Historical Interpretations: What

impact did Thatcher’s governments

(1979-90) have on Britain, 1979-97?
Four main topic areas
• Effect of Thatcher’s economic policies
• Extent to which state intervention and the public sector were ‘rolled
back’
• Extent of social and political division in Britain
• Effect of Thatcherism on politics and party development

Arguably brought about revolutionary changes and radically altered

shape of British society. Extent to which she is responsible for change
and the effects of them generates historical controversy.
Historical interpretations
The question on Thatcher is a compulsory one and is structurally
different to other topics.

You will receive two historians interpretations (extracts) be asked to

analyse them and make a judgement about the question.

You need to select key points from both extracts and use contextual
knowledge to test the validity of the claims.
Margaret Thatcher - Background
Took over Conservative party in 1975 after successfully challenging
Heath for leadership.

Was cabinet minister in his government and witnessed it be brought

down by might of NUM – had lasting effect on her ideas.

Was dismayed by Heath’s refusal to stick to his manifesto pledges and

reluctance to confront trade unions.

Won elections in 79, 83 and 87 before being ousted by her own party in
1990.
Margaret Thatcher – Beliefs (not exhaustive)
Conviction politics – rejected consensus politics and believed politicians
should always stick to principles, abandoning them was wrong

Economic outlook – against welfare dependency instead of hard work,

low taxes to benefit from hard work, private enterprise was superior to
public due to differing aims

Law and order – people should obey the law which could only be
changed democratically, not through forceful protest, opposed radical
groups and unions for this reason
The effect of Thatcher’s economic policies
Had radical approach to the economy, seeking to end large scale state
intervention and promote the free market.

• Some historians argue her policies helped reverse Britain’s economic

decline.
• Others suggest it did little to change Britain’s long-term economic
performance
• Many view her policies are mostly negative, weakening British
industry and creating massive wealth inequality
Economic policies in first term - monetarism
Thatcher’s first term was marked by introduction of monetarist
economic policies – theory that inflation is most significant threat and
gov should prioritise its reduction.
Involved raising interest rates, higher indirect taxes and public spending
cuts.

Despite opposition, even within own cabinet, pressed on with policies.

Economic policies in first term - monetarism
1981 budget was in the middle of recession, conventional wisdom had
been to stimulate spending and cut taxes.

Instead cut government expenditure by £2 billion and introduced,

indirect taxes imposed to bring down inflation, pack of cigarettes
increased from 14 to 80 pence.
Economic policies in first term - effects
Some argue that policies worked, inflation peaked at over 20% in May
1980, back down to 5% by Dec 1982. Economy exited recession and
was growing again by end of 1981.

However, cost of policies was severe. Prioritising inflation meant

unemployment increased by a million, manufacturing output fell by
25%, tax policies helped the rich and hurt the poor.

Additionally, successes can’t necessarily be attributed to monetarism,

applied unequally, accepted Labour appointed commission
recommendation for 25% pay rise in public sector, gave above inflation
pay settlement to end steel strike.
Economic policies in second term, 1982-7
Gradual privatisation of industry – Thatcher was sceptical of state run
industry and objected to use of gov money to keep them afloat
Initially simply allowed them to fail, refused to bail out unless there
was prove of move towards efficiency, e.g job losses and British Leyland

Industries were set targets to break even and be turned around, as a

result government subsidies went from £1.1 billion, to industries
making profit of £1.3 billion by 1988.
Economic policies in second term, 1982-7
Final and most important stage of making companies more profitable
was selling off to private sector.

Nationalised companies were inefficient, 25% of British workers

producing only 10% of GDP, and were making losses. Between 82-6,
British Aerospace, Jaguar, British Gas, Britoil and BT all privatised.

Selling them off also involved encouraging ordinary people to buy

shares, Tell Sid campaign, so that more people could feel benefit of free
market by owning shares.
Economic policies in second term, 1982-7
Effects of privatisation:
4.6 million bought shares in British Gas, % of country owning shares went
from 7% to 25% between 79-90. However distribution was uneven, less than
tenth of unskilled males compared to half of professionals.

The sales bought significant revenues to the gov which helped fund tax cuts.
£19 billion raised from privatisations.

Clear improvement in quality of services like telecoms, but no appreciable

difference in quality of water/gas supplies.
Post-Thatcher, government spending on British Rail increasing despite poor
service and PFI schemes created huge future debts to be paid off.
Economic policies in second term, 1982-7
Deregulation- Range of financial rules and restrictions removed, key ones:
• Scrapped floor trading in stock markets for computer based
• Relaxed rules surrounding foreign ownership of banks
• Became easier to lend money and mortgages (banks could give them)
Allowed city of London to become major financial world centre, However:
Debt became significant issues, private household debt and mortgages
combined were highest in Europe by end of century.

Stock market crash in 1987, solution of solving inflation by raising interest

was made worse by extent of credit, recession and unemployment by
1990
Consequences of economic policies
Inflation – claim to have lowered inflation undermined by rates still
being higher than European average between79-97, additionally there
were prolonged periods of low inflation from 54-69.

Economic growth – despite reaching a peak of 4%, long-term trend

puts it even with other prolonged periods from 1960-97 and Britain
continued to decline in global ranking of GDP per capita

Unemployment and productivity – massively increased unemployment

a legacy of Thatcher gov (3.2 mill peak) and workers still remained far
less productive than competitors, US, France, Japan, Germany
Extent to which state intervention and the
public sector were rolled back
Some historians argue that Thatcher failed to prevent the growth of the
state throughout the 1980s, citing increased cost of welfare and law
and order as evidence.

Others suggest she successfully ensured the state intervened less in

peoples lives than before and allowed market forces to determine
many more outcomes.

Others argue that the state wasn’t rolled back, but its role was simply
changed, with left-wing councils having their power reduced with the
central government stepping to take over their duties or strip them of
other roles.
Contradictory Thatcherite beliefs
Thatcher spoke of wanting to ‘roll back the state’ but in reality her
ideology was more complex.

1. She sought to roll back the state in the economy and reduce
government expenditure on welfare/social security

2. However believed strengthening of state was necessary to protect

political and economic freedom from threats like Soviet Union,
powerful trade unions, crime and left-wing councils
Rollback of the state - Economy
Corporatism – government since 60s negotiated with businesses and
union reps to create common policy on pay, prices etc.
Thatcher was highly critical and Norman Tebbit, key ally, argued it was
undemocratic and a characteristic of fascist governments.

Thatcher completely abandoned these policies, stopped negotiating

with major unions on economic policy as well as the CBI.

Instead left prices, wages, investment etc to free market.

Rollback of the state - Economy
Keynesianism – gov had used these policies in times of low growth to
stimulate the economy by cutting taxes and increasing spending
Thatcher was opposed on grounds of it creating high inflation and
interfered with natural function of free market.

However government arguably did not cease to intervene in the

economy, continued to use interest rates to impose monetarist policies
and control inflation.
Rollback of the state – Public sector
Thatcher wanted to end much of public sector’s work – claimed that
individual freedom and wellbeing was more important that policies
promote welfare of society as a whole

State action was counter-productive and inferior to actions of private

companies and individuals
Rollback of the state – Public sector
Housing – thatcher was keen to reduce numbers of council houses.

Advocated giving all council house tenants the right to buy their
homes. Believed home ownership made people more responsible due
to it being a stake in society and it was crucial for individual freedom
and becoming independent of the state.

1980 Housing Act gave council tenants right to buy house for 33%
discount after three years, 50% if they had lived there for 20 years.
Rollback of the state – Public sector
Half a mill bought homes every year from 1980-9. Rate decreased after
this but over 5 million state-owned homes were sold to private tenants
up till 1997. Owner occupation went half to over three quarters
between 81 and 89.

Additionally, councils could not use sales to build new homes and there
saw decline in council houses being built. State was effectively no
longer building homes.
Rollback of the state – Public sector
Privatisation – clear evidence of size of public sector being shrunk

Her terms in office clearly shifted balance of economy away from public
towards the private sector. Privatisation continues after her fall.

600,000 fewer people were employed by the state.

Rollback of the state – Public sector
Civil Service – public sector employees that work directly for the central
government (Crown) as opposed to local government etc (doesn’t
include NHS, police, army)
Thatcher was unhappy with the size of the civil service, over 700,000
and three times similar countries, and wished to reduce their numbers.

Created Management Information System to monitor and reduce its

costs, which meant job losses – £1 billion efficiency savings made,
largely through reducing numbers by 25%
Additionally, agencies required to work more with private sector to
work more efficiently, e.g Prison Service use of private security
Rollback of the state – welfare state
Thatcher was not wholly opposed to the welfare state, but was keen to reign
it in.
Did not propose privatising the NHS but sought to make it more ‘efficient’ by
requiring hospitals to buy some services from the private sector. Also created
NHS internal market, NHS hospitals become independent, receive money
from local health authorities who buy their services – designed to promote
competition between hospitals.

Introduced 1986 Social Security Act which brought in means testing for some
universal benefits, designed to stop rising costs and make claims harder.

Tried to encourage private pensions vs state by making them less attractive.

Rollback of local government by strengthening
central government
Thatcher’s program for state rollback put her on collision course with
local government.
Firstly it was significant in size, accounted for almost 1/3 of government
spending.

Secondly, many local authorities were trying to expand their services

just as thatcher was shrinking the public sector.
Situation exacerbated by fact that many local councils were in hands of
left-wing Labour strands, Ken Livingstone and the GLC, Trotsykist
Militant Tendency in Liverpool City Council.
Thatcher believed left-wing councils were trying to introduce socialism
and was determined to curb their powers.
Rollback of local government by strengthening
central government
Initially attempted to pass laws that reduced funding to local
authorities, however many local authorities simply increasing their own
rates.
Gov responded with 1984 Rates bill which gave central gov power to
impose a cap on local taxation.

18 councils initially rebelled and set illegal rates, however their

campaign fell apart with each one eventually complying by 1987 due to
public divisions and intelligent government negotiating.
Rollback of local government by strengthening
central government
1988 Local government Act, forced councils to buy in (or contract-out)
services from private sector rather than provide them directly.
Wanted local gov to follow example of Conservative authorities, such as
Wandsworth, did this in areas such as rubbish collection. Private
businesses had to bid for contracts.
This led to a cut of staff in Wandsworth of 30% between 1997-95.

However this was only achieved through expansion of central gov

power, Act gave them power to force councils to accept most
competitive offers to keep costs down.
Rollback of local government by strengthening
central government – Showdown with the GLC
GLC taken over by Ken and other new left councillors (Traditional Labour
policy + commitment to greater equality and nuclear disarmament)
Aimed to create ‘urban socialism’, subsidised underground travel,
financial support to LGBT, black/Asian rights groups, spent nuke attack
money on anti-nuclear campaign, published secret nuclear war plan.
Seen to support terrorism, endorsed Mandela, invited Gerry Adams.

Responded to provocation by abolishing the GLC in 1986 claiming it was

responsible for high taxes and public spending.
Increase in size of the state
Expanded state power to deal with trade unions as laws passed to
allow them to control aspects of union activity.

Passed laws that outlawed secondary action and secondary picketing.

Unions forced to call secret ballot and win majority prior to strike
action. Similarly could only impose closed shop by secret ballot of
majority of members.
Increase in size of the state
Significantly increased defence spending due to international climate,
defence spending rose by 20% due to several policies, buying trident
nuclear deterrent, Falklands military operation. However eventually,
nuclear costs led to cuts in conventional weapons spending.

Significantly extended police powers, passing several laws enhancing

police stop and search powers as well as powers to arrest and charge
people involved in protests/pickets.

Restricted press freedoms on issues related to national security,

banned documentary on ‘zircon’ satellite, banned former MI5 officer
book, ban on interviews with IRA, Sinn Fein members being broadcast.
Increase in size of the state
Despite attempts to reduce welfare bill, spending on range of public
services continued to increase. NHS spending grew up 35% between
79-89 in real terms, social security bill continued to rise despite means
testing and state pensions did not decline.

Additionally, state power was significantly enhanced with school

reforms. National Curriculum was introduced for first time and national
testing to be published in league tables.

Creation of ‘grant maintained’ schools allows schools to opt out local

authority control and receive funding from central government.
Extent of social and political division
Thatcher became prime minister at a time of social division and had
promised to bring harmony and hope.

However social divisions had arguably reached their lowest point since
the war. A range of social divisions surfaced with riots, industrial
conflict, protest moments and treatment of sexuality.

Some historians argue these divisions were due to Thatcher’s policies.

Others argue they were down to other longer term economic and
social changes.
Social and political division - gap between rich
and poor
A number of Thatcher’s policies were very unpopular with the
working classes and clearly favoured the rich – for example,
the Poll Tax. Regressive taxes led to the poor paying a much
larger percentage of their income in taxation than the rich.

The bottom 10% of earners paid £400m more in 1989 than

they did in 1979. However, the top 10% paid £9.3b less in the
same period!
In 1974, the top 10% of earners gained 25% of all post-tax
income in the UK. This figure went up to 35.2% in 1997.
Social and political division - gap between rich
and poor
Income was the most obvious cause of a gap between rich and poor
under Thatcher.
The richest 10% saw their income rise by 61% under Thatcher. They
earned 20.6% of total UK income in 1979 and 26.1% in 1991.
The poorest 10% saw a decrease in income by 18%. They earned 4.3%
in 1979 and 2.9% in 1991. This gap has got bigger since 1991.
The middle classes were torn – whilst some got more income, others
lost their jobs or were unhappy with the dismantling of the public
sector.
This led to many in the middle classes not voting Conservative in 1987
– 55% was the lowest since 1918.
Social and political divisions - Regional divisions in
wealth
The south-east gained much more money and productivity, at the
expense of the north. Thatcher arguably created a ‘north-south divide’.
Thatcher tried to reverse the issue by creating enterprise zones. These
were supposed to allow private companies, using government money, to
move into deprived areas to promote economic growth.
This improved some areas, such as the Albert Docks in Liverpool, but it
was largely unsuccessful. Many manual workers, made unemployed
during the Thatcher era, remained out of work during the 1990s – this
figure actually went up.
By 2001 1/5 men who used to work in coal mines were unemployed.
Some areas did recover, for example Yorkshire, but many did not (e.g.
South Wales).
Social and Political division – class war
Thatcher was dedicated to eradicating class division and instead
replace it with national unity.
She wanted people to embrace British values like hard work and
independence, rather than socialist values like welfare dependency.

Foreign policy was her greatest success in seeking to create this,

repeatedly called for national unity in face of Soviet Communism.
Greatest success was Falklands operation, war was seen as defence of
national honour and created sense of unity, especially in press and saw
surge in support for her government.
Social and Political division – class war
Argument that her economic policies created inequality which
ultimately led to increasing class conflict. With less of a stake in society,
people feel less a part of society or reason to respect its laws or
customs.

Policies like right to buy arguably created gap between working class
between those who could and couldn’t afford to buy homes and left
choices for those who couldn’t very limited.

Growing inequality between regions, arguably leads to nationalist

parties increasing support as Cons no longer seen to represent them.
Social and Political division – class war
Major action came about with confrontation of NUM – economic
policies put her on collision course with Arthur Scargill.
Historic roots of Heath government falling, she was determined to
succeed.

NUM were strongly opposed to any pit closures which would be caused
by cuts in government subsidies.
Scargill ignored legislation and went ahead with a strike without a
ballot and strike begun in May 1984.
Social and Political division – class war
NUM strike saw thousands of police officers oversee them, often
provoking confrontation. Police on horses armed with riot shields had
high profile clashes like Battle of Orgreave, over 100 miners and police
injured.

Thatcher used incident to present strikers as undemocratic mob

violently imposing will on nation.

Polarised public opinion, radical groups (Race Today Collective, LGBT

groups) supported miners, Labour party was split, vast majority of
press and public supported government and opposed Scargill.
Social and Political division – class war
Highly organised and determined government defeated increasingly
divided miners by March 1985. NUM vote to call it off and defeat Scargill.

Previous Conservative governments had chosen to work with big unions

to preserve social/political unity, Thatcher chose outright confrontation
and was willing to divide country further to achieve this victory.

However Thatcher was arguably supported in this action by large

swathes of the country, including many working class groups who
supported her emphasis on self-reliance.
Social and Political division – Racial division
There was a rise in black and Asian protest and radical groups as a result of
policies by Thatcher.
She stressed cultural uniformity and a need for black and Asian people to
assimilate, her economic policies had a disproportionate affect on these
workers and supported police initiatives that targeted young black men.

New Cross Fire, 13 black teenagers killed in suspected racist arson, lack of
response from Thatcher angered black community, especially compared to
letters of support from Queen/gov/parliament to deaths of white teenagers in
Dublin party.

Only ‘Black Peoples Day of Action’ forced government response, 20,000 went
on march.
Social and Political division – Racial division
Operation swamp increased division further with extensive use of stop
and search through racial profiling – academic Paul Gilroy argued it was
designed to reassert police authority after ‘symbolic defeat’ on Day of
Action.

Brixton riots followed after rumours black teenager was killed in custody,
hundreds of injuries and properties destroyed, other riots broke out in
other deprived inner city areas.

Thatcher refused to accept Scarman report which suggested socio-

economic reasons for riots and excessive use of police stop and search –
situation unchanged.
Social and Political division – Improvements in
race relations
Black and Asian people became better represented in society, large
increase in MPs during 80s e.g Diane Abbott, Paul Boateng as well as
more media roles

Stephen Lawrence murder highlights clear change, government and

media immediately condemned (as opposed to silence over New Cross)
and police mishandling of investigation led to Met police of being called
institutionally racist – willingness to address racism indicates change in
Major government
Social and Political division – Sexuality
Promotion of family values were highly controversial – LBGT groups
argue that her policies were divisive as the government used its power to
promote one vision of family life to discourage others through her
Section 28 policy.

However, Thatcher government adopted a conciliatory approach to

HIV/AIDS and refused to blame it on sexual attitudes, instead promoting
safer sex campaigns.
Policy did not translate to media representation – Representation in
media gradually became much more positive. E.g pop music like Boy
George or Pet Shop Boys ‘it’s a sin’, first ever gay kiss in EastEnders 1989.
Thatcher and the Conservative party
Despite becoming Conservative leader in 75 and winning the 79
election, her party remained ‘moderate’ in many ways and her cabinet
was dominated by ‘wets’ – men who were appointed by Heath to the
cabinet and remained committed to post-war consensus.

Thatcher believed compromise with ‘socialism’ made you a traitor and

tried to exclude moderates from the cabinet.

Thatcher excluded them initially from any key areas of economic policy,
instead appointing her ideologically committed ‘drys’ to these posts.
‘Wet’ Jim Prior was one of few men who were exception, employment
secretary, however he was shifted to Northern Ireland in 81 reshuffle.
Thatcher and the Conservative party
1981 reshuffle saw further demotions for ‘wets’ and promotions for
keen supporters like Norman Tebbit.

With two further election wins in 83 and 87, she was able to win over
majority of the party, her ideas were dominant.

However despite popularity of her ideas, her leadership style had

become unpopular and poll tax dispute in 1990 bought it to an end.
Highly unpopular and unenforceable measure which she refused to
compromise on, alongside increasing problems in the economy and
internal divisions over Europe, led to leadership challenge.
Impact of Thatcher on the Conservatives
Thatcher resigned however the new leader, John Major, was the most
Thatcherite of all the candidates who ran to succeed her.

Continued a range of Thatcherite policies, in particular towards

privatisation and the public sector.

Completed Thatcher privatisations like selling of electricity companies,

British Rail in 1992.
Additionally, continued to introduce elements of the free market into
public services e.g outsourcing of building and maintaining
schools/hospitals through PFI schemes
Impact of Thatcher on the Conservatives
Continuation of socially conservative policies, introduced the failed
‘Back to Basics’ campaign that sought to emphasise traditional British
values and to promote monogamous heterosexual marriages and
‘family values’.

Campaign largely failed due to high profile Con sex and corruption
scandals.
Impact of Thatcher on the Conservatives
However John Major crucially abandoned the style of government
Thatcher brought and the strict ideological commitment.

One of his first acts was to remove the poll tax and introduce council
tax similar to original one based on property.

Part of a broader style whereby he disliked confrontation and sought to

be more consensual in his leadership and work with different wings to
create compromise.
Clear recognition that Thatcher years were full of conflict and British
politics should be less divided to help heal the country.
Thatcher and the Labour party
Arguably most significant impact was on the Labour party. Labour had
transformed radically as a party by 1997 from their 1983 position under
Michael Foot.

There were still some positions that were at odds with Thatcherism
however and the change was not wholly brought about by it.
Thatcher and the Labour party
Labour initially lurched to the left after 1979 defeat under Callaghan.
1983 manifesto proposed unilateral nuclear disarmament, ending
privatisation and renationalising industries, leaving EEC and massive
increase in welfare spending.

However a crushing defeat for Labour in that election led to a new

leader Neil Kinnock beginning to shift the party towards the right.
Many policy commitments under Foot were abandoned and even
begun to question commitment to nationalisation.

However there remained a strong commitment to improving welfare

and Keynesian policies to increase employment levels.
Thatcher and the Labour party
Labour continued to shift more radically to the right under Tony Blair in
1994 - Creation of ‘New Labour’ ideology.
Claimed party was still committed to traditional Labour values but
wanted to achieve them in a new way.

Blair wanted to abandon Labour’s commitment to nationalisation and

did so by rewording Clause IV of Labour party constitution.
Thatcher and the Labour party
Blair was keen to expand beyond traditional Labour voters and sought
to attract typical working class voters, ‘Mondeo man’.
Individuals who benefited from Thatcher’s policies and supported low
taxes, wanted to own their homes as opposed to renting council, but
were still concerned with state of education and hospitals.

Sought to change Labour’s image by keeping Thatcher tax policies and

not reversing privatisation, but promising to offer better public
services.
Labour therefore responding to desires of a changing electorate.
 The ‘third way’ - New Labour ideology was a ‘third way’
between extreme free market capitalism of Thatcher
and Old Labour left.
Thatcherite policies included commitment to free markets and rejection of
Keynesianism or corporatism, rejecting nationalisation, continuation of PFI
and internal markets, continuing to tackle welfare dependency

However also sought to spend more on health, education, introduce

minimum wage, expand workers rights, protection of minorities (hallmark
of the New Left).

Acceptance of Thatcherite economic policies but stresses on dealing with

some of the inequalities they may have created.
Reasons for change
Return to ‘moderate’ policy is a natural trend, early 80s was exceptional
time, party was always dominated by moderates in other periods.

Even James Callaghan had adopted monetarist policies prior to election

of Thatcher by trying to tackle inflation.

Electoral disasters which drove desire for change were also arguably
due to Labour divisions and catastrophic SDP split that occurred in
1981.
Impact on the SDP and Liberals
Labour leftward lurch led to SDP split by four former cabinet ministers,
rejecting both radical Labour and Thatcherite extremes. Went into
alliance with the Liberals who had been steadily recovering since the
war.
Gained significant vote share but failed to make electoral
breakthrough.

Like Labour, gradually abandoned commitment to mixed economy in

1983 manifesto and favoured privatisation by 1987, however extent of
Thatcherite influence debateable, David Owen was part of Callaghan
gov and was arguably more influence by European economies.
Impact of the SDP and Liberals
Additionally they can also be given credit for changes that take place in
Labour under Blair.

Ideas like a bill of rights, freedom of information laws, devolution etc

were originally Liberal ideas.

The large acceptance of these policies by Blair and Labour were

arguably caused by the Liberals.
Overall impact on party politics
All major parties certainly embraced free market economics before
1997, however cannot be solely attributed to Thatcher. The right of
Labour had drifted this way before Thatcher as had many European
economies.

Additionally, some elements of her legacy were abandoned, both in the

Labour and Conservative parties.

Other influences can be found for changing party politics, like the New
Left emphasis on minority rights, Liberal ideas for reform and Labour
desire to appeal to new electorate.