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Opinion

Thatcherism is the big Tory scam that still

distorts our politics
Aditya Chakrabortty

Thu 5 Aug 2021 07.00 BST

A
mong the public services performed by journalism is alerting readers to
scams, and the newspapers are currently full of them. When HMRC rings
up, threatening a court case unless you press 1 on your keypad, slam
down the phone. Texts from Royal Mail asking for money are about as
kosher as marketing from Charles Ponzi. And if an email arrives from someone
purporting to be from the sainted Martin Lewis, gushing over some new platform
for trading bitcoin, it’s a hoax.

Politics is also rife with scams ­– except that you can’t depend on these being
exposed by the press. The biggest and most pernicious whopper doing the rounds
today is about Boris’s Big State. It runs thus: the prime minister is an utterly alien
breed of Tory. He loves public spending and big government, those things abhorred
by Conservatives ever since Margaret Thatcher took charge of the party five decades
ago and made it her central mission to roll back the state. The Iron Lady’s legacy is
endangered by the blond Nero.

Versions of this story can be spotted everywhere. In the Spectator, headlines warn
that “the big state is back”. Telegraph columnist Fraser Nelson balks at “the rise of
big-state Conservatism”. There is even panic around the Downing Street cabinet
table, with David Frost – he of the ever-unravelling Brexit deal – huffing and puffing
against “the intellectual fallacy” of a big state. And when Boris Johnson takes on
Rishi Sunak over this autumn’s spending review, it will inevitably be painted as Big
State v Small State: the most electorally successful Conservative since Thatcher
battling one of her true believers.

Take all that seriously, and I can offer you London Bridge at a very reasonable price.

What’s wrong with this picture isn’t how it depicts Johnson, who clearly enjoys
spending more on rail lines, tunnels, and anything else that demands a hard hat and
a camera crew. No, the real misrepresentation is of Thatcher and what she actually
did. This is greater than a run-of-the-mill falsehood. It is an out-and-out con: a lie
used to swindle the public out of both money and options.

True enough, Thatcher wore her anti-state feelings on her sleeve. One of the very
first white papers published by her government in 1979 claimed public spending lay
“at the heart of Britain’s economic difficulties”. It wasn’t just a financial crusade – it
was a moral one. Government was Nanny, and taxes reduced individual freedom.

And yet, over the course of her 11 years in power, neither the tax taken by the
government nor the amount it spent actually fell. Thatcher’s enemy may have been
supposedly big government, but under her it got even bigger.

Let’s start with taxes, because if there’s one thing everyone knows about Mrs T it is
that she cut them. Except she didn’t. Although she grabbed front pages for slashing
income-tax rates, especially for top earners, she also jacked up national insurance
contributions, and VAT for shoppers. The result is freshly laid out in a paper in the
Cambridge Journal of Economics (CJE), which states: “The total value of central
government receipts was 30.4% of GDP in 1979; by 1990, this proportion had risen to
30.9%.” Taxes actually went up under Thatcher, and the increase fell hardest on the
less well-off.

On public spending, reputation again doesn’t fit the record. Over her first four years
in No 10, only a few programmes got cut, most notably foreign aid, even while she
shovelled cash into domestic policing and an overseas war. Far from being the
opposite of Johnson, Thatcher’s combination of free economy and strong state is
not so far from his own instincts. The overall result, noted by Kevin Albertson and
Paul Stepney in the CJE, is that after inflation, “total managed expenditure rose by
7.7% from 1979 to 1990”. Even flogging off BT and British Gas and all the other
national utilities, and shifting those running costs and wage bills into the private
sector, couldn’t stem the rise.

Measured against national income, public spending did fall in the late 1980s, writes
historian Jim Tomlinson, “as the economy recovered from the slump at the
beginning of the decade”. But, he notes, “When the economy returned to recession
in the early 1990s [under John Major], the ratio again rose.” However large
Thatcher’s boasts, and whatever the propaganda in the Spectator and the Telegraph,
no miracles were worked here: there was no great lasting shift.

Thatcher did not roll back the state. Instead, she changed whom it serves and what
it can do, in ways that still shape our world. Under her, high earners won big and
finance became the UK’s boss industry. At the same time, the state began using tens
of billions in public money to pay for Thatcherism’s consequences.

The biggest of all her privatisations was of public housing, with at least 1.5m council
homes eventually sold off at a vast discount, costing the public about £200bn in
today’s money. Couple that with the scrapping of rent controls, and fairly soon the
bill for housing benefit exploded, with the state paying landlords to house tenants.
Similarly, breaking unions and driving down wages meant taxpayers subsidising
low-paid work through benefits. Under Thatcher, that was family credit; today it is
universal credit.

These weren’t screw-ups, but a deliberate and profound transfer of money and
power to the already well-off. Thatcher’s most notable achievement was how she
normalised this, “persuading the public to change economic expectations and
assumptions”, as the political scientist Ivor Crewe wrote soon after her 1987
landslide.

Those same expectations and assumptions course through this summer’s debate
over Johnson’s thinking. Those warnings about a big state, predicated on a lie about
Thatcher’s rollback, are ministers and commentators effectively policing the prime
minister. The belief that income tax rates can never go up was hardwired into
politics by Thatcher and her chancellor Nigel Lawson, and has effectively removed
the possibility of proper funding for both the NHS and social care. The sense that
the state is always failing has been repurposed to justify everything from academy
schools to Downing Street’s cronies getting billions in Covid contracts.

This is what a 50-year scam looks like. The pandemic and its aftermath means
Johnson will inevitably run a bigger state than either Thatcher or David Cameron,
but he will do so within limits effectively set by her. His government will give
taxpayer money to civil engineering firms and property developers, while ensuring
that free school meals and an uplift to universal credit are deemed unaffordable.

Most newspapers will urge him to spend less, to shrink the state. But the rest of us
shouldn’t focus on whether the state will shrink – because, just as under Thatcher, it
won’t really. Instead we should ask for whom the state will shrink – and who is in
line for an almighty payout.

Aditya Chakrabortty is a Guardian columnist

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