The Thatcher Governments

I

Introduction

The Thatcher Governments, period of government by the Conservative Party under the premiership of Margaret Thatcher, who led the party to three successive UK general election victories between 1979 and 1990. Over the course of these governments an attempt was made to transform the economy and values of Britain. Thatcher, who had won the leadership of the Conservatives in 1975, promised a sharp break with the policies not only of the Labour government in power before 1979, but those of all post-World War II British governments, including those of her own party. She had been a Conservative Member of Parliament since 1959 and minister of education under the premiership of Edward Heath (1970-1974), but had come increasingly to believe that a future Conservative government should pursue much more radical policies aimed at reducing the role of the state and trade unions, giving priority in economic policy to the reduction of inflation and public spending, and taking a tougher stance on law and order. At the international level, she was sceptical of the benefits to Britain of membership of the European Union (EU), very pro-American, and sought to pursue a harder line against the USSR (see Cold War).

II

Labour Government in Power 1974-1979

The 1970s was a troubled period for the British economy, and these troubles had a major impact on politics. The OPEC price rise of 1973, when oil producers quadrupled the price of oil, generated “stagflation”, a combination of economic stagnation and inflation (see Business Cycle). Labour came to power in February 1974 with both these problems worsening, and in addition a climate of crisis in industrial relations following the Heath government’s confrontation with the National Union of Mineworkers (NUM) in the bitter strike of 1973-1974. Initially the government under Harold Wilson (succeeded by James Callaghan in 1976) floundered in the face of this unprecedented combination of problems. In 1975-1976 inflation reached an all time high of over 25 per cent, and, reinforced by pressure from the International Monetary Fund, the Labour government prioritized the reduction of public spending. After 1976 inflation fell and the economy began to recover, but Labour was anxious to reduce inflation still further, and this led to an attempt to hold wage increases in 1978-1979 to 5 per cent, at a time when prices were rising at around 8 per cent. This was particularly resented by low-paid workers in the public sector, whose wages had been held down in previous years. The result was a “winter of discontent”, with major strikes among such groups as local authority manual workers (including even gravediggers in some places) and hospital cleaners. These disputes fatally undermined the Labour government’s claims to be able to “get on with the unions”, and opinion swung the Conservatives’ way, giving Thatcher a substantial electoral victory in May 1979, with 339 seats to Labour’s 269, and with the support of 43.9 per cent of those who voted.

III

Margaret Thatcher’s Politics

Thatcher argued that the problems of mid-1970s Britain were not just to do with the alleged incompetence of the Labour government, but the symptoms of a much more serious and longer-running disease. She argued that post-war governments, in pursuing “consensus”, or political agreement, had over-expanded state welfare, given too many powers to the trade unions, ignored the need to encourage enterprise and initiative among the population, and, internationally, had pursued policies of appeasing rather than standing-up to communism. She wanted the state to be rolled back, with welfare spending and taxation reduced, albeit with higher spending on the military and law and order. She also wished to strip trade unions of some of their powers, and alongside this to allow market forces a greater role in the economy, thereby, she hoped, unleashing individual initiative and enterprise, and allowing the economy to grow faster. To achieve this she believed governments had to give less weight to pursuing full employment, and put more emphasis on defeating inflation. The key to achieving this objective was, according to the economist Milton Friedman by whom Thatcher and her supporters were strongly influenced, control of the money supply since, the argument went, maintaining price stability was, in the long run, the most important thing governments could do to encourage economic prosperity. Internationally, she wished to combine the free trade aspects of the EU with a much smaller role for Brussels in policies pursued in individual EU countries. She had no interest in the EU playing a role in foreign policy, and wanted a tougher line with the USSR over such issues as the placing of short-range nuclear weapons in Europe. She was keen to strengthen the Anglo-American alliance (see British Foreign Policy).

IV

A Break With the Past?

Thatcher positioned herself as offering a sharp break with past policies. A key term in this positioning was “decline”, seen as both economic and political. She argued that ever since World War II Britain had suffered such a decline because of the mistaken policies pursued, and that only radical changes in policy could reverse that trend. The crisis circumstances of the mid-1970s encouraged her in this thinking, and she drew substantially on the work of the Conservative MP and theorist Sir Keith Joseph, who from the middle of the 1970s was calling for a radical change of policy, not least a focus on monetary control as the only way to reduce inflation. This led to the use of the term “monetarist” to describe Conservative policy, but this term understates the scope of what was being proposed. Above all, the key element in this radical position was a reduction in the role of the state, not just as a way of improving short-run economic performance, but much more importantly, as a way of making space for what Thatcher called the “Victorian values” of enterprise, self-reliance, and thrift. The rhetoric of Conservative politics in the late 1970s suggested a government aiming at a cultural revolution, not just changes to particular policies.