Peter Allen
Mrs. Thatcher, the New Year is starting rather unhappily with the steel strike. Does the Government intend to intervene?
Prime Minister
It depends what you mean by intervene. If you mean does the Government intend just to say to the tax payer, you have got to provide bigger subsidies to steel, the answer must be no, because before the negotiations started we made it perfectly clear that as far as next year is concerned we are already prepared to commit some £450m to the steel industry next year. And you know that is equal to about £30 for every family in this country. So that money is available. We really cannot commit any more. Its only five years or so since the steel industry was making a profit. In the last five years it has made big losses and the tax payer has had to commit very heavy sums to those. We must soon come out of that into making a profit once again. We are prepared to help to the tune of £450m next year.
Peter Allen
I thought the intervention to which I was referring is the beer and sandwiches variety of intervention at Downing Street.
Prime Minister
Well no I really think that, I don't think that that would do any good. And the reality is that the Steel Board have offered the steel unions centrally some 6%;. And you say well that isn't very much. Perhaps it might not seem very much but then that's not all that's on offer. There is a tremendous amount to be got from increasing productivity, that is from earning it, and that has to be negotiated locally. And I'm told that even more than 10%; can be got from that. So add 10%; to 6%; and you can see it looks very different. But that's got to be got and earned before it can be paid. But in the end you know that's life. No-one owes any of us a standard of living. Our standard of living is what we can earn for ourselves.
Peter Allen
Is that the reality facing Hoover, not just the steel workers that in the short term we have got to make do with less because we have been overspending in the past? [end p1]
Prime Minister
I think the reality is that we can only keep up the standard of living that we can earn for ourselves. Now if you just take steel as an example. All right there has been a steel recession the world over and every country has been in difficulty with steel. But you see some of them have come out of it far faster than Britain. Some of them have managed to slim down the numbers of men working in the steel industry and most of them have found other jobs. Some of them have managed to have far bigger output per man hour. Just let me give you one or two figures. In Britain it takes, to produce one ton of steel, nearly 11 man hours. One ton of steel—11 man hours. In Luxembourg, they have got their productivity up so much—under 5 man hours to produce a ton.
Peter Allen
(interrupting) Twice as efficient as us.
Prime Minister
(continuing) Twice as efficient as us. In Italy, with whom we are often compared, also 5 hours to produce one ton of steel. Now don't you see that gives us a tremendous scope for improving productivity. And that means tremendous scope for increasing real wages by earning them. And I hope that the steel workers will look at it that way.
Peter Allen
You ask in your New Year's message for strikes to be a last resort. You are asking really for a change in philosophy on the part of people who belong to unions. Now do you think that in present circumstances, with inflation running at its levels, its really on to expect that over the next year, to expect people simply to accept less, perhaps, than the rate of inflation?
Prime Minister
Yes, but you know you are only entitled in fact to the amount you earn, aren't you? And if you were brought up in a self-employed family as I was you didn't expect to say “I am entitled to a certain amount this year” . You knew that the amount you would have that year would be the amount which you can earn. And if the nation doesn't earn enough to keep up with the rate of inflation, then we have to look and see why. Why is it that in this country the average person with a wage packet and his wife is preferring to buy foreign goods to British. Why? You and I know why. Because they see some of them in the shops and [end p2] they say “but they are better value” . Therefore overseas they have got better productivity. What we should be saying is not “we are entitled to a standard of living” what we should be saying is “why are they better than we are? We used to be better than they were. We've got to get back to being better, more efficient, using more modern machinery, using to the best and fullest extent, having better management” . That is the change of attitude we need here and we can do it.
Peter Allen
If the nation doesn't face that reality. If the nation doesn't improve its productivity are we facing in the end another incomes policy simply to enforce …
Prime Minister
Well incomes policy really wouldn't help on that. What an incomes policy does is to treat those who are doing well in exactly the same way as those who are making losses. Who does that help? Who does that help? Those who are doing well, making good profits and therefore providing the money out of which we pay for education, for health, for defence, for law and order. They should do better. Their companies are doing well because they worked well. If you are working well, if you are using the latest equipment and machinery to the fullest extent, if you are working with management, if you have got good management, you ought to do better. And we want people to move into factories that are doing better. So we have fewer making losses and more making profits. After all I work in the public sector—we depend on the people who are working hard, conscientiously day in and day out and making profits for health, education for the public sector and for those subsidies into the steel industry at present.
Peter Allen
What you are suggesting is a change in philosophy. Do you see the transition, until people accept what you are saying, as being a painful one. Do you see the next year as being a painful one?
Prime Minister
I think when you have been living beyond your means for a very very long time as a nation, you know how much we have borrowed year in and year out, and we are now having to pay for it, when you have been living beyond your means it is unpleasant having to live within them. It is a challenge. And [end p3] everyone knows, every housewife could tell you, it's something that you have to do. You can't go on spend, spend, spend. The people I am very very sorry for if the steel strike gets under way is the housewife. Just to face the two hardest months of the year—January and February—when the children need more clothes, more shoes, you need more heating in the home. It is she who will suffer.
Peter Allen
Looking at the year ahead, once again, isn't there a danger that the kind of policies being adopted by the Government that is high interest rates and public spending cuts lead to a recession, a recession leads to less revenue for the Government, less revenue for the Government leads to more public spending cuts and you will put yourself into a kind of spiral going downwards?
Prime Minister
No, no, no I am afraid Keynesianism has gone mad and it wasn't in the least little bit what Keynes thought. What Keynes said was “look if we have a couple of bad years, you can perhaps, what is it called, extend the money supply, print a little money, so in a couple of bad years you can increase demand; then in boom years you've got to live right within your means and create a surplus.” That's been interpreted through boom and slump you can go on borrowing money you haven't got. Now that's what this nation has been doing, over each and every one of the last five years, six years. We have been borrowing, borrowing, borrowing. The last time we actually lived within the nation's means, in terms of the budget was in 1970. Roy Jenkins 's budget. Now its that that has been causing the problems.
Peter Allen
Are we going to face more public spending cuts in the 80s?
Prime Minister
Already we are having to borrow a tremendous amount. So much that people will only lend it to us at 17%;. And industry also wants to borrow money. The person trying to buy their house also wants to borrow the money. And there just aren't enough people willing to save it at that amount. So we shall have to get down Government spending to make room for people who want to buy houses, to make room for people who can really expand in private [end p4] industry. Yes if you are spending too much, you've got to cut down. There's no other way.
Peter Allen
Finally, a New Year wish. It's January the 1st tomorrow have you got a New Year wish for the nation?
Prime Minister
Do I have a New Year wish? That I hope that next year we really shall be able to get everyone's finances on a sound footing, that people will know that if they are prepared to work harder, work more continuously, work better then they will earn more. That that is their only security and I can promise them that if they earn more they will be able to keep a bigger proportion of what they earn.