Donald MacCormick, BBC
Prime Minister, how did the Government get itself so out of touch with its own supporters on the top pay issue?
Prime Minister
I think we were bound to get people reacting when one gives such considerable increases to top salaries. It is natural; it is human; but that does not mean that you must not do it. After all, the Report that recommended us to do it was a wholly independent group of very distinguished people who had looked at it for several months and then made their recommendations. They did so, I believe, on the basis that for top people, whether in the private sector or the public sector, you need people of considerable calibre, leadership and merit, and for that—although you cannot give as much in the public sector as in the private sector—must be reflected in their remuneration.
They recommended implementation in full; we staged it: half this year, half next year. [end p1]
Donald MacCormick, BBC
Does that carry an implication at all that the present people in these top jobs at the present levels of salary are not doing their jobs well enough?
Prime Minister
No, of course it does not, and in the Report they pointed out that we are not getting some of the best graduates now into the public service; that we are not always able to retain people in the public service, because such high salaries are paid elsewhere in the City and attracts them away. I have lost two from my office. They have lost quite a number from DTI, and it is vital that in the public service, which carries enormously heavy responsibilities, we for the future attract people of very top calibre.
Donald MacCormick, BBC
But the belief that this is an unfair matters when, for example, the teachers are being offered 5%; and these people are being offered—are getting—an average of 16 or 17%;; that belief is not confined to the Labour Party. We heard Lord Denning saying that it was unfair and apparently several of your own backbenchers like Mr. Anthony Beaumont-Dark came back from their constituencies before the Commons vote saying that at the grass roots people thought it was unfair too. [end p2]
Prime Minister
I am very sad about that, because I think if they think about it they would not like their judges not to be paid commensurate with the duty of judges in upholding the whole calibre and the whole reputation of the legal system. They would not like their field marshals and generals not to be properly paid, bearing in mind the immense responsibility which falls upon their shoulders. And you know, your people at the top of the Civil Service also bear enormous responsibility. Top of the Home Office, in charge of the Health Service, in charge of Department of Health and Social Security, in charge of education; these are very important jobs. Of course, we have tried to look after other people:
We implemented the nurses' review body in full, staged. We implemented the ordinary armed forces review body, in full. We implemented it for the doctors and dentists; for the physiotherapists, the occupational therapists. So we have tried to do it for everyone.
Teachers: we offered teachers arbitration. They refused it. And then we did say to them: “Look! If you will do as other people do: have a specific contract as far as your terms of service are concerned” because they really do not know what they are supposed to do and what they are not supposed to do and they argue about it … . “and also undertake that you would go in for an assessment of merit, then we would like to offer more, but we need those two things—a contract of service and an assessment of merit!”
Then, yes, I would love to pull up the structure of teaching, as to some extent we have in the Civil Service. A [end p3] top head teacher of a comprehensive school is paid about £23,000. One would love to pull up head teachers and deputy heads who have taken such a lot of the flak and such a lot of the problems in schools, especially during the strike. One would love to do that and pay the really good teachers more. We offered that.
Donald MacCormick, BBC
How do you think, however, that you are going to get that message across to the public, when so signally, it failed to get across to many of your own supporters in the Commons and the Lords?
Prime Minister
Well, we are trying very hard now. We are trying just here tonight. Yes, we did offer more to the teachers, provided we get those two things. We did also offer arbitration and again, may I repeat, we accepted every review body, including that for the nurses, and you know, it was this Government that gave the nurses a review body, because they had never been on strike.
Donald MacCormick, BBC
What do you say to Mr. Beaumont-Dark 's specific point at the end of that bit of interview we heard just a moment ago that the Government is not listening hard enough to its own supporters and unless it starts doing so people like him are going to be out of a job? [end p4]
Prime Minister
Well, we listened very hard to those people who for several months sat and decided what salaries and what structure they should recommend for the whole of the top services. I think they are complaining that we perhaps did listen to those.
You know, even in the House of Lords, they did not vote against the Order; they voted against its insensitive implementation, and it is very difficult to know when you stage something and say: “You only get part this year and part next year!”, what would be more sensitive implementation. One would like to be sensitive to these things, but I think when you do have to give consideration to top salaries, you must have good leadership, you must reward merit. If things go wrong at the top, they go wrong all the way down.
But yes, you do get a reaction, but I still think you must look at leadership and calibre at the top.
Donald MacCormick, BBC
But on the specific point again of the way you put this over to your own supporters and now to the country, what do you say to the point that really, you have misjudged the British people's sense of fairness on this matter? Even Lord Whitelaw said, for example, that you could have prepared the ground better for this decision.
Prime Minister
No. May I just explain once again? We accepted the recommendations of a totally independent review body. We [end p5] accepted it on the grounds which they laid out: that you must have calibre and merit at the top. It is vital. And that that must be rewarded commensurate with responsibilities. If you do not get things going right at the top, you will not anywhere down in either the Civil Service or the Armed Forces.
They also pointed out they were not comparing with salaries outside. Salaries outside, top salaries, fair make one gasp, they are so large! You take the Chairmen of some of the big companies: £200,000 or £300,000 a year. You take the salaries in the City: they do make me gasp—£200,000 or £300,000 so many of them—and I am quite sure Mr. MacCormick that you do in fact set out to reward top people in the BBC. Just have a look at the salary of your Alastair MilneDirector General. I am sure—indeed, I know—that he is receiving the kind of salary to which we are going to put up our Permanent Secretaries. You believe that leadership and merit matters—so do I.
Yes, people say: “Please, we would like that too!”. Who would not? It is human, but the task of a government must be to see that you get leadership, merit, calibre, at the top and that young people considering their future see salaries sufficient at the top of the public service to tempt them into that instead of to some of the bigger salaries they could get in the private sector.
Donald MacCormick, BBC
But just before we leave this matter, do you think that [end p6] there is a problem of presentation by yourself and other Ministers when you have such large rebellions against this point of view in both the Lords and the Commons?
Prime Minister
I wonder if it was presentation or I wonder if it was this year the size of the increases, because it was a whole restructuring that the independent review body were doing. If it is presentation, we must obviously look at it. For example, I know that a number of our people were quite surprised when I said: “But don't you remember the Labour Party implemented not merely 15%; average increases for top salaries, but 35%;, and if you look, you know Joel Barnett made a speech in the House of Lords yesterday. Just go and look at what he said when he was in power. You know he wrote a book about inside the Treasury. He spoke about the difficulties …”
Donald MacCormick, BBC
Much quoted from by Government Ministers!
Prime Minister
Much quoted from, but you see, I do not like it when they say one thing in government and a different thing in opposition when they are facing the same decision. In government, they said: “Yes, it is a difficult decision. We must accept it and God Bless us All!” I thought it was really rather nice! God Bless us All. All right! But they took the decision because they knew the importance of getting leadership [end p7] and merit at the top—and everyone does. They would rather work in private industry for a real live wire with tons of drive, leadership and initiative in the private sector than they would for someone who is paid half that amount and has not got it.
Donald MacCormick, BBC
As we move on now, Prime Minister, to look at some of the main challenges you will be facing in the second half of your second term of power, can I ask you first about the most perennial problem perhaps for any British Prime Minister, that of Northern Ireland?
Now there have recently been much speculation that talks between British and Irish officials about the future structure of government in Northern Ireland have made some progress and could perhaps lead to an Autumn Summit between yourself and Doctor FitzGerald. How much hope do you have of progress in this area?
Prime Minister
Well, Dr. FitzGerald and I, and indeed the members of the two governments, have been talking for some considerable time. Yes, we are making progress. We have not yet reached a conclusion. It would be a conclusion which obviously has to be accepted both by their cabinet and by ours. It would be a conclusion which, if we agree, must be placed before their Dail and before our Parliament for full debate.
It is an age-old problem. It has dogged us for 400 years. It is not easy and the whole purpose is to get more stable [end p8] government in Northern Ireland with a fair deal for each and every citizen in Northern Ireland, and to reassure the Unionists that their future is all right, because the border is accepted, that it could only be changed by a vote of the majority, and also to reassure the Nationalists—the Republican people—in Northern Ireland that they have a fair deal and that they can have confidence in the future.
That is the specification. It is not an easy one, to provide precisely for, but that is the objective.
Donald MacCormick, BBC
Does this continuing process … did this continuing process … . have any bearing on the Home Secretary's request to the BBC not to show a documentary film next week in which Provisional Sinn elected councillor Martin McGuinness was interviewed, a request which of course the BBC has acceded to in agreeing not to transmit that programme, at least in its present form?
Prime Minister
No, I do not believe those talks had any bearing on that request to reconsider from Leon Brittanthe Home Secretary and after comments by myself. I do not believe that any great body like the BBC should do anything which might be construed as furthering the objectives of the terrorists and I feel extremely strongly about it. We had nearly 2,500 people killed by those terrorists, in the armed forces, in the police, the prison service, ordinary civilians. We have had them here; you will remember the bomb when the Horse Guards were coming down to mount guard in Whitehall. You [end p9] remember the Green Jackets, you remember a bus going back to Chelsea. We have had all of those terrible things perpetrated by these people and every single person in Northern Ireland has the ballot. They do not need, and should reject, the bullet and the bomb, and anything which is shown which seems to help the terrorists seems to me totally and utterly wrong. We had not seen the film, but the IRA is proscribed here and in the Republic of Ireland, and the Republic and we are at one in condemning those people, because they are not only against Northern Ireland—they are against democracy itself.
Donald MacCormick, BBC
But in Northern Ireland and in Britain, the Provisional Sinn Fein, which Mr. McGuinness represents, is not proscribed. Indeed, people like Mr. McGuinness and his colleagues are free to walk the streets and to become elected to the Northern Ireland Assembly and to District Councils in Northern Ireland. How, in that context, can the broadcasters put such persons in some sort of quarantine and not speak to them?
Prime Minister
There is no difficulty about putting that view. Those people have got seats on local authorities, they have votes. If they wish to put their view, there are democratically elected bodies in which to put it.
What I think, if I might say so, the BBC in my view, because we do not censor, never do—request sometimes—should never show things which help anyone who wishes to further their [end p10] cause by the use of violence, and that is why we said: “Have a look at it again!” The BBC and the Governors who are ultimately responsible to the public did have a look at it again and have made their decision and I am very pleased with it, and I believe that most people will applaud their decision.
But let me make it quite clear: yes, I do say things to the media. I do request them. I requested them to look at a code of practice after the way in which they publicised hijacking, because I think you help terrorists when you publicise their cause and I think what one should be trying to do is to help the law-abiding citizen, but I am never going to put censorship on. We are not that kind of party, but we say: “You use freedom. Please recognise your tremendous responsibilities to the continuance of that freedom and consider that in making your decisions!”
Donald MacCormick, BBC
Turning now, Prime Minister, if we may, to the economy. Earlier in the programme, we heard the CBI calling for further cuts in interest rates to prevent the economic recovery from flagging and to prevent also the loss of still more jobs in manufacturing industry.
What do you say to that request from them?
Prime Minister
Well, point number one: I saw quickly the film you were presenting, but nowhere did I see representation of some facts which I think are relevant. That last year, this country had [end p11] the highest standard of living of all time. You see it in the money that is being spent in the shops and on holidays. The highest standard of living of all time. It produced a bigger output in manufacturing and services together for all time. It had the biggest investment, the biggest retail sales, but I never heard that pointed out. It is very important, because the economic performance is the strongest of any July; yes, we have the problem of unemployment, but you know, in the last year this country created more jobs than all the rest of the Common Market put together. We have not created enough yet to have a marked influence on unemployment, but created more jobs, so that is the background.
Now, I just heard what you were saying about the CBI survey, so I went and had a quick look, and you have been very selective in what you have reported and, of course, it was made before the reduction of interest rates which has taken place.
Donald MacCormick, BBC
Yes, but their spokesman has said they would like interest rates to come down further.
Prime Minister
Of course! So would I! So would I, but just supposing the pound were to plunge again and all the cost of their raw materials went up. Then they would have cause for other complaints. But I went to look at that CBI survey. They say that the volume of orders is still very healthy. They say that the volume of export orders is still at one of its highest levels. They say [end p12] that the numbers of companies who are going to put up prices in the coming few months are very low. All of that is good, but look at it against the background I have indicated. Yes, let me blow our own trumpet. Highest standard of living ever. Highest output. Highest investment. Highest retail sales. Highest ownership of houses. Highest expenditure on health. Highest number of doctors and nurses. Highest number of patients being treated. Highest amount spent per pupil in education. Best training for teachers ever. Biggest proportion of teachers to pupils. Please will you remember that sometimes!
Donald MacCormick, BBC
What about the highest ever unemployment which is what most people in the country are most worried about according to all the evidence and which is what the CBI are worried about, because what they say as they look towards the next six months or so is that jobs in their manufacturing sector are going to go on being lost?
Prime Minister
Yes indeed. We have a technological revolution. You have it in television. You know all about it. They have it in the printing press. They know all about it. We have it in industries. We can produce more with fewer people and that is why it is more difficult to create more jobs and why so often they are created in the service industries and why actually we, as I indicated, last year did make a tremendous effort in the private sector as well as in the public and created more jobs than in the rest of the Common [end p13] Market put together.
Now we have an extra problem, that we are just going through a period from 1980 to 1990 when we have far more school-leavers coming on to the labour market than we have people retiring, so we have got a bigger population of working age. That adds to our problems.
How are we tackling it? By trying to deregulate industry. By trying to give tax incentives. By taking off the overheads of industry. We took off the National Insurance Surcharge and, because I do not want young people to be without a job, so we are increasing the training to them. That will help them to get more jobs, but also it means it will give them some clear objective—increasing that to two years, and we can only do it with the tremendous cooperation of private industry and for those who have been unemployed for quite a long time we have increased what is called the Community Programme. Yes, there are jobs funded by the tax-payer—everything is funded by the tax-payer, government has no money—to give them a chance to do worthwhile jobs in the community.
And there is just one other very ironic thing. You know, in the whole of Europe, I think, save Denmark, we have a bigger proportion of our population of working age at work than anywhere else save Denmark.
Donald MacCormick, BBC
Why do you not use some more tax-payers' money to help with Britain's crumbling infrastructure as discovered recently by [end p14] the National Economic Development Council, as a result of evidence submitted to them by some of your own spending ministers? People look on and they see that the roads are in disrepair, the sewers are in disrepair, public buildings are in disrepair, and they see this vast army of unemployed. Surely it is a natural thing to wonder why on earth can we not employ some of the people putting these things right without necessarily putting inflation shooting up again?
Prime Minister
Now look! The record on infrastructure, if I might say, it is called infrastructure—you and I call it roads, houses, etc. construction—is good. Heaven knows, I hear on the BBC every morning complaints about roads closed because they are being repaired or new by-passes are being built or new sections are being built. Yes, you are quite right, they are. Yes, they do cause traffic dislocation, because we are doing so much, and we are catching up with the backlog of repairs and we have spent a very great deal on new roads—far more than previously—and we have 51 hospitals under construction. I sometimes wish we had a board outside every one. The Government, through the taxpayer, is doing all this. No, the infrastructure is not crumbling and it is not fair to say that, because we have in fact, as I said, done more for hospitals, more for roads. We are electrifying some of the railways right up to the North East. That also will help. All of that is being done.
Now you say why don't we do more? Now, I said a moment ago that we had terrific record investment last year. It actually [end p15] was 55 billion. Now, the moment one says that, you can see that if you were to take 2 billion more from the taxpayer, and that would mean putting up VAT by 2%; or income tax by two pennies in the pound, if you were to do that you would not solve the whole of the unemployment problem or do very much towards it, when you have already got 55 billion of investment. And what is more, you have to take the 2 billion away from people who themselves would have spent it, and so there is a considerable amount of doubt whether in the end you would have more jobs or less.
Donald MacCormick, BBC
Far from cutting … far from putting up taxes … is it still your conviction that cutting them between now and the next election is an essential part of getting the economy properly moving again and producing more jobs?
Prime Minister
Not only the economy and helping to produce more jobs, but I do feel very strongly indeed that people on comparatively low wages and pensioners pay too much tax, and when I hear other people saying: “Look, there is no need to have more tax relief” I say: “Well that is all very well for you, you are in the upper half of the salary earners. What about those in the lower half?” You see, 41%; of our income tax comes from those who earn average male earnings or less, and let me tell you, a nurse—we have just put up nurses' pay in response to the review body, a nurse who gets £140 a week will pay away £40 in taxation and national insurance. Now, of course, she is not going to look at the 140; she is going [end p16] to look at net take-home pay, and yes, I do believe that people as a matter of justice ought to be able to keep more of the fruits of their own earnings. Yes, I do work for that. Yes, it does mean a government being able to live within a budget and if a government cannot do that, it will soon get the nation's finances in a mess.
Donald MacCormick, BBC
The Government has overspent its budget in terms of the PSBR for the last three years running!
Prime Minister
But we have never got ourselves into difficulty because we have had a very good contingency reserve, as you know. Indeed, the whole of the Falklands was met out of the Contingency Reserve. This year we shall have to meet out of the Contingency Reserve considerable increases in the social services, because of inflation, which although it is bad for us at 7%;, is a better record than the Labour Party ever had at any time, but we have kept borrowing within reasonable limits.
If I had listened to some of the other people, interest rates would be far higher than they are now and yes, it is my pride that we have managed the finances of the nation well. We have not got into difficulty with two big deficits. Inflation is a better record than at any time during the Labour Government and we shall get it down again towards the end of this year. In spite of all that, pensions will go up in November by £4 for a [end p17] married couple. Yes, we said whatever inflation was they would get it. They will. We have kept those promises. We have managed the economy well and in spite of what you are saying, it is the strongest economy now than at any time during our time, and highest output and standard of living ever. That is not bad!
Donald MacCormick, BBC
You recently said to your MPs at Westminster that you were even more of a Conservative now than when you first came to power in 1979. Do you think that really still applies to the electorate, given the council elections, the Brecon and Radnor by-election and the opinion polls?
Prime Minister
Yes. When I get down and explain it when it comes up to an election, yes.
Look at the things that we have done. We have in fact stood up to the unions. A united Government party, united with some of the unions who are determined to keep their jobs, standing up to a strike run by violence and intimidation and run in violation of the rules of the union which really says you have got to have a ballot. Yes, we stood up to that. We stood up for the ordinary union member.
Yes, we have had privatisation, because Government ought not be running businesses. They do not know how to do it, and privatisation is popular. It has given many many people the chance to become share-owners who work in those industries for the first time and those businesses that have been privatised [end p18] are running much much more efficiently. People are becoming home owners; people are becoming share owners; people have had a reduction in income tax. Yes, this I believe is what they want. We have put more into law and order; we have put more into defence; we shall go on putting law and order a very high priority because there is a lot more to do in public order and a lot more to do to stop more drugs being sold to young people.
Donald MacCormick, BBC
Even if people still approve, Prime Minister, basically, accepting that argument of your policies, is there a danger that they may becoming disenchanted with Mrs. Thatcher herself? For example, the Daily Mail has been running a very interesting opinion poll in which it has been surveying the views of people who voted for you in 1983, and it seems that about a fifth of these are now saying that they are not going to vote for you again and, more interesting than that even is the individual comments they have been making. The qualities they associate with you are inflexibility, lack of compassion, not on the same wavelength as ordinary people, time and time again, people who have voted for you even in '83 are saying this. Does that worry you?
Prime Minister
Would you look back to 1981? They were saying exactly the same thing. In 1981, some of the polls were slightly worse than they are now. Inflexible, lacking compassion. Inflexible? I am inflexible in defence of democracy, in defence of freedom, in defence of law and order, and so should you be and so should the BBC be, and so should everyone else be. And in spite of being [end p19] said, lack of compassion, look at the record! More patients being treated on the National Health Service, more nurses, better pensions, and we have looked after the disabled better than any other previous government.
No, we do not talk a lot. Perhaps we should talk more, but that is what we have done!
Donald MacCormick, BBC
Looking back to what you were saying at the very beginning of this discussion about the need for merit at the top of society to be rewarded, is it not your natural instinct to sympathise with the clever and the strong and not to sympathise with the feckless and the weak and the stupid and the people who have not done as well in life as you have yourself?
Prime Minister
No, you have got it wrong! Unless in fact your able, talented people, capable of great leadership, capable of building industries, unless they succeed the wealth is not created, the jobs are not created, and the wealth is not there to provide for the social services, to provide for education. You are not doing anything against the poor by seeing that top people are paid well. You are not doing anything against the poor by building up great industries, enabling them to build up, and paying top salaries to top managers in the private sector. How else are you to succeed, except through the talent and ability of the most able?
You ask a mother where she would like her son to work. For [end p20] a company that is losing money, or for one that is making good big profits with a managing director paid well! She will tell you!
Donald MacCormick, BBC
Just a last question, Prime Minister, if I may. You say that perhaps you and your colleagues should talk more about the compassion you feel instead of practising it. Does that mean we are going to see a change of Thatcher style between now and the next election?
Prime Minister
I do not know. People talk about my style. I do not quite know what it is. I only know that I believe very strongly certain things. I spend a great deal of time in discussing them. I actually listen to review bodies. I actually have masses of people in here, listening to them, talking to them. I am out all over the country, as you know. I know what I would expect of a prime minister—strong leadership, clear leadership, doing what you believe to be right. That I have done. That I must continue to do. It is the only way I know how.
Donald MacCormick, BBC
Prime Minister, thank you very much indeed for talking and listening to us tonight.
Prime Minister
Thank you!