Chap 6: Thatcher’s Britain (1979-90)

Chap 6: Thatcher’s Britain (1979-90)

Margaret Thatcher was the first woman to become Prime Minister of the United Kingdom. She became Prime Minister in 1979, after the Conservative Party won a majority of seats in the House of Commons (HoC) in the general election. Queen Elizabeth II then appointed her as Prime Minister.

Thatcher represented change, both within the Conservative Party and in British politics more generally. As a woman, she was different from most previous Prime Ministers. She also wanted to break away from the old policies of previous Labour and Conservative governments, which she believed had caused Britain’s decline. Her goal was to make Britain strong and successful again.

She had a clear personal vision of a “new Britain”. She explained these ideas during the Conservative Party leadership election in 1975. Her political ideas and style became known as Thatcherism, also called the “New Right”.

I. What is Thatcherism?

The “New Right” was never an official name, and it was mainly used in newspapers. It is better to use the term Thatcherism, especially because its ideas were not completely new. Thatcherism was not a single or unified political doctrine. It included both Conservative and Liberal, or Neoliberal, ideas, which could sometimes contradict each other.

It was mainly a set of ideas and policies designed to break with the policies of previous decades, including some policies of the Conservative Party. Thatcherism was also often a response to events and problems that happened during Thatcher’s time in government. Finally, Thatcherism was also about political style, especially Margaret Thatcher’s style and the people she chose to work with, based on the idea of meritocracy.

II. Margaret Thatcher’s First Term 1979-1983

After becoming Prime Minister, Margaret Thatcher formed her government. Most important positions were given to members of her Shadow Cabinet. However, many of them were important members of the Conservative Party who did not share her Thatcherite ideas, especially on economic and social policies.

As a result, her first term in office was difficult because she faced criticism both from members of her own government and from the Labour opposition. This made it harder for her to introduce radical changes, especially regarding trade unions and immigration.

Inflation

Margaret Thatcher’s government wanted to solve Britain’s economic problems and make the economy stronger in order to stop Britain’s decline. Its main priority was to reduce inflation and allow the free market to work without too much government intervention or control from trade unions.

To reduce inflation, the government wanted to reduce public spending and control the money supply. This policy was called monetarism. The government also wanted to reduce laws protecting workers and businesses, so companies could react more freely to supply and demand. It also wanted to reduce the power of trade unions and the importance of the nationalised industries, which were owned by the state and had many unionised workers.

Companies were encouraged to reduce costs, become more competitive and adapt to market needs. They could adjust wages and the number of workers depending on their level of production and demand.

In short, Thatcher wanted less state intervention, fewer regulations and less protection for workers. Her aim was to create a free-market economy based on competition, with a flexible workforce. This economic approach is called neoliberalism.

Week 8 Audio Part 1

During her first term in office (1979-1983), Margaret Thatcher wanted to change the British economy. She believed that inflation was one of the country’s biggest economic problems. Her main priority was therefore to reduce inflation. To achieve this, she used a policy called monetarism. Monetarism is an economic theory based on the idea that controlling the money supply helps control inflation.

The government can influence the amount of money in the economy through interest rates, taxes and public spending. For example, Thatcher’s government kept interest rates high to make borrowing more expensive. This encouraged people and companies to borrow and spend less, helping to reduce the flow of money in the economy.

As borrowing became more expensive and spending decreased, companies had to reduce their costs and become more competitive. They had to manage their budgets carefully and find ways to work more efficiently. However, these changes also affected workers. To reduce costs, companies could lay off workers, make employees redundant or reduce wages. Thatcher wanted companies to have more freedom to make these decisions according to their needs and their level of production.

However, two major obstacles stood in the way of this goal: trade unions and nationalised industries. Trade unions defended workers’ rights and could oppose decisions to reduce wages or dismiss employees. Nationalised industries were companies owned by the state, and many of their workers were members of trade unions.

Thatcher wanted to weaken trade unions for both economic and political reasons. Economically, she believed that unions had too much power and prevented companies from making their own decisions. Politically, she strongly opposed socialism, which she often criticised. She also disliked the close relationship between trade unions and the Labour Party, because union membership fees helped finance the party. Her government introduced several laws, especially Employment Acts, to limit the power of trade unions and restrict their ability to organise strikes and other industrial action.

Thatcher’s government introduced three important changes to trade union laws:

1. It restricted secondary picketing, which happens when workers picket a workplace to support a strike taking place somewhere else.
2. It introduced compulsory ballots, meaning that union members had to vote before official industrial action could take place. A majority was generally required to support the action.
3. The government weakened the closed shop system. Under this system, workers had to belong to a trade union to get or keep certain jobs. Thatcher’s government wanted to end this system because it believed that workers should not be forced to join a union.

Trade union membership increased significantly after the Second World War. In 1945, Britain had about 7.9 million union members. By 1979, this number had risen to approximately 13.3 million. By 2000, it had fallen to around 7.3 million. This decline was caused by several factors, including Thatcher’s anti-union laws, the policies of her governments and the decline of traditional manufacturing industries. Weakening trade unions was an important part of Thatcher’s economic reforms because she wanted to give companies more freedom and reduce the power of organised labour.

The second major obstacle to Thatcher’s economic vision was the nationalised sector. Nationalised industries were companies owned by the state, particularly in manufacturing and industry. Thatcher believed that a successful economy should be based mainly on private companies, competition and market forces, rather than state ownership.

Between 1945 and 1979, Britain had a mixed economy, meaning that both the public sector, owned by the state, and the private sector, owned by individuals or companies, played important roles in the economy. This was different from a planned economy, such as the Soviet Union’s, where the state controlled most economic activity, and a free-market economy, where private companies and competition played the main role.

Thatcher wanted to move Britain towards a free-market economy. To achieve this, her government introduced privatisation, which means transferring companies from public ownership to private ownership. She argued that many nationalised companies were inefficient and unprofitable because they regularly needed financial support from the government. She called these companies “lame ducks”, meaning companies that struggled to survive without state support. However, this was Thatcher’s argument, and not all nationalised companies were necessarily unprofitable. Their economic performance varied. Her government used the idea that state-owned companies were inefficient to justify privatisation and a smaller role for the state in the economy.

In short, Margaret Thatcher wanted to transform Britain into a free-market economy. She aimed to reduce inflation through monetarism, weaken trade unions, reduce the role of the state and privatise nationalised industries. Her economic vision was based on less government intervention, fewer restrictions, more competition, private ownership and greater freedom for companies. This approach is known as neoliberalism.

The Falklands War (April-June 1982)

The Falklands War (April-June 1982) was a conflict between Britain and Argentina over the Falkland Islands, South Georgia and the South Sandwich Islands. The war began when Argentinian troops occupied South Georgia on 19 March 1982, followed by the invasion of the Falkland Islands on 2 April 1982. Argentina was led by a military government headed by General Leopoldo Galtieri. Neither side officially declared war. Argentina surrendered on 14 June 1982.

The conflict caused 258 British deaths and 649 Argentine deaths. The war was a major victory for Margaret Thatcher. It created a wave of patriotic feeling in Britain, which increased her government’s popularity. This became known as the “Falklands Effect” and helped the Conservative Party win the 1983 general election, gaining more seats than in the previous election.

Audio Part 2

During Margaret Thatcher’s first term in office (1979-1983), one of the most important events, apart from the economic problems and inflation, was the Falklands War, which took place between April and June 1982. The conflict began when Argentinian troops occupied South Georgia on 19 March 1982, followed by the invasion of the Falkland Islands on 2 April 1982.

The islands are located only a few hundred miles from Argentina but several thousand miles from Britain. Argentina was facing serious economic problems, and its military government, led by General Leopoldo Galtieri, wanted to shift public attention away from the economic crisis. Taking control of the islands could create a feeling of national pride and patriotism among the Argentine population. However, Britain had stronger military and naval forces.

Argentina surrendered on 14 June 1982, after a short war that caused 258 British deaths and 649 Argentine deaths. The war was a major victory for Margaret Thatcher and increased her popularity in Britain. It created a wave of patriotic feeling, which strengthened her government. This became known as the “Falklands Effect”. It played an important role in the June 1983 general election, when the Conservative Party won more seats than in the 1979 election. The Falklands War was therefore a major political success for Thatcher, helping her win a stronger electoral victory.

III. The Second Term (June 1983-June 89)

Despite having more than 3 million unemployed people, the Conservative Party won the June 1983 general election. Inflation had been reduced, so Thatcher had kept one of her main promises.

The Labour Party, however, was in difficulty. In 1980, it elected Michael Foot, a left-wing leader who wanted to restore trade union rights and leave NATO and the European Economic Community (EEC). His policies were considered too left-wing by some members of the party. In March 1981, four senior Labour members, Roy Jenkins, David Owen, Shirley Williams and William Rodgers, left the party and created the Social Democratic Party (SDP), which supported more moderate policies. The SDP did not win many seats, but it divided the opposition and weakened Labour.

At the same time, Thatcher benefited from the popularity she had gained after the Falklands War. The Conservatives won a landslide victory in June 1983, giving Thatcher a stronger position than during her first term. During her first term, she had faced opposition inside her own party from more moderate Conservatives, whom she called the “Wets”. They had prevented her from introducing some of her most radical reforms. After her victory, Thatcher had more freedom to choose ministers who shared her ideas, known as Thatcherites. She then accelerated her plan to privatise the British economy, meaning that state-owned companies were sold to private owners. By January 1987, 14 major companies had been privatised, although British Rail remained publicly owned.

The most difficult event of Thatcher’s second term was the miners’ strike (March 1984-March 1985). The National Coal Board (NCB) announced that 21 coal mines would close because they were considered unprofitable, putting many jobs at risk. In response, Arthur Scargill, the leader of the National Union of Mineworkers (NUM), called a national strike in March 1984. The strike was also a reaction to Thatcher’s policies against trade unions and her economic reforms.

Thatcher strongly opposed the strike because she believed that trade unions were preventing economic change. She even called the strikers the “enemy within”, comparing them to the foreign enemy Argentina during the Falklands War. The strike officially ended on 3 March 1985, after NUM delegates voted to end it. This was a major victory for Thatcher because it weakened the trade unions and made it easier for her government to continue its economic reforms.

Many people were shocked by the violence shown on television, although some reports did not present the whole picture. The Labour Party was also weakened because it struggled to distance itself from Scargill and the strike. However, the media often focused on the conflict between Thatcher and Scargill rather than on the consequences for mining communities. Many families suffered after spending a year without wages, and the closure of mines caused long-term economic and social problems, particularly in Yorkshire.

Another important decision during Thatcher’s second term was the abolition of the Greater London Council (GLC) and the six English Metropolitan County Councils. Thatcher’s government believed that these local authorities created an unnecessary and expensive level of government. This decision prepared the way for another controversial policy during her third term: the Poll Tax. This tax was presented as fair because everyone had to pay the same basic local tax, regardless of their income. However, critics argued that it placed a heavier burden on poorer people. Thatcher also wanted voters to see how much local government spending affected their taxes, especially in areas controlled by the Labour Party.

Although the economy was Thatcher’s main priority during her first term, she also achieved important results in foreign policy. One major achievement concerned Rhodesia, where a conflict over political power had continued for many years. In 1965, white minority leader Ian Smith had declared independence from Britain without British approval. The Lancaster House Conference, which began in London in September 1979, helped find a peaceful solution. In 1980, Rhodesia became the independent country of Zimbabwe, under black majority rule.

Another important achievement was the agreement to return Hong Kong to China in 1997. Hong Kong had been under British control since the Treaty of Nanking in 1842, although some territories were held under a lease that was due to expire. Negotiations between Britain and China were long and difficult. China agreed that Hong Kong’s existing economic and social systems would remain unchanged for 50 years after the handover. However, some wealthy residents were worried about the future and threatened to leave. Many who emigrated eventually chose Canada rather than Britain. The handover took place in 1997, under Prime Minister John Major, after Thatcher had left office.

Another major economic reform was the “Big Bang” of 1986, which deregulated the financial markets and banking system in the City of London. The aim was to make London more competitive and turn it into one of the world’s leading financial centres. The reform helped strengthen London’s position in international finance.

However, Thatcher’s government also faced a major political scandal, known as the Westland Affair (1985-1986). Westland Helicopters, the only British company producing helicopters for the British army, was in financial difficulty and needed a buyer. Thatcher and Leon Brittan, her Chancellor of the Exchequer, supported a takeover by an American company, while Michael Heseltine, a pro-European Conservative minister, supported a European offer. The company eventually went to the American side. The disagreement became a major scandal and led to the resignations of Brittan and Heseltine. Heseltine later became one of the main figures challenging Thatcher’s leadership of the Conservative Party.

By the time of the June 1987 general election, inflation was under control, but unemployment remained above 3 million. Spending cuts had also put pressure on public services, including the National Health Service (NHS), making it harder for poorer people to access adequate services. Meanwhile, the Labour Party had improved under Neil Kinnock and was gaining public support. However, it was not strong enough to win the election.

The Conservatives increased some public spending shortly before the election and gained support from some working-class voters through the sale of council houses to their tenants at reduced prices. This policy supported Thatcher’s idea of a “Property-owning democracy”, in which people who worked hard could own their homes. The Conservatives also benefited from support from parts of the popular press, including newspapers owned by Rupert Murdoch, a media tycoon who was close to Thatcher.

The Conservatives won another comfortable victory, securing 380 seats in the House of Commons, compared with 229 seats for Labour. In January 1988, the Social and Liberal Democrats were formed through the merger of the SDP and the Liberal Party, with Paddy Ashdown as their first leader. The 1987 election victory was Thatcher’s last general election victory as Conservative leader.

V. Third Term (June 1987-November 1990)

Margaret Thatcher’s third and last victory was a personal triumph for her, although the Conservative results were not particularly good. Overall, more people voted for other parties (53,4%) than for the Conservatives (42,2%). But under the existing system, the first past the post, it was difficult for smaller parties to fare well and their existence only contributed to splitting the anti-Tory vote.

Audio Week 9

Margaret Thatcher’s third term lasted from June 1987 to November 1990. After her re-election, the economy improved and unemployment started to fall. She continued her economic reforms, including privatisation, tax cuts and market reforms of the National Health Service (NHS).

Thatcher believed in trickle-down economics: if rich people and companies became richer, their wealth would eventually benefit the whole country by creating jobs and economic growth. She also believed in self-reliance, meaning that people should work hard and depend on themselves rather than on the state. Inspired by Victorian Values and Samuel Smiles’s book Self-Help (1859), she criticised the welfare state, which she believed made people too dependent on government support. In a famous interview in September 1987, she declared: “There is no such thing as society.” She also criticised the “nanny state”, which she believed took too much responsibility for people’s lives.

To encourage independence, she wanted to reduce welfare benefits. One of her most unpopular policies was the Poll Tax, officially called the Community Charge, introduced in 1989 in Scotland and in 1990 in England and Wales. Every adult had to pay the same basic local tax, regardless of their income. This made the tax particularly unfair for poorer people and large families. On 31 March 1990, a major demonstration against the Poll Tax took place in London and turned violent. The policy became a major political disaster for Thatcher, even within her own party.

Another important problem was her disagreement with Europe. Thatcher accepted the Common Market, but she opposed greater European integration and the idea of a European federal union. In 1979, she famously declared “I want my money back!”, demanding a reduction in Britain’s financial contribution to the European community. She also opposed joining the Exchange Rate Mechanism (ERM), which aimed to limit exchange-rate fluctuations between European currencies. Some members of her government, including Nigel Lawson and Geoffrey Howe, supported greater European monetary integration because they believed it could help control inflation. Lawson resigned in October 1989, and Howe resigned in November 1990 after a major disagreement with Thatcher over Europe.

Howe’s resignation speech weakened her position and encouraged Michael Heseltine to challenge her for the leadership of the Conservative Party. Thatcher won the first ballot but did not receive enough support to avoid a second round. Many Conservative MPs no longer supported her, and she was advised to resign. On 28 November 1990, after 11 years in power, Margaret Thatcher resigned as Prime Minister. John Major, her preferred successor, became the new Conservative leader and Prime Minister in November 1990. There was no general election because Major replaced Thatcher as leader of the governing party.