Thatcher Breaks Consensus

When asked who has been the most controversial and radical postwar British prime minister, many historians and academics incline towards Margaret Thatcher. Taking office 40 years ago, and in power between 1979 and 1990 as the UK’s first female prime minister, the circumstances she faced in office gave her the opportunity to stamp her mark on British life – and this she did. When she departed from 10 Downing Street, she had become the longest-serving continuous British leader of the 20th century. Her divisive legacy has been debated ever since.

On assuming the premiership, Thatcher preached harmony, social unity and conciliation, quoting St Francis of Assisi as she stood on the doorstep of 10 Downing Street for the first time in May 1979. She did so in the wake of a divisive decade. The 1970s had been plagued by political and social instability, economic turbulence and trade union unrest. However, Thatcher’s radical policies and her solutions for resolving the UK’s postwar economic decline meant that harmony was unlikely to be realised in the years that followed. This would become apparent in the controversial decisions she took during the 1980s. Consequently, in the almost 30 years since the end of her rule, successive governments have had to grapple with the issues and problems that are the legacy of her own specifically divisive policies.

The end of consensus

When Thatcher successfully challenged Edward Heath to become Conservative Party leader in 1975, it symbolised the end of the ‘years of consensus’. The period since 1945 had seen broad agreement between Britain’s two main political parties (Conservative and Labour) on how the country’s economy should be managed, entailing relatively high levels of tax and spending to invest in core public services, bipartisan government aspirations of full employment and significant state intervention in nationalised industries.

Both the major parties had similar economic policies during this period, yet after being elected as an MP in 1959, Thatcher had become increasingly critical of the mainstream perspective. Her views aligned with the influential Institute of Economic Affairs (IEA), a free-market think tank that emerged in 1955 to highlight the growing power of the state within the UK’s political system. The IEA had links to F.A. Hayek, an Austrian economist, who wrote The Road to Serfdom in 1944, a landmark political text that represented one of the earliest significant critiques of 20th-century ‘statism’. Hayek’s book was a response to the constant growth of central government power, which, to the IEA, was a cause of concern in respect to its perceived threat to individual personal liberties.

Thatcher viewed the concept of political ‘consensus’ with disdain, equating it with weakness, indecision and a lack of political conviction. This was evident in one of her best-known quotes, when, in 1981, she described the notion of consensus as ‘the process of abandoning all beliefs, principles, values, and policies in search of something in which no one believes, but to which no one objects’.

With three decades of ‘consensus’ consigned to the political dustbin, Thatcher set about devising an ambitious programme for government that she believed would transform the UK’s economy and, in turn, its society. In doing this she was supported by key ministerial allies who shared her ideology, such as Keith Joseph, Geoffrey Howe and Norman Tebbit. This would mark her out as a curious phenomenon in British political history, embracing the role of a ‘radical Conservative’; principally because traditionally Conservatives were usually resistant to political change, not advocates of it. Yet this was a demand for change against a postwar consensus shaped by the political left. With the influence of Hayek and other figures linked to the IEA operating as her intellectual foundation, Thatcher embraced a ‘New Right’ liberalising, economic agenda, whereby the state would withdraw from many of the areas that it controlled and regulated, in what Thatcher described as ‘rolling back its frontiers’.

Thatcher wanted the dynamics of the capitalist ‘free market’ to replace the state as a more efficient mechanism to supposedly deliver better quality public services. This would allow individualism and self-sufficiency to flourish, with Thatcher’s analysis arguing that individual liberties were being ‘suffocated’ by state powers because of high levels of taxation and excessive government spending, which fuelled price rises, and the bureaucratic over-regulation of industry. The state would consequently be more streamlined and more effective in its reduced role. Thatcher was discarding the comfortable practices of recent history, abandoning the traditional Conservative inclination for pragmatism, pursuing instead a more ideological economic approach, which became known in later years as ‘neoliberalism’.

Taking power

Thatcher formed a Conservative government in May 1979 in the aftermath of the ‘Winter of Discontent’ (1978/79), when large-scale industrial action, and specifically strikes from key public sector workers, brought parts of the country to a standstill and fatally wounded James Callaghan’s Labour administration. Her economic analysis swiftly crystallised into specific practical solutions and inflation was identified as the first thing to be tackled, having peaked at 26 per cent in the mid-1970s. Thatcherites argued that it was essential for inflation to be brought under control in order to restrict the growth in both wages and, in turn, the prices of everyday goods. If this could be quickly achieved, then other positive economic indicators should follow, such as steadier patterns of consumer spending, cheaper consumer goods and an overall rise in living standards. The initial government mechanism for tackling inflation was to control the amount of money in circulation. This was the principal tenet of ‘monetarism’, a key to the economic policy of the early years of Thatcher’s rule which, in practical terms, would assist in rapidly reducing levels of government expenditure. It was acknowledged, however, that such a focus on tackling inflation would, thanks to a drastic removal of public funding for various state-run industries, inevitably bring social costs in the short term. Unemployment would rise rapidly as a consequence, particularly in traditional areas of heavy industry.

Supported in this approach by her Chancellor of the Exchequer, Geoffrey Howe, Thatcher’s first budgets proposed significant reductions in public spending. This caused internal party tensions and opposition emanating from the so-called ‘wets’ within her Cabinet, those more moderate Conservative politicians still wedded to consensus politics, such as Iain Gilmour, Francis Pym and Jim Prior. In addition to this criticism, Thatcher’s determined pursuit of ‘fiscal Conservatism’ and economic retrenchment (cutting national borrowing and debt levels) also faced hostility within the ‘expert’ community; 364 economists wrote to The Times in 1981 to argue that the Thatcherite ‘monetarist’ experiment (that flourished in her 1981 budget of spending cuts and tax increases) would deepen an already damaging economic recession.

Thatcher’s response to such criticism was typical of the ‘Iron Lady’ image, a name given to her by the Soviets, that she would cultivate as her premiership progressed. At the 1980 Conservative Party conference she rejected the prospect of an economic policy ‘U-turn’ (which the Heath-led Conservative government of the 1970s was accused of), declaring instead: ‘You turn if you want to. The lady’s not for turning.’ Such boldness in the face of criticism was seen as a sign of strength. As if to vindicate her position, inflation dropped from around 22 per cent in 1980 to under four per cent by 1983.

The social consequences, however, were damaging. Unemployment climbed towards three million during the same period, a level not seen since the 1930s. As a consequence, there was notable urban unrest and rioting during the spring and summer of 1981 in inner-city areas of Liverpool, Leeds and London, where unemployment became rife.

Popular capitalism

After being re-elected for a second term in 1983 following a landslide general election victory against a divided opposition, and further boosted by her military success in regaining the Falkland Islands after it was invaded by Argentinian troops in 1982, Thatcher’s confidence grew. Seeking to promote ‘popular capitalism’, council houses continued to be sold at a reduced rate to tenants as part of the ‘right to buy’ scheme, while, in pursuit of a ‘share-owning democracy’, Thatcher accelerated the pace of her flagship and high-profile policy of privatisation, arguably her most vigorous attack on the post-1945 ‘consensus’. Core industries (the so-called ‘commanding heights’), nationalised by the postwar Labour government, were sold to the private sector and shares were offered to the wider public as part of the process.

Gas, water, telecommunications, electricity, steel and coal were just some of the more than 50 key privatisations that took place from the mid-1980s onwards. This policy encapsulated everything that the Thatcher political agenda aspired to achieve: a reduced state, greater individualism, enhanced business efficiency and competition and reduced trade union powers within an inflated private sector. It reshaped British politics and proved popular with sufficient numbers of voters to secure further electoral success, although critics of the policy saw it as a short-term option: even the former Conservative prime minister Harold Macmillan warned that such a policy was like ‘selling off the family silver’.

‘Haves’ and ‘have-nots’

In 1987 Thatcher was re-elected for a third consecutive term, again by a significant margin of victory, and appeared to be at the peak of her powers. With a booming economy, levels of income tax cut significantly, trade unions demoralised and restricted by new laws and both inflation and unemployment seemingly under control, her political prospects seemed brighter than ever. Her bold policy agenda appeared to have worked.

Yet it was during the late 1980s that the adverse social implications of Thatcherism again rose to the surface. The gap between rich and poor continued to widen, homelessness and unemployment rose as part of a further deep recession and key public services, such as health, education, local government and housing, started to creak towards the end of the decade due to insufficient investment. There were recurring annual crises in the NHS and schools complained of underfunding. The trade unions had been humiliated by defeat in high profile disputes like the miners’ strike of 1984-85 and, as a result, class-based animosity lingered. By 1990 the UK appeared to be a starkly polarised nation of ‘haves’ and ‘have-nots’. Parts of the south and the midlands boomed, with modernised ‘hi-tech’ industries, rising social mobility and greater home ownership; but by contrast, the traditional northern industrialised areas and much of Wales and Scotland were left behind, de-industrialised and faced with a crumbling infrastructure, visible decline and decay. In turn, these areas swung heavily away from the Conservatives at the ballot box and many have remained resistant to Conservative policies up to the present day. Thatcherism appeared to have reinforced a more long term, and so far insoluble, north-south divide.

Legacy

Thatcher reluctantly left office at the end of 1990, not ousted by the electorate as she would often remind people in later years, but rather by her own party, who feared she had become an electoral liability. Her replacement in Downing Street was the more consensual-minded John Major. At the start of this new decade, the turbulent UK economy was heading in a negative direction yet again and unpopular policies such as the poll tax had fuelled further social unrest and rioting.

The increasingly problematic and divisive issue of Europe also played a part in her downfall, as destabilising tensions and divisions emerged in her Cabinet over closer proposed links with the European Community.

Her record in office can be looked back on as momentous, turbulent and controversial in equal measure, ending the ‘era of consensus’ and transforming Britain’s economy and society, driven by the most radical policy agenda of the postwar era.

During the volatile 1980s, British politics had convincingly shifted to the right and the social democratic-inclined postwar consensus was dead. Thatcher’s ideological approach had unsettled the Conservative Party’s previously pragmatic equilibrium and created some significant internal divisions in the process, which have continued in subsequent decades. Trade union power was crushed and the UK economy, the ‘sick man of Europe’ in the 1970s, was revived and enjoyed a renaissance. New Labour would emerge in subsequent years to symbolise the realignment of British politics and society along Thatcherite lines – Thatcher remarked that this new and moderate version of the Labour Party was ‘her greatest achievement’, symbolising what she believed was the defeat of socialism in Britain.

This acceptance of the ‘modernising’, individualised, free-enterprise economy effectively marked a new consensus that reached beyond 1990. While many prospered, many were also pushed into poverty. The social consequences of this policy agenda remain a source of political dispute to the present day. Growing inequality, the continued decline of many industrial communities, a shortage of affordable housing, under-investment in public services and the struggle to deliver an effective welfare system remain the outstanding problems that the Thatcher government caused or exacerbated, yet never wholly provided answers for.

There is certainly unfinished business. The conflict between Left and Right regarding the role of the state and its degree of intervention in the economy goes to the heart of today’s politics. This is highlighted, for example, in the ongoing debate about the future role of institutions such as the welfare state and, in particular, the NHS. It could be argued that a continued failure since 1990 by both major parties to address the legacy of the post-Thatcher settlement has contributed to the recent revival of ‘populist’ extremes on both the political left and right.

Thatcher’s radical policies changed the UK, but whether the positives outweighed the negatives continues to be the source of evolving academic and political debate. While Britain may well have required a new direction in 1979, the policies offered by Thatcher’s government were, on reflection, perhaps too harsh and the negative socio-economic divisions and inequality that her policies created have overshadowed her desire to revive the country’s entrepreneurial spirit.

Ben Williams is a tutor in Politics and Political Theory at the University of Salford.