Continuity Thatcher: rescuing a complex leader from historical cliché

British Conservative prime minister Margaret Thatcher wipes crumbs off the table at 10, Downing Street, London, circa 1990. A painting of her predecessor Winston Churchill hangs on the wall behind her. (Photo by John Downing/Getty Images)
To argue that Thatcher attacked the post-war dream is to caricature, not illuminate, her importance to British history.
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History has no full-stops, but every history book has to start and end somewhere. For those works that take as their theme post-war Britain, the obvious entry point is either the election victory of Clement Attlee’s Labour government in 1945, or the wartime planning that it enacted.

This is followed by an outlining of a broad political consensus: a vertebrae of public sector continuity that is buffeted by events and frayed by maverick critics on the Left and Right, but which evolves and endures until the victories of Margaret Thatcher. That is where it ends. ‘Mrs T’ blows the roof off the house that John Maynard Keynes and William Beveridge (and Herbert Morrison, Nye Bevan, Rab Butler and Harold Macmillan) built.

This, of course, is the long view of post-war Britain for the historian – and reader – with stamina. A shorter narrative, particularly if focussing on social and cultural life, withdraws the ‘post-war’ tag from Britain sometime between the end of rationing in 1954 and ‘the satire boom’ of the early Sixties.

But for the politically-minded, the long view seems logical. It is a post-war period that might just as rightly be termed the Cold War period: the disintegration of the Soviet Union and its Warsaw Pact – conclusive events that neatly coincided with Thatcher’s fall from power in November 1990 – ended a period of continuity in British foreign policy (and, with it, the country’s strategic importance in world affairs) that had been constant since an iron curtain descended from Stettin to Trieste, and which had guided the actions of every Foreign Secretary from Labour’s Ernest Bevin to the Conservatives’ Douglas Hurd.

A further contention is the theme of this essay – that during the course of her three terms of office between 1979 and 1990, Margaret Thatcher ended a post-war consensus on what Britons should expect from the state. It is a claim which often fosters agreement between her most vehement admirers and detractors. For they both take her at her word, agreeing that ‘The Iron Lady’ (aka ‘That Bloody Woman’) was a consensus-breaker who brought a full-stop to the old certainties that were, according to outlook, bonding society together or holding Britain back.

This is my faith and my vision

Anticipating the 1979 general election campaign that was about to commence, the prime minister, James Callaghan, made a television broadcast in which he argued that Labour stood for continuity, the Conservatives for an end to it. Given the industrial chaos that had so recently marked the ‘winter of discontent’ these were definitions that his Tory opponent gleefully embraced when she addressed the first major party rally of the campaign.

‘There used to be in this country, a Socialism which valued people,’ Thatcher suggested to the packed hall in Cardiff. ‘Its methods were those of the collective, of putting all decisions to the centre, which was why it was not our creed,’ but its aims, she continued, were noble, unlike the ‘ugly apparatus’ of intimidation, enforced trade union membership and ‘flying pickets’ that were ‘turning worker against worker, and society against itself.’ These wreckers now held such sway, she suggested, because the corporatist state put them at the heart of the decision-making process. ‘The Old Testament prophets didn’t go out into the highways saying, ‘Brothers, I want consensus,’’ Thatcher perorated, ‘they said, ‘This is my faith and my vision! This is what I passionately believe!’’

Widely reported, it was a vivid articulation of her uncompromising attitude as a ‘conviction politician.’ It set the tone for how she would be viewed – and caricatured. But which period of misrule had she in mind when she sneered at consensus: the recent past of Harold Wilson, James Callaghan (and her one-time boss, Edward Heath) or that of the Beveridge/Attlee post-war settlement and the political culture that endured through the 1950s?

Thatcherism in action did not emerge fully-formed when the MP for Finchley challenged and defeated Heath for the Conservative party leadership in 1975. Indeed, it was still evolving in 1990 when her grip on power was wrenched from her. What can be said of her first term in Downing Street from 1979 until 1983 is that it neither achieved, nor set out to undertake, the unpicking of the post-war settlement. Its targets were far more immediate – the reversing of policies that were not the work of the leading Attlee-to-Macmillan consensus builders.

During her first term, hardly any of the big nationalisations achieved by Herbert Morrison between 1945 and 1951 were reversed or were even scheduled for privatisation. That the NHS should be free at the point of use was not even up for debate in Downing Street – and nor was it at any time in her tenure there. As for removing redistributive social justice from fiscal policy, only the recent stratospheric levels of tax were chipped-away at: top rate tax was reduced from the self-defeating 83 percent to 60 percent and standard rate from 33 to 30 percent; higher rate corporation tax remained at 52 percent and inheritance tax at 60 percent; indirect taxes like VAT soared. Her government was in its ninth year before these rates fell significantly. Any administration that these days perpetuated such high tax rates might be regarded as to the Left of Jeremy Corbyn.

Margaret Thatcher’s primary objectives in office were bringing to heel the twin-enemies of inflation and trade union power. Given recent experience this was not surprising. But they were linked because government strategy for the past decade had strengthened the connection by seeking to curb inflation through a corporatist pay bargaining policy involving senior management, trade unions and Whitehall. Although the Treasury under the Labour chancellor, Denis Healey, had begun to study the money supply, it was still the primary assumption that inflation was caused by big pay rises. Moderate them, and inflation would be tamed.

It was an approach that owed little to the post-war consensus. Until the late 1960s, both Labour and Conservative governments had been reluctant to tread into this area of industrial relations, preferring to leave collective bargaining to the employers and unions it concerned. But with Harold Wilson, incomes policy became central to the management of the economy. This tightened further under Edward Heath in the early 1970s, who made his incomes policy statutory. Upon returning to power in 1974, Labour, believed it could work with the unions more fraternally to achieve the same results. This miscalculation ultimately resulted in the ‘winter of discontent.’

At that time, the majority of the country’s employees counted amongst their personal effects a trade union membership card – far more than had a credit card. Of the 30 percent of the national workforce that were state employees (by 2019 the proportion was down to 16.5 percent), four out of five were union members. So, union-government pay bargaining had considerable leverage. What is more, having agreed a pay deal, enforcement came through a statutory Price Code which meant that any significant employer that paid for wages above the agreed ‘norm’ through higher prices was breaking the law. Different categories of major businesses had to report intentions to increase their prices to the Price Commission, a bureaucracy that adjudicated on the fairness of the price increase. The market was not the mechanism.

To this cats’ cradle, the doctrine of monetarism offered escape. Semi-scientific disputations about which measure of the money supply was best became a near theological obsession in the early years of the Thatcher government, but at least the theory offered a neat alternative to making the fragile goodwill of trade union leaders the lynchpin upon which controlling inflation rested.

But breaking this link came with a vicious economic cost. The counter-inflationary strategy of the chancellor, Sir Geoffrey Howe, depended upon high interest rates at a time of global downturn and when North Sea Oil pushed the price of sterling up further, Britain’s exporters were handicapped. Thatcherism’s belief in ‘Tina’ (‘There Is No Alternative’) was hammered on the anvil that the alternative had already failed. But she was at least three years into her first term before she could point to evidence for success.

The same results might have been achieved much less painfully if the supply-side reforms that could have lubricated such a transformation had already been in place at the start of the 1980s, as they were by the end of it. But that is to inhabit an alternative universe. Doubtless, the policy’s hardest blows would have been lighter if the globally low inflation of the twenty-first century ‘Great Moderation’ had prevailed in 1980. Again, Thatcherism did not enjoy that luxury.

But the central point is that the replacement of incomes policy and price codes with tight monetary policy unpicked ideas from the 1970s, not the 1940s. Many of the accompanying legislative measures and strategies that disabled the ability of the trade unions to determine industrial relations were promoted out of revulsion for recent provocations, and drew wide popular support from that experience.

Privatisation postponed

To the modern reader, what stands out from re-examining the Labour Party’s 1945 general election manifesto is how briefly it deals with what are now seen as the main achievements of the Attlee government. Combined, the NHS and the implementation of William Beveridge’s version of the welfare state were the stuff of six very short and vaguely-phrased paragraphs. Instead, the manifesto’s emphasis was overwhelmingly on the benefits that industrial planning and nationalisation would bring.

Of all Margaret Thatcher’s consequences for the post-war consensus, one that is almost universally attributed to her is the comprehensive dismantlement of the state’s ownership and control of large parts of the British economy. The reality is more nuanced.

Before winning the 1979 general election, the Conservatives had made only limited plans for privatisation because of what Nigel Lawson described in his memoirs as ‘Margaret’s understandable fear of frightening the floating voter.’ The first phase focussed not on the post-war nationalised industries upon which some degree of consensus had taken hold in the 1950s (from that period, only Cable & Wireless and Amersham International were privatised). Rather, the goal was to reverse the highly contentious recent nationalisations undertaken by the Wilson and Callaghan governments between 1975 and 1977: the state-owned British Leyland taking over the country’s consolidated car industry; the bringing of almost all shipyards under state control as British Shipbuilders, the nationalisation of the Aerospace industry and the creation of the British National Oil Corporation (subsequently Britoil) to extract oil and act as a middleman in the North Sea. With varying levels of success, the state’s share in these industries were duly sold.

Only in Thatcher’s second and third terms were the major stock market floatations attempted. It was the privatisation in 1984 of British Telecom – the largest privatisation the world had at that point seen – that really made popular capitalism a central tenet of Thatcherism. But the state-ownership consensus to which BT belonged was an Edwardian one, it having become a department of the Post Office (which monopolised telecoms) in 1912. Two other major privatisations that followed were also of businesses that were government concerns before 1945, namely BP (the state’s controlling share dated from 1914) and British Airways (nationalised in its previous guises by Neville Chamberlain in 1939).

Of the major nationalisations of the post-war Labour government, only two were privatised by Margaret Thatcher. These were the road haulage industry through the National Freight Corporation – sold to its employees in 1982 and floated on the stock exchange seven years later – and British Gas. The latter was created in 1973 but descended from Herbert Morrison’s nationalisation of the regional gas boards in 1949. British Steel, privatised in 1988, had never been part of any sort of post-war ‘consensus’ – having been controversially nationalised in 1951, de-nationalised by Winston Churchill in 1952 and re-nationalised by Harold Wilson in 1967.

The state owned 44 percent of the UK’s capital stock in 1979. Thatcher’s privatisations reduced that to 30 percent. She did not reverse the other key nationalisations of post-war Britain: the Bank of England (given operational independence by Gordon Brown in 1997) or the NHS (for which an internal market was created but no effort to de-nationalise was entertained). Following her victory in the 1984 miners’ strike, Thatcher reorganised the National Coal Board into a nationalised corporation, British Coal. It was John Major who privatised it, four years after he replaced Thatcher.

It therefore fell to the market to shut an industry central to Labour’s heritage that, had it remained alive and heavily subsidised in state hands, would have been administered the kiss of death by Tony Blair and Gordon Brown to cut carbon emissions. Thatcher also kept under state control another 1940s nationalisation, British Rail. In privatising it in 1994, Major travelled a track Thatcher had helped engineer, but it was not towards an ideological terminus. The privatisation of the network infrastructure was reversed by the creation of Network Rail in 2002 and emergency Covid-19 measures de facto nationalised the whole system in 2020.

Thatcher – Beveridge’s most faithful disciple?

What of the welfare state? When Thatcher referred to the Beveridge Report it was usually favourably. It had, as she was want to point out, been commissioned by ‘Winston.’ Having been a parliamentary secretary at the ministry of pensions and national insurance in Harold Macmillan’s government, she boasted that ‘one got right to the heart of it.’ Her criticism was not with Beveridge, but with how successive governments had undermined his insurance principles and compromised his advocacy for additional private provision. In that sense, she was a closer disciple of Beveridge than any of the post-war prime ministers who more readily took the credit for implementing his vision.

Addressing her party’s Central Committee in 1983 she proclaimed that ‘our party has no more intention of dismantling the welfare state than we have of dismantling the Albert Hall.’ What she wanted was a ‘partnership between the individual and the state’ because ‘we can’t snatch for ourselves what we want and have no concern for its cost or who pays for it. It is that sense of obligation and of duty which ought to mark our attitude towards the Welfare State.’

She enthusiastically quoted Beveridge’s instruction that ‘The State in organising social security should not stifle incentive, opportunity, responsibility; in establishing a national minimum it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family’ and reminded City dignitaries later in 1983 that, ‘even those who planned the reconstruction of our society in the last days of the war did not have a vision of an all-providing government. It was Lord Beveridge himself who wrote: ‘The underlying principle of the report is to propose for the state only those things which the state alone can do, or which it can do better than any local authority or than private citizens.’

Prompted in 1986 by a friendly interviewer for the Sunday Telegraph who suggested that ‘the welfare state mentality’ was making Britain lethargic, Thatcher was more nuanced. ‘The Welfare State is intended to help people who come across hard times through no fault of their own.’ She supported the Beveridge concept that ‘you insure, while you are working, against being unable to work because you cannot get a job, because you are ill, because you are too old to work.’ She distinguished Beveridge’s national insurance from the non-contributory supplementary benefit system. In order to reduce the potential for the latter providing almost as much income as paid employment, she supported incentivising work with family income support for those on low wages ‘so that their children will get as much as those children on supplementary benefit.’

Conservatism’s old direction

When Margaret Thatcher first entered 10 Downing Street as its tenant, the social security budget was 26 percent of total government spending. Eleven years later, when she faced eviction, the social security budget exceeded 30 percent. ‘I came to office with one deliberate intent’ she had explained in 1984, ‘to change Britain from a dependent to a self-reliant society – from a give-it-to-me, to a do-it-yourself nation.’ Many impediments to doing business and keeping more of its proceeds were lifted, but enduring unemployment alongside shifting social attitudes and changing family structures had sapped the ability of millions to stand on their own feet, unaided.

Nor was the social security budget the only area that Thatcherism perpetuated rather than curtailed the welfare state. Throughout her time in office, she faced repeated accusations of under-funding the NHS. The reality was mixed: on her watch, spending on the NHS increased by a third (in real terms, i.e. above inflation); but the rising costs of, and expectations for, the healthcare sector meant that was never sufficient. The NHS might not have been in her heart in the way that it set the pulse of Labour opponents, but the raw statistics do not show Thatcher as kicking against the grain of long-terms health funding priorities. Government spending on the NHS ranged between 4 and 4.5 percent of GDP during the Thatcher years whereas throughout the 1950s it had hovered above and below 3 percent. In this respect, it is in the last twenty years, not the 1945 to 1990 period, that has broken with a long-term trajectory (NHS spending as a share of GDP soared in the first decade of the twenty-first century and – prior to the 2020 Coronavirus outbreak, was plateauing above 7 percent).

‘I don’t think I have changed the direction of Conservatism’ from that of the 1950s, she assured the journalist Hugo Young, pointing out to him that as chancellor and prime minister, Harold Macmillan’s priorities had been to restrain inflation below 3 percent. Five years into her tenure, the state was spending 42 percent of GDP and it was not until the end of her time in Downing Street that government spending was heading down towards the 33 percent of GDP typical of Harold Macmillan’s years as prime minister. At the time of writing, it is soaring to 54 percent.

Restoring the post-war consensus

Margaret Thatcher had an unshakable belief in some pillars of the post-war consensus, the Atlantic alliance and NATO being among the handiwork of Churchill, Clement Attlee and Ernest Bevin she treated most reverentially. Other props of that consensus had collapsed long before she came to power. The grammar schools set-up by Rab Butler’s 1944 Education Act had exemplified the efforts to create a post-war meritocracy, but they fell foul of 1960s progressivism to such an extent that as Education Secretary in Heath’s Cabinet she was prevented by her own party’s commitments from saving the grammars. In 1988, City Technology Colleges were one imitation of Butler’s Act that had not developed as envisaged the first time around, and they failed to take off at the second attempt too.

The Thatcher governments’ record in education was not one of dismantling the post-war consensus but of failing to restore it. In no decade was the comprehensivisaton of Britain’s secondary schools more complete than during the Eighties.

That decade has been cast as the period where government gave up on the attempt to secure the post-war goal of full employment. It was an ambition that had already ceased to be realisable in the 1970s and whilst there was a marked shift from Keynesian demand management to supply side reforms during the Thatcher years, she always maintained that John Maynard Keynes had been ill-served by successors who affected to be his disciples. Certainly, looking from the perspective of 2020, it does not appear that the Treasury has given-up on the idea of stimulating economic demand in tough times. Of more lasting significance was the removal of exchange controls (a measure introduced in 1939 to limit capital flight but which had never been revoked): one of the first and most vital of Thatcherite reforms. Do we really miss a government department telling us how much money we can carry out of the country for our summer holiday or to buy a property abroad?

Some other forms of economic management had been jettisoned before she took office. For instance, the Bretton Woods system of fixed exchange rates had ended in 1971. Perhaps it may be said that a floating currency was one of the few developments of that decade that she came to appreciate. Indeed, the manoeuvres of the Tory pro-Europeans amongst her Cabinet colleagues to reintroduce constraints on the pound’s movement through the Exchange Rate Mechanism was the prologue to her downfall. In her final, belated, repudiation of British immersion in Europe’s ever closer union she drifted far away from the Establishment consensus thinking of the 1960s and 70s and back to the outlook of Attlee and Bevin.

For the reality is that Margaret Thatcher was a politician who had spent her first ten to fifteen years in parliament articulating relatively mainstream Conservative views only to realise in the 1970s that, as she put it, ‘things started to go wrong in the late sixties,’ and were getting worse as the Seventies progressed. Her priority upon entering Downing Street was to attack this ‘management of decline.’

Some causes of that decline she traced to the post-war period, and these she sought to address. But there was much that she valued in that inheritance. To portray her as the alarm clock that ended the post-war dream is a convenient way to punctuate a long narrative. But to do so is to caricature, not illuminate, Margaret Thatcher’s importance to British history.

Graham Stewart

Graham Stewart is a Senior Research Fellow in Twentieth-Century British History at the University of Buckingham. He is a specialist in twentieth century British politics. His publications include Bang! A History of Britain in the 1980s (London: Atlantic Books, 2013).

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