Margaret Thatcher: A Warning (written 27/4/2010)

Though still with us in body, the spirit of Margaret Thatcher still marches at the head of today’s Conservative Party.

And it is clear now that she is a founder member of New Labour.  They are both the inheritors of ‘thatcherism’ and therefore cannot be trusted. Margaret Thatcher was Prime Minister of Great Britain from May 1979 to November 1990 (4,285 days) and thereby the longest serving Prime Minister of the twentieth century and the longest since Lord Liverpool in the nineteenth.

Her party won three general elections – two with large majorities – but with a minority of the popular vote each time.  Her personal popularity varied from 52% after the Falklands war to under 25% in 1982 and again during the poll tax crisis.  It averaged over the whole period about 40%, the lowest of all post war Prime Ministers. Her personal popularity was always below that of her party. She was in fact an unpopular leader even among her own people.

Her great aim was to re-establish Britain’s reputation in world affairs after the inevitable decline since the end of the Empire.

In this she succeeded, facing Russia, China and her European ‘partners’ and befriending the geriatric United States President Reagan. She did not like Europe but realised Britain had to be inside but with special conditions.  In this she was encouraged by the captains of industry and her Tory grandees for whom Europe was both profitable and convenient.

Nevertheless, she had no enthusiasm for spreading Britain’s culture as well as its influence.  In spite of the obvious ascendancy of English into the position of world language, she cut the budget of the British Council, forced the Foreign Office to reduce the BBC World Service and introduced high fees for all foreign students at British Universities.  She also ensured that there were no increases in arts spending and refused to back any bids to host international sporting events.

In financial and domestic policy she turned away from the political settlement which had developed since the nineteen thirties’ crises between the right and left of British Politics and proceeded to dismantle both the socialist state and one nation conservatism.  She was persuaded that markets were better than control and always worked for the good of all.  She was also convinced that the less money the government took the better and believed that taxes could be cut indefinitely.  (This fallacy continues in present right wing thinking.) In fact all taxation will increase for ever almost to infinity as a matter of arithmetic not policy.

Margaret Thatcher hated all public ownership and was persuaded that under private ownership it would be more efficient and produce better outcomes for consumers and more taxes for the exchequer.

In this she has been proved completely wrong.  She was deeply suspicious of state schools run by local authorities and encouraged successive ministers of education to embark on almost Teutonic centralisation, which persists to today.  She hated the National Health Service but could do little about it except starve it of money. So by 1997 Britain had nearly the worst figures of morbidity in Europe and far and away the worst for hospital infections. Under her government waiting lists for all types of medical treatment hit a historic high and in some cases were measured in years.  Most of these outcomes resulted from the brutal privatisation of hospital and care services.  These were never cheaper; just generally worse.

There are many myths around the positive achievements of the Thatcher years.

Most of these have turned out to be false on examination.  She is supposed to have ‘defeated’ the trade unions.  All the significant legislation governing employment and trade union activity was enacted by the Heath, Wilson and Callaghan governments.  Her infamous Labour Secretary Tebbit simply tightened the rules, many of which had to be relaxed later.  The biggest influences in changing  employee behaviour were 3.6 million unemployed in 1983 followed by a six year unrestrained boom.  There is no doubt that the rise in general prosperity doomed the old fashioned unions not Mrs Thatcher.

It is often said that she planned to take on the coal miners in revenge for the Tory defeat of 1984.  She certainly had energy resources stockpiled and appointed compliant police chiefs before she engineered the strike.  But her ‘victory’ was ably assisted by the miners’ leader Athur Scargill who just could not negotiate nor give in until totally destroyed.  The strike lasted over a year and resulted in the destruction of whole communities as well as a way of life.  All this was completely unnecessary as demonstrated across the Channel where France, Germany and Belgium closed their deep mines with no trouble because their governments were generous and invested hugely in alternative industrial activities and , where possible, preserved the towns and villages involved.

The second myth was that she satisfied the long held desire of the English to own their homes by selling council houses.

..and not allowing the local authorities to build more.  This meant that by 1990 Britain had more homeless than at any time since 1893.  And to make sure we could all see the homeless on the streets she closed all the state run homeless shelters.  But she could not ignore the housing needs of the poor, so housing benefit was invented in 1984. This has now risen to an average of £68 per week for every man and woman and accounts for 10% of all welfare expenditure. It rewards landlords, since it is paid to them and not  home dwellers, and it has helped to fuel the huge inflation of house prices by encouraging the growth of subsidised ‘buy-to-let’ ownership.

On top of that the general state of the nation’s housing stock is the poorest for half a century.  In 1952 Macmillan as Housing minister introduced a scheme whereby a house owner could receive a 50% subsidy for renovations to plumbing, electricity, roofs and insulation.  All that was required was a plan, an estimate, an inspection and an invoice and the money was paid over.  Of course many house builders profited from the scheme, but the improvement to the stock over the next thirty years was huge and at first it only cost 2p in the pound to administer. In 1981, after many new regulations to make it ‘fairer’ had been introduced so raising the cost of the scheme, it was abolished.  The high cost of houses and their mortgages now means that owners often cannot afford to maintain the houses they buy.

The third myth was that Margaret Thatcher ‘encouraged entrepreneurship’.

Before she came to power it was possible to start a business on very little capital thanks to a benign tax regime – both income and VAT.  There were few rules and regulations for businesses; most control was exercised through the common law.  By 1990 nobody could realistically start a business without substantial capital resources and entrepreneurship was dampened by a blizzard of regulations and bureaucracy. Far from encouraging independence and enterprise the present day tax regime discourages independence and most of this happened under Chancellor Lawson. And just to rub the lesson in, all start-up subsidies and tax breaks were removed.

The next myth was that London and its financial institutions were over regulated and stifled.

So, through the 1980’s the city and its markets were progressively deregulated culminating in the ‘big bang’ in October 1988.  In view of what has happened since 2007 one need hardly argue that this was a disaster in the making.

Mrs Thatcher always prided herself on being in charge of the oldest democracy.  However, under her rule most of the democratic elements of parliament were destroyed.

Or at least diminished.  She had no time for most Members of Parliament and really considered the House to be a silly distraction.  She refused to approve the increase in parliamentary salaries on four occasions. In the end the members persuaded her to tie their pay to a civil service grade – that of assistant secretary, of which there are some twenty thousand in Whitehall.  When it was pointed out to her that members were becoming seriously destitute, she suggested and encouraged the development of a ‘liberal’ allowances system and from 1987 the House Fees Office became de facto an alternative pay source and we all know to where that has led.

During the 1980’s there were many attempts to increase parliamentary supervision of the government.  This was always resisted and the power of the parliamentary whips became overwhelming.  By the end of the decade the House had become merely a body required to ratify the Prime Minister and all her actions on a weekly basis.

Now let us turn to the nationalised industries.

(In 1975 I was one of the economists and a political adviser to the Macintosh Committee on the Nationalised Industries.  After a year’s investigation we concluded that these industries – some 38 – were almost all profitable (4 exceptions) and all contributed substantially to national tax revenues, in fact a number were among the most efficient of their kind in the world. ) There was no subsidy to any nationalised industry as such except coal and steel.  All the transport fare box subsidies were systemic and have all continued into privatisation but those industries were actually fundamentally very efficient.

All this was ignored by Mrs Thatcher amid complaints of telephone waiting lists and poor train services.  In fact most of these industries were natural monopolies and provided essential public services.  Also their chairmen and directors were paid sensible salaries comparable to top civil servants.  The Thatcher government sold 28 of these over ten years and her chancellor used the funds to give tax cuts.  So we lost our productive assets which gave huge annual profits to the Treasury and enabled sensible social policies to be pursued.  Subsequently, the huge gap left by the annual benefits going to the city put pressure on the public purse magnified by the social losses and has meant more borrowing and taxes. This was daylight robbery on a grand scale.  The main beneficiaries were the chairmen and board members who have set the standard for boardroom greed.

(Incidentally, the Thatcherite tendencies of Blair and Brown were confirmed in this area through their refusal to countenance any renationalisation even of the railways  – John Major’s personal contribution to the mess.  They argued that the Country could not afford to.  This is pure nonsense since under modern financial practices such renationalisation would be costless by the device of simply issuing government paper bearing the same value and implied rate of return as the shares owned by investors.  This is the way most mergers and takeovers are managed.  The real reason was the Treasury’s obsession with the rather obscure public sector borrowing requirement, hence the mass of private sector adventures.  We now know the consequences of such policies!)

The next myth was that government spending was controlled.

No, it increased by 23% in real terms over the decade, topped by law and order – 57% and defence – 42%.  This was a government that interfered with every aspect of our lives.  By 1990 we had legislation on all aspects of business and commerce as well as our domestic lives.  One example was the 1988 Party Wall Act which repealed the ancient right to prevent a neighbour’s activities on the boundary of ones property if that boundary was a wall and if such activity was considered to be an imposition.  The new act made all such permissions automatic and only left one with arguments about the detail and the price, which inevitably led to extended planning procedures.  The developers had won.

But all these new laws and regulations (often passed by Orders in Council with no debate) required a new army of civil servants to administer.  That government boasted that it reduced the number of officials.  It did that by selling off the activities.  But it more that replaced them with all the new bodies.  The growth of quangos and enquiries went on apace throughout the decade.  (Only to be far exceeded in the next by Major and Blair.)

Now we come to the real villainies of the decade.

There were five separate occasions when riots broke out on the streets of Britain.  Barricades were erected, cars set on fire, police attacked and shops looted. The roll call: Brixton 1984, Toxteth 1986, Brixton (again) 1986, St Pauls Bristol 1986, Central London 1991.

There had been no such riots since the opening decade of the twentieth century.  Not even in 1968 when the youth of France and America were on the streets.  In fact we came through two wars and a huge slump peacefully as regards our domestic conduct, until the Thatcher years; and since then nothing more.

Under Mrs Thatcher spending by government on transport – both infrastructure and operation – actually declined in real terms by 5%.  The London Underground was so starved of funds which led to the negligence and carelessness which  directly caused  the Kings Cross fire.  The Channel Tunnel was built with, so called, private money.  This was a colossal confidence trick.  There never was the slightest chance of it being built within the budget .  In the end all the investors have lost large sums.  The main beneficiaries have been the people s of Britain and France and this huge project should at the very least have been underwritten by the governments. Ideally it should have been publicly funded.

The entire railway system was starved of investment.  While France, Belgium, Italy and Germany have built thousands of miles of high speed railway track, Britain has just seventy eight.  We also have the densest domestic air network on the smallest land mass.  As we face the great uncertainties of the long term energy crisis we are years behind in transport investment because of the personal foibles of a prime minister who even went to the opening of the new National Railway Museum by car.

Before Mrs Thatcher Britain had hardly any drug problem.

The police took a pretty relaxed attitude to cannabis and the hard stuff which developed addictions was dealt with as a medical problem.  Addicts were prescribed drugs weekly on the NHS and as soon as possible given remedial treatment.  Of course most addicts split the prescription and sold half to buy food and shelter.  There were no drug barons and no high cost market.  In 1981 Mrs. Thatcher personally ordered that this policy must stop and the NHS could no longer prescribe any addictive drugs.  All our problems of drug use, import and trade date from then.  It is estimated that Britain now has twenty five times the addicts it had then.

While trying to prohibit drugs the same government deregulated the sale of alcohol and laid the foundations of our youth alcohol problem.

Of itself the policy of the Thatcher government to close the lunatic asylums was a good thing.

..but no significant money was made available to house the inmates more humanely.  As a result a huge number finished either on the streets or in the prisons where they still are.  Those in need of permanent long term care with acute mental disability were paid a weekly sum which was just enough to purchase residential care.  In 1990 this was taken away and funding passed to local authorities who have ever since been starved of sufficient funds.

The record of the Thatcher government over those eleven years can be seen to have caused real damage and hardship to Britain.

But perhaps the real legacy was the attack on the kind and gentle tendencies of all British people to contribute to society and care for those who are in need, physical, mental or spiritual.  She denied that there was such a thing as society. She therefore emphasised individuality.  She said she wanted people to have choices and to be unrestricted in the exercise of such choice.  That has been interpreted as encouraging greed.  However, the reality was a more highly regulated society , with such regulation skewed towards her libertarian view of life.

The political settlement which she destroyed was based on a fundamental belief that the benefits of technology and the resulting prosperity should be shared between the individual, the state and the owners of capital.  After Thatcher the first two hardly get a look in.  The damage done to Britain by the Thatcher years was immense and is still with us.  This is mainly because the succeeding Labour government was avowedly neo-thatcherite.  The utilities are still in private hands and certainly cost us all much more than they would have done publicly owned. All aspects of the services we need and require from our government are constricted by considerations of cost and regulation.  The march of the ‘nanny state’ continues.  We have developed a blame culture to such an extent that we spend millions on enquiries just in order to apportion blame.  Nobody accepts responsibility, all emphasise rights and this is the worst of the Thatcher legacy.

It may take more than a generation for us to put right all the damage done in that decade.

But first we need a new political settlement under which there can never again be an elected dictatorship. Powerful single party government benefits nobody other than the members of that government.  We need a more collaborative and participative style of government where no single view of policy is allowed to dominate.  Perhaps the most damning indictment of the present system is the growing tendency for young ministers with no credentials other than the fact that someone voted for them to overrule committees and commissions loaded with expert professionals in whatever field is in question.  The hubris of the current political class must be replaced with some sense of  human fallibility.  Today’s leaders are not there to do as they think is right (pace Mr Blair) but there to do what we think is best and that takes real expertise and broad reconciliation.