatcher's response to the belgarno was that it was a real threat to britain, regardless of its position and heading since ships 'can always turn around'

  - 2 days later hms sheffield and several frigates were destroyed by an argentine missile but royal navy prepared effectively for british landing and recaptured san carlos and goose green

  - argentina surrendered when falklands capital was freed, the conflict killed 255 british and 665 argentinians
• political benefits for thatcher

  - due to how she handled the falklands conflict, she won an overwhelming victory in 1983 election with a surge of popularity (397 seats tories, 209 seats labour)

  - conservatives won perhaps due to labour having a remarkably poor performance whose total vote went down by 3 mil and share of votes by 9%

  - opposition who had opposed military action were trying to attack the gov and at the same time support those who did fight in the war which decreased votes for these opposition parties

  - thatcher was likened by churchill on how she was able to inspire people during the time of war -> thatcher let it known she had no intention of negotiating the islands away
• causes of miners strike 1984-85

  - coal was becoming costly and difficult to mine

  - lack of gov investment into the coal mines and instead were importing coal from abroad therefore british mines were running at a loss

  - thatcher's gov refused to put further public money into an industry that didn't really have a chance to recover in this market

  - argument for pit closures was that it was better to face the problem and lessen consequences rather than pretending it gets better

  - national coal board intended to cut national capacity by 4 million tonnes, close 20 pits with a loss of 20, 000 jobs
• development of the miners dispute

  - NCB wanted to cut out the non profitable parts of the coal industry and was faced by NUM leader who was resisting the pit closures

  - gov claimed to be neutral but fully backed NCB and encouraged it to bring the trade unions to heel

  - employment minister, norman tebbit, steered through 2 employment acts in 1980 + 82 which were the first steps towards weakening union power that included measures: forbade mass picketing, outlawed the 'closed shop' (all workers had to be part of an union), declared industrial action illegal unless workers had voted for a strike in a formal ballot

  - gov undermined miners' legal defences

  - gov stockpiled coal and coke at fuel stations and drafted emergency plans for importing further stocks

  - strike began in 1984, lasted a year, saw clashes between miners and the police, worst one being in south yorkshire 'battle of orgreave' = strikers tried to prevent coke filled lorries leaving orgreave, 6000 pickets struggled against 7000 policemen before finally being overcome -> 93 arrests, 51 strikers and 72 policemen injured

  - NUM leader could barely keep the strikes going after this and it ended in 1985
• reasons for strikes failure

  - coal was no longer vital fuel source as more people turned to using oil and gas therefore the strike never made the impact the strikers had hoped for

  - employment acts hugely restricted the strikers and the gov which backed NCB made careful preparations to maintain essential fuel stocks and supplies

  - NUM leader, arthur scargill, refusal to hold a ballot made it appear that he was undemocratically forcing his union to strike and refusal of certain miners to not strike and keep working prevented the strikes from becoming solid
• impact of miners strike

  - miners defeat was a huge success for the gov on their anti union campaign and work power was on a decline which was evident in the failure of the print workers

  - since miners and printers were the strongest unions in britain, their defeat marked a major success for thatcher's industrial policies and strengthened her resolve to overcome other forces in britain

  - failure of the strike and the pit closures led to job losses, social disruptions and decline of traditional mining communities + convinced majority of people that action of this kind would no longer be an appropriate way of settling industrial issues in modern britain
• thatcherism: second stage aim

  - monetarism had been largely abandoned by mid 1980s

  - to create economic growth by Supply side economics (which believed people would work harder and be more productive if they were allowed to keep more of their earnings):

  - reducing taxation which would provide greater incentives to work

  - encouraging competition in order to lower prices

  - limiting trade union powers so that they don't block productivity and prevent modernisation of industry

  - cutting wasteful welfare payments as a way of saving public money and reducing dependency
• deregulation


  - remove the financial and legal restrictions which thatcher believed prevented efficiency and profitability in many areas of social and economic activity

  - areas that were included in the deregulation programme were:

  - finance= credit and exchange controls were abolished

  - transport= bus companies were deregulated to encourage competition

  - education= schools were entitled to opt out of state sector and become responsible for their own financing

  - health= hospitals were required to operate an 'internal market' by taking control of their own finances and matching needs to resources
• housing: the right to buy

  - an aspect of deregulation that was focused was the right, granted by the housing act of 1980 to council house tenants to buy the homes that they were renting

  - critics argued that it undermined the principle of social housing and reduced the stock of available properties

  - defenders argued that it provided an incentive for poorer members of society who previously would've not had the possibility of becoming property owners

  - it was thatcher's belief that it was a further move towards the ideal of britain as a property owning democracy

  - popular move amongst its target audience as over 800,000 tenants by 1985 had begun to purchase the properties that had previously rented

  - 15% increase in home ownership from 1981 to 85
• privatisation


  - whilst providing the state with large additional funds, this policy was aimed at increasing 'popular capitalism' by giving a much greater number of ordinary people that chance to become shareholders

  - between 1979 to 90, the number of shareholders increased from 3 mil to 9 mil

  - out of the 50 enterprises that were sold during thatcher years, largest were british airways, british steel, british coal

  - financial deregulation encouraged banks to advance larger loans to their customers and a significant part of the money borrowed then spent on consumer goods from abroad -> britains balance of payments deficit rose from £16 billion to £47 billion
• north sea oil


  - most controversial privatisation was selling off of north sea oil

  - labour gov had established the british national oil corporation as a means of keeping north sea oil under public control but in 1982 under thatcher's gov, majority of its shareholdings were sold to a private sector

  - argument for this was that though britain did gain revenue from this, world oil prices in 80s were in a period of long term decline

  - critics saw deregulation as an irresponsibility on the gov's part that threatened to destroy larger parts of britain's industrial economy which was evident in the increase in unemployment in british manufacturing industries
• debate for thatcherism


  - made uk face economic reality

  - encouraged initiative and entrepreneurship

  - created the conditions of growth + created new jobs even though there was greater unemployment, they believed it didn't prove national decline -> productivity rate increased by 4.2%, highest growth rate in british industrial history

  - advanced popular capitalism

  - developed the notion of accountability
• debate against thatcherism


  - encouraged individualism and greed

  - ignored the needs of the more vulnerable in society

  - caused unemployment

  - led to a recession and a combination of north sea oil bringing in billions to the treasury and privatisation saved thatcher's gov from bankruptcy and overcome the recessions that its monetarist policies had created
• taxation under thatcherism


  - period of low taxation and though there were reductions in income tax rates, the overall tax bill for ordinary people hadn't been greatly altered and this was because of increased indirect taxes like VAT and local rates

  - US film 'wall street' wasn't explicitly about thatcherism but was interpreted as a critique of reagan whos economic policies were similar to thatchers

  - opponents of thatcherism seized this interpretation of film to show that this system allowed the powerless in society to be abused and exploited by the powerful

  - defenders of thatcherism pointed that the film was fictional and that thatcherism actually gave the powerless the opportunity to regain control over their lives by loosening the grip of the state over them
• Westland Affair 1986


  - revealed a serious division within gov

  - was a helicopter company which michael heseltine, defence secretary, had proposed to save by making it part of a european consortium which would include british aerospace (privatised recently)

  - but leon brittan, industry secretary put forward another package that would takeover westland by a US company, sikorsky

  - when thatcher backed the sikorsky option, heseltine stormed out of cabinet and resigned when it was revealed that the department of industry had put pressure on british aerospace to withdraw from the european consortium

  - labour opposition used this to highlight the negative aspects of thatcher's gov: her bullying of the cabinet and her readiness to give into US pressure
• 1987 election


  - dispute over westland didn't greatly harm the gov's environment

  - thatcher got the conservatives 375 seats whilst labour got 229 seats meaning it still had an overall majority of 100

  - results showed labour party to recover in their votes compared to the 1983 election
• local government reforms under thatcher

  - SSAs introduced which enabled central gov to control local gov expenditure levels

  - councils required to adopt 'compulsory competitive tendering' which is to contract out their services to the companies that could provide the best service at the lowest price

  - gov hoped this would be welcomed by public as it would create 'more gainers than losers'

  - for thatcher this was a further move in her plan as she believed public institutions primary purpose was to serve the public so it had to become more responsive to the needs of the people which was true of local gov

  - she knew that many local authorities were unpopular and only a minority voted in these local elections
• education under thatcher


  - education reform act 1988 had the same purpose as local gov reforms to make schools more responsive to the needs of children and parents, main provisions included:

  - national curriculum introduced which included core subjects such as english, maths and foundation subjects such as geography, art, history

  - where local conditions allowed, parents could specify which school they wanted their child to attend

  - primary and secondary schools could opt to become grant maintained schools which would allow them to become independent of their LEAs and be financed directly by central government
• poll tax


  - thatcher's period came to an end due to her misjudgment of poll tax and the opposition she met from within her own cabinet over her policy towards europe

  - poll tax is a flat rate levy to fund local services which is to be paid by all residents in the local area, not just owners of property

  - its argued that some of thatcher's mistakes could've been avoided if the deputy pm was still there to provide advice

  - thatcher thought the gov would continue to support her because of her local gov reforms but it didn't, poll tax also was never meant to arouse controversy and was meant to rationalise the existing system of raising money through rates which everyone thought was unfair

  - idea that poll tax led to everyone becoming more conscious of the quality of services provided as everyone pays and the state redistributes resources in society

  - thatcher thought poll tax would be supported however the opposite happened
• One Nation Conservatism


  - many conservatives were unhappy with thatchers approach as they wanted the gov to use redistributive taxation to help the disadvantaged members of society

  - these 'one nation conservatives' disliked poll tax as it was regressive tax meaning it bore hardest on the poorest when imposed on everyone

  - they believed that the riots had been warnings of the disaffection especially from the young unemployed people

  - public saw the new tax imposed by the gov intent on trapping everyone in the same net

  - gov then listed a large number of exemptions from payment for those on low incomes but these were lost sight when the poll tax aroused

  - opposition to the charge when it was introduced was immediate and organized, millions of people refused or avoided payment
• opposition spreads against poll tax

  - opposition came from across the spectrum

  - far left group militant tendency which had previously caused trouble for labour, revived itself to from all britain anti poll tax federation

  - scottish national party ran 'can't pay, won't pay' campaign

  - thatcher had a forewarning when several conservatives backbench rebellions against the poll tax had occurred

  - most serious disturbance came in 1990 with a violent anti poll tax demonstration in london

  - poll tax cost 2 and a half times more to collect than the rates had and in order to keep down the poll tax levels, the gov 'charge capped' a number of authorities = compelling them to reduce their budgets even if it meant cutting services

  - this 'charge capping' was argued by critics that it was aimed at imposing the will of central gov on local authorities and not at encouraging greater democracy

  - poll tax was abolished in 1991 by john major, thatcher's successor and replaced with a new council tax
• Thatcher and the EEC

  - when thatcher first entered office she was confronted by britain's poor economic performance that were partly caused by arrangements britain had to meet when entering EEC before

  - she initially was pro EEC but became anti EEC when she realized how much waste and inefficiency there was in the brussels bureaucracy and how much britain was disadvantaged

  - the centralising bureaucratic character of europe was countering the revolution thatcher was trying to bring to britain
• thatcher's main concerns about europe/ EEC


  - protectionism= the principle on which europe operated was outmoded in an age of economic globalism

  - europe was obsessed with the dated concept of centralisation when that policy was clearly collapsing in the wider world e.g. USSR

  - imbalance between budget payments made by separate member states rewarded the inefficient nations and penalised the efficient ones
• european federalism threats to britain

  - thatcher stressed how young european institutions were, none of them pre dated 1945 whilst british gov had evolved over centuries

  - she felt that europe could easily fall prey to creeping socialism and bureaucracy because the final analysis to the EEC was not subject to genuine democratic control
• the issue of federalism for thatcher

  - federalism threat fears had always been around and had shaped the attitudes of both labour and conservative parties as early as 1950s

  - thatcher was more hostile about these threats in her manner, going into direct confrontation with european ministers which were rare (techniques such as private agreements were more common)
• britain and the EEC budget

  - thatcher was against the EEC the most due to britain's disproportionately high payments to the EEC budget

  - her battling had some success as EEC authorised a reduction in britain's budget payments but thatcher's problem with centralising within europe still remained a problem

  - in a landmark speech at bruges 1988 she condemned the 'erosion of democracy by centralisation and bureaucracy' and this speech was widely regarded as a rallying cry to all those who wished to prevent the absorption of national identities into a centralising europe

  - she was trying to appeal over the heads of europe's bureaucrats to the ordinary people in france and germany as well as to the british
• single european act 1986

  - despite thatcher's remarks against EEC it was her who accepted the single european act which marked the biggest step towards a centralised europe that had yet been taken

  main terms were:

  - signatory countries committed themselves closer to monetary and political union

  - principle of supranationality (subordination of individual member states to the EEC) was established

  - right of individual member states to veto majority decisions was abolished
• the exchange rate mechanism (ERM)

  - britain had agreed to enter the ERM in 1990 as it would provide means of fighting inflation

  - it did the opposite of fighting inflation and led to a monetary crisis which obliged britain to withdraw from it

  - thatcher claimed she was misled into entering the ERM by her former chancellor of exchequer, nigel lawson, and her foreign secretary, geoffrey howe, who both played a role in weakening her position as prime minister and party leader

  - chancellor of exchequer resigned when he found out thatcher had been taking more of a notice of Alan Walters whom she appointed as her special economic adviser

  - howe also claimed thatcher's aggressive anti europeanism was distorting his attempts as foreign secretary to smooth britain's entry into the ERM

  - when thatcher returned from a top level european meeting in rome in 1990, she openly declared that britain would never join the single currency
• Howe's resignation speech, 1990


  - howe resigned after feeling that his position wasn't grounded and untenable and in his speech he revealed that there were serious divisions amongst the conservative party over europe

  - he critisised her in a sorrowful tone of her obstructive attitude towards european development and her undermining his position