Mr Lewis
Prime Minister, what do you consider the main successes and setbacks of 1980?
PM
I think there have been a number of successes. Let me just give you two in the foreign field and then we will come to the economy. We started the year with Rhodesia unsolved, with very considerable quarrels with the European Community about the Budget. By the end of the year Rhodesia is an independent country after a ballot. Secondly, on the European Budget we have got a solution at any rate for two to three years and the first repayment of £100 million arrived just in time for Christmas. But the main thing was we got rid of the worst of our problems with Europe. Now those are two very big pluses in foreign affairs, particularly when you consider we started the year with Russia in occupation of Afghanistan—still in occupation of Afghanistan. Iranian hostages taken, Iranian hostages still there. So we have two big pluses in foreign affairs and also Britain's standing in the world is high. That is a very big plus and people notice it when they travel abroad.
Let's have a look at the economy. The most difficult thing to face in rising unemployment. We have had rising unemployment—under the last Labour Government it rose from 600,000 unemployed to 1.6 million. So they too have known what it is like to have it and it has risen further now. There are some real big pluses. Inflation is now falling fast and people would be really worried if it weren't. Interest rates are coming down. Exports and the balance of trade have held up far better than any economic forecaster predicted. Indeed they have done so well they have confounded the economic forecasters. There is a new attitude to pay. That is absolutely vital. Because the real thing that has hit this country and is bringing home the moment of truth now is that for years we have taken out more in pay than we have put in in output. Now the moment of truth has come. That is why we have lost our business to others. People realise it. There is a new attitude, a new approach. With that new approach the number of strikes in the autumn of this year—the number of days lost—was the lowest [end p1] for thirty years. Now these are good things on the positive side. I could go on but other things will come out as we talk.
Mr. Lewis
And yet we do move out of 1980 in a deep recession with high unemployment, the money supply apparently out of control. Many commentators see 1980 as a year that went badly wrong for you. Are you as firm in your belief in monetarism now as you were at the beginning of the year?
PM
There is an awful lot in that, isn't there? World recession. Not only a recession in this country, there is a recession in the world. There is unemployment now in almost all Western countries—7½ million in the United States. I am not responsible for that. A higher level of unemployment in Belgium, Italy and the Republic of Ireland than there is here. I am not responsible for that. A high level of unemployment in Canada. I am not responsible for that. All of that is world recession and the main cause of world recession is, as you know, the very rapid increase in the price of oil—over 120%; in just over a year which means that because people have to spend so much more on oil they haven't enough to spend on other things which means that the people who produced those other things go out of business and it is often not their fault either. So we have all had that.
On top, in this country, people have taken out more in pay here in relation to output than in Germany, Japan, France, the United States, where they have all of them kept their pay more in line with output so that they have stayed competitive. We haven't and we are having to scramble back. And I am having to try and run policies which see that they will scramble back. Now you mention this thing called monetarism. Monetarism is as old as money. It is not new at all. What monetarism is is a Government saying “We will try to keep the supply of goods, the supply of money, in line with the supply of goods and services because we know the moment we print more—and we used to call it debasing the coinage—the value of the money will fall” .
Mr. Lewis
But you are printing more. The money supply appears to be out of control. [end p2]
PM
The money supply has gone up in the last few months and I believe it will come back in control at the beginning of the New Year. We have indeed, unfortunately, gone up and if it were to be kept up like that there would indeed be trouble. But that is not what people are complaining about. People are saying we should print more and more in spite of the past experience of what has happened, if anyone has pursued that as a policy. We are trying to keep it under control. We shall bring it back into control so that the supply of money matches the supply of goods and services—that is the only way of ending inflation.
Mr. Lewis
One of the consequences of your policies has been rising unemployment. Is there any point beyond which you will not go because many people are predicting social unrest if unemployment rises much more?
PM
Yes. The only way to get down unemployment in the longer run—and it is the longer run I am interested in—as unemployment under the old policies has steadily risen each time we have had a trade cycle you have finished up with a higher level of unemployed than the last one. Years ago it used to be only 300,000. I was handed over 1.4 million unemployed because we have gone the way we have. I want to cut that right away and get unemployment down in the longer run and steadily falling so that more and more people have a job. There is only one way to do that. That is sound money first. Competitiveness of industry which means that people must realise they mustn't take out more in pay than they put in in effort which means they must watch what they try to claim in pay. They must watch restrictive practices because if they have them and other people don't, our costs will be higher than others and we must have enough money for expansion. Now savings at the moment are good. There is a lot of money available for investment and the cheerful thing—two really cheerful things—is the rate of formation of new companies being financed by an organisation especially to finance new start-up companies, the Industrial and Commercial Finance Corporation is excellent. They are financing more new companies this year than in the last four years. That is very good because that is where the new jobs are going to come from. But the money is there and we have got to get it into the [end p3] right companies because that is where the new jobs will come from. So the way I am going—and this is the really relevant thing—is the way to reduce unemployment permanently in the longer run. If I went a different way, yes, you get artificial jobs for a few months and they you would have a much higher level of unemployment in the longer run. I can't go that way. It is not fair.
Mr. Lewis
Is it fair to say then, that in the short term unemployment is being used by your Government as a weapon to bring down pay rises?
PM
No. That is not a fair way to say at all. Unemployment—I have given some figures for world recession—we all have it. In addition we are hit worse than anyone else—not everyone else, but some other people—because for years and years we have taken out more in pay than we have put in in output and therefore we have become uncompetitive. And many, many people here are using their wages to buy goods produced by companies overseas. Why? Because they recognise their better value for money. Where the British are best value for money they are in fact buying them. So we have had bad restrictive practices, wages too high for output. Now I am not using that as a weapon. I am saying we shall never keep jobs or get more jobs unless companies themselves deal with that. And because they haven't that is the reason why they have had unemployment. Some have. That is why exports are booming. There is a boom in exports. They have held up remarkably well even in terms of volume because some people have tumbled to it. They have got the jobs because they know what makes jobs.
Mr. Lewis
There is a feeling abroad that this recession is somehow different, it is deeper, more permanent. Are we seeing in this country a shift away from a strong manufacturing base to service industries? [end p4]
PM
The recession is deep the world over in industrial countries because of this factor of the very sharp increase in oil prices—120%; more than that since we came into office—which is not our fault, any more than it is a fault of the Western industrialised world, it is the rapid increase in oil prices by the OPEC countries. And I have just explained what that means in terms of world recession. I would not say it is more permanent. If the price of oil went on going up and up and up we would all of us be extremely worried and we have to get that message across to the OPEC countries. No. We have a chance, a very good chance, of coming out of it much better because the opportunity of increased productivity in this country is greater than other countries because we have been so far behind. Also we are a very inventive country and the tragedy has been that our inventions have been taken up by other countries. When you get our inventiveness allied to a new realism and new attitudes and a good savings rate so that there is enough to go into investment allied to secure supplies of oil, gas and coal and fuel. We have actually a bigger and better opportunity than other countries. I can't make people take it. I can create conditions which say “Right, there are good savings. If you will produce the goods, if management would manage, if you don't go on strike, if you don't have restrictive practices, you will do well” . But the vast majority of our people hate restrictive practices, hate demarcation disputes, hate being pushed around by some of the trade union bosses and they are making their view felt. That is why exports are doing well. That is why new companies are coming on. I went down to Wales the other day. There was some extraordinary good news. There had been an American survey of new companies in Wales. They had found that the new companies had productivity as high as anywhere in the world. Do you know why? Where they had got unions—and they hadn't always got them—they had got one union only. No demarcation disputes fully backed by the Welsh TUC and no restrictive practices. So you see there is a tremendous lot to play for. [end p5]
Mr. Lewis
Prime Minister, you put across your views, and have done throughout 1980 with great passion and conviction. Does it ever occur to you that you might be wrong?
PM
Wrong on the things which I have said? No, it doesn't occur to me that the alternative is to print and print and print money regardless. What would that do to all the people who save? To everyone who saves in a building society, to everyone who saves in national savings, in the Post Office, everyone who saves in pounds? I am not just going to say to them I am going to print pounds regardless of the effects on you. And if I were to turn to a policy of printing pounds, or reflation as it is called—a polite name—there would be no confidence in British industry, there would be no confidence in the future of Britain and very soon there would be unemployment, hyper-inflation at a level which this country has not seen and I hope never will see. So of course it doesn't occur to me that my policy is wrong. It isn't. Of course it doesn't occur to me that a policy which says to industries you will thrive and flourish if you are competitive. That is not wrong. It is so patently and basically right. What has happened is that people don't want to face the facts. They don't want to face the truth. They have gone on printing money and taking more out than they have put in for years. Now has come the moment of truth. If we face that moment of truth, take advantage of the opportunities, Britain will be as competitive and perhaps even better than people in Europe because basically we are such a good people. We are inventive. We can develop new technology and some of our companies are wonderful and do you know we have a reputation for honesty second to none. And that is good too.
Mr. Lewis
Finally, Mrs Thatcher, could I ask you for the beginning of our cassette programme to sum up in a couple of sentences 1980? Is that possible? I know it may be difficult. [end p6]
PM
1980 was the year when we faced the truth about what we have to do to become a prosperous nation once again. We knew it would not be easy. It never is. But we know we have to go through with it because that is the only way to get the British economy, including our manufacturing industry and our services, fit and healthy again. And it was also the year when people began to realise not only that we had to do it but that we could do it and that they have got a Government that is prepared to go through with it until that success for us all is achieved.
Mr. Lewis
Prime Minister, thank you very much.