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POL13: Margaret Thatcher and the Conservative governments, 1979-97
● 1925: born in Grantham, the second child of Alfred and Beatrice Roberts.
Strong emphasis on discipline and self-improvement in the household. Dad was a local politician, who later became the mayor of Grantham.
● 1957-63: Macmillan as PM
● 1964-70: Harold Wilson as PM
● 1959: MP for Finchley for 33 years
● 1970-74: Edward Heath as PM
● 1970: became Education Secretary
● 1974: became front-bench spokesman on Treasury matters
● 1974-76: Harold Wilson as PM
● 1976-79: James Callaghan as PM
● May 1979: won first term as PM
● Oct 1989: Nigel Lawson resigned
● Nov 1990: Geoffrey Howe resigned and lost in leadership context to Michael
● many Conservatives, the likes of Harold Macmillan and R. A. Butler
(Chancellor) accepted the expansion of govt responsibility in the post-war period
● Macmillan, after winning 1959 election 'the class war is over and we have won it'
● Macmillan accepted the resignation of his entire Treasury team in order to defend the policy of full employment
● Macmillan created the National Economic Development Council (NEDC), a
National Incomes Commission (NIC), and applied to join the EEC
● 1960s: focusses on modernisation and increasing productivity, adopting production methods of Fordism. Performance never matched the performance of similar industries elsewhere. The Conservative govt actually gave the first serious attempt at an income policy, establishing the National
The long 1970s
● A decade of instability: joining EEC, Scottish and Welsh nationalism, Northern
● Symbolises the collapse of post-war consensus.
○ James Callaghan in September 1976: 'The cosy world we were told would go on forever, where full employment would be guaranteed by a stroke of the Chancellor's pen, cutting taxes, deficit spending, that cosy world is gone...We used to think that you could spend your way out of a recession, and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only
1 POL13: Margaret Thatcher and the Conservative governments, 1979-97
worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment.'
● Reassessing 1970s Britain by Lawrence Black, Hugh Pemberton and Pat
○ It was a myth used for political purpose
○ Economic difficulties in the 1970s were reflection of global conditions,
and people's living conditions generally rose
● Began radical: dismantled many of Labour policies and institutions, including the Prices and Incomes Board, the Industrial Reorganisation Corporation.
● 2.5p cut in the basic rate of income tax, 25% cut in corporate tax
● Before Heath, legislations targeting the power of trade unions, such as A
Giant's Strength published by the Inns of Court Society, a group of
Conservative barristers, in 1958, were seen as radical and politically infeasible. In Sept 1958 the Minister of Labour (Iain Macleod) concluded that that there is no case at all for legislation aimed at strikes.
○ Heath passed the 1970 Industrial Relations Act. Despite the strong public approval, it was poorly implemented. It was rarely used by either the govt or employers. The no. of days lost to strikes actually increased.
○ Provoked dissatisfaction from the industry, esp the public sector by holding down the wage of public sector workers in order. Suffered a major defeat in 1971 against the miners + collapse of Rolls Royce in 1971, which had to be nationalised + rise of unemployment toward 1 million during 1971 led to a U-turn a year after being in govt
● Rapid entry into the EEC and relative coolness towards the US. He saw other
EEC member states as a model for Britain
● U-turn: substantial reflation needed to achieve growth, increased public spending, introduced a statutory income policy when negotiation with the
TUC and the CBI broke down—this goes against what their manifesto promised
● British economy grew by 8% until the boom reached its peak in autumn 1973, However, it was then when Egypt and Syria invaded Israel, leading to an oil crisis. The whole of Western Europe was experiencing difficulties, but it hit Britain particularly bad. (1) Britain was experiencing a boom (2) Coal miners had a greater bargaining power in wage bargaining. Demanded a pay rise of more than 70%.
● Economists argued that there was an underlying cause other than oil shock:
○ The boom was running out of steam
○ Other international corporations (like Japanese ones) were competing with British industries.
2 POL13: Margaret Thatcher and the Conservative governments, 1979-97
○ There was a profit squeeze between 1970 and 1973, partly due to union power.
○ The Phillips Curve was breaking down—hypothesis that inflation goes down as unemployment goes up. This was partly due to trade union power too. As union demands higher wages, companies raise prices to pay for that.
● Govt declare 5 states of emergency in the 3.5 years. At the height of the miners' ban imposed a three-day week on industry
Heath decided to call an election before recession hits. However, Labour took office as a minority government (37.2% of vote). Labour was able to gain traction by pointing to issues such as higher prices and Britain entering the ECC (Eurosceptics voted Labour). James Callaghan entered into a coalition with the Liberals and ruled with David Steel.
● inherited a crisis of economic management
○ public sector net borrowing increased. Budget deficit became a serious factor in British politics (1976 IMF Crisis)
● 'Social contract' with trade unions. Trade unions voluntarily agreed to keep wages down in return for influence over various areas of govt policy,
particularly pension and social welfare. The voluntary element that unions promised was not really carried out. Inflation was still growing. Chancellor
David Healey tightened up the deal in 1975. Trade unions knew that if they did not keep wages down, government would resort to the means of legislations.
○ problem is that government could easily set the limits in public sector wage rises, resulting in a wage disparity between the public and the private sector. Explained why Winter of Discontents (1978-9) primarily happened among public sector workers.
● careful public spending management. Cut public spending and set targets for growth of money supply, under pressure from the IMF
○ inflation fell from 24.9% in 1975 to 8.4% in 1978, but by 1978-9 public sector workers were tired of pay restraint.
Thatcher's intellectual and political influences
What is the agenda of the New Right? (according to Gamble 1994)
● First emerged in the 1960s. First serious right-wing politician was Enoch
Powell (Minister of Health under Macmillan). He was critical of the public spending and was an exponent of laissez-faire. He demonstrated that there was a coherent intellectual opposition to the post-war consensus, esp available to the Conservatives
● Sound money
○ monetarism is a doctrine popularised by Milton Friedman in the 1960s:
restatement of the quantity theory of money
3 POL13: Margaret Thatcher and the Conservative governments, 1979-97
○ the economic deterioration and unemployment in the 1970s shook the confidence in Keynesian economics
○ inflation in the early 1970s was fuelled by the fixed exchange rate system that ties the pound to the dollar, which was weak, and the quadrupling of oil prices by OPEC in the end of 1973
○ New Right advocates the publishing of strict money-supply targets.
Stabilising the value of the currency is key to confidence of the financial markets
○ control of inflation would be the top priority of economic policies.
Attempting to achieve full employment will only lead to more inflation and is not necessary—ensuring the fundamentals of the market economy is more important than controlling market outcomes
● major reduction in taxation and public expenditure and a programme of deregulation and privatization
○ supply-side economics: monetarism alone is not enough to reverse the decline of British economy—awakening enterprise and restoring incentives are crucial
○ public services are ineffective in meeting the needs of people, destroy choice and entrench dependency—places an emphasis on self-help,
independence and financial prudence
○ Esp among the conservatives
■ Rebuild the foundation of authority and criticise the destructiveness of social democratic institutions (enemies within)
■ Revived hostility in the Soviet Union, increase defence budget
● According to Gamble (1994), the New Right represented 'a novel political strategy…that broke away from the assumptions and limitations of the 1940s settlement'
● There are some pragmatic explanations to denationalisation: financial needs,
statecraft and creating a Conservative voter base. Francis (2012) argues that there is some truth in that, but it overlooks the ideological element in privatisation.
● Deep roots in Conservative thought. Idea first proposed in 1923 by Noel
Skelton, a Unionist MP. In response the lag in people's property rights in comparison to the rapid expansion of political and educational rights. The imbalance between people's political and economic status, Skelton believed,
would destablise society and create socialist demands. He wanted 'to see every man and woman in this country a capitalist.' This would create the most powerful 'weapon' for the Conservatives.
4 POL13: Margaret Thatcher and the Conservative governments, 1979-97
● Eden revived the ceonept in 1946 by promoting private home ownership.
Conservatives' appeal by pledging to build 300K houses each year was strengthened by the dire shortage of houses after WWII.
● Heath established the Policy Group on the Nationalised Industries (PGNI) in
1967. The Committee was convinced that there was strong case for privatisation. Although the party agreed that the conclusion was right in principle, that was not the correct time for it. Denationalisation remained the fantasy of a few ideologues.
● In 1971, Russell Lewis proposed that the nationalised industries should be sold to the public as shares to create a vested interest in privatisation and to create a 'popular capitalism'
● One of the most persistent advocate of linking property ownership and democracy together was David Howell. The ownership of private property and the expansion of economic power 'enlarge personal choice'
● The ideological aim to promote 'property-owning democracy' can be shown by the way the schemes are implemented.
○ The employees of privatised corporations would receive priority when applying for shares, in addition to an allocation of free and matching shares, and an entitlement to buy further shares at a discount. In the case of British Telecom more than 96% of eligible employees—almost 250,000 people—became shareholders.
○ Small investors are often privileged over institutional shareholders in the event shares were oversubscribed. The 'clawback' clauses ensured that even when a share is oversubscribed a portion will be reallocated from institutional shareholders to small investors.
Ascendancy of Thatcher
● Many, mainly in the middle and lower ranks of the Party were unhappy about
Heath's U-turn in 1972. The name 'Selsdon' is used to describe this group of people. The name is taken from the Conservative Shadow Cabinet
Conference a the Selsdon Park hotel in Feb 1970 where a radical agenda was discussed.
● Great pressure for Heath to resign or renew his mandate in 1974
● Only credible challenge was Sir Keith Joseph—Conversion to Conservatism.
Tory press, including the Spectator was supportive of Joseph
● When Joseph ruled himself out for standing in for leadership because of a speech in Birmingham perceived to be racist, Thatcher stepped in. She was associated with Joseph in opposition, but never had any ideological speeches from her, nor opposed any govt policies while she was in cabinet
● 1975 party leadership election
○ Only Heath, Thatcher and Hugo Fraser, a backbencher stood. It was indicative of Heath's critics inability to find an alternative leader
○ Thatcher won 130 votes in the first round; Heath won 119. This was a hugely unexpected result.
5 POL13: Margaret Thatcher and the Conservative governments, 1979-97
○ William Whitelaw, a Heathite stood in the second round but was unable to win.
● Conventional account of why she won: 'The party did not vote for Margaret,
they voted against Ted Heath.' Her campaign manager Airey Neave did a successful job of underestimating her support to MPs. She won by drawing votes from people who would want to create sufficient pressure for Heath to resign. It was the product of luck and a series of accidents.
○ This account has important ramifications of the understanding of the
Conservative Party at the time. If Mrs Thatcher's election was on the basis of anti-Heath vote then there was no right turn in the party at the time.
● Wickham-Jones (1997) set out to challenge this account. Even if Thatcher won the first round due to luck, how did she win the second round? It was true that Whitelaw ran a poor campaign.
○ It was clear that Tory MPs wanted far-reaching change after Heath govts and the elections of 1974. Norman Tebbit wrote later 'the second round tactics were straightforward. The party wanted a change.'
○ Thatcher was a clear right-wing candidate. Those who argue that it was not apparent at the time to other MPs just how right-wing she was. This was a misled argument. She had a reputation for challenging Heath going back to Shadow Cabinet discussions of the late-1960s. In govt she notably disagreed with Heath on the Industry Bill of 1972. She was also the Vice-President of CPS.
○ 'The battle-lines between the centre-left and the right within the Tory
Party were already well established by the time of Mrs Thatcher's election.'
● Her becoming of PM was partially enabled by the culture of the Conservative
Party at that time that promoted four leaders in a row from humble backgrounds who would connect with ordinary voters.
Years in opposition (1975-79)
● Early challenges
○ low momentum for Tories
■ empire gone
■ traditional role of defending the English way of life became blurred as they supported modernisation and rapid social change
■ supportive of the EEC, so no longer can play the nationalist card
○ Not well-liked in the party
■ she was not an intellectual figure (unlike Joseph) and her politics seems to be a matter of instinct and principles rather than rational argument
■ Conservative political class has always despised conviction politics
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○ antagonism with Heathites
○ Labour govt was actually doing well. Inflation fell, North Sea oil profit stream came in, unemployment was controlled below 1.5M, and strikes were not a frequent occurrence
○ 'a radical assault on the assumptions of the postwar consensus on domestic policy' (Gamble 1994)
○ Foreign policy
■ revival of hostility towards the USSR and called for a new arms build-up by NATO
■ revived interest in Atlantic Alliance
■ lukewarm towards the EU
○ Economic policies
■ controlling inflation: removing price controls
■ supported the return of collective bargaining
○ Trade unions
■ The stance on trade unions was not settled by 1976. Prior and
Thatcher deemed it prudent to take a cautious line on trade unions, esp because it tied into incomes policy. It was later that
Thatcher decided that what was wrong with Britain's industrial performance had nothing to do with wages (the problem was that of productivity). The 'wages problem' was a symptom rather than a cause of the problems.
■ commissioned two internal reports (one by Nicholas Ridley and one by Lord Carrington) on industrial relations. Suggested fighting industrial action when the govt is sure to win.
How the Tories won the 1979 election
● social change was in their favour. In 1964, the 'salariat' comprised of 18% of the electorate and the manual working class 47%. By 1983, the percentages changed to 27% and 34% respectively. The proportion of owner-occupiers in the residential housing stock also increased from 39% to 63% in 1986.
● built a hegemonic grip over the constituencies of southern England. This was not new to the Conservative Party, but under Thatcher, the electoral base of
Conservatism became increasingly social homogenous and geographically concentrated.
How to define Thatcherism
● Nigel Lawson, claimed to have coined the term, defined it as 'a mixture of free markets, financial discipline, firm control over public expenditure, tax cuts, nationalism, "Victorian values", privatisation and a dash of populism'
● first time Thatcher used the term Thatcherism was only a few weeks before her election as party leader. Responding to the label as 'extremist Rightwingers', she said 'to stand up for liberty is now called Thatcherism'
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