Speeches, Interviews & Other Statements

Complete list of 8,000+ Thatcher statements & texts of many of them

1976 Apr 14 We
Margaret Thatcher

Speech to Association of Independent Businesses

Document type: Speeches, interviews, etc.
Venue: Russell Hotel, Bloomsbury, central London
Source: Thatcher Archive: CCOPR 404/76
Editorial comments: Embargoed until 1330.
Importance ranking: Major
Word count: 1861
Themes: Conservative Party (organization), Economy (general discussions), Industry, Monetary policy, Public spending & borrowing, Taxation, Labour Party & socialism, Trade unions

Independence and Prosperity

I was delighted when I received your invitation to speak here today.

First, because it enables me to pay tribute to you and your colleagues for the work you are doing.

Secondly, it gives me the opportunity briefly to analyse the importance and potential of independent businesses and the problems you face.

And thirdly, because it allows me to say something about the Conservative approach to business enterprise.

There could not be a more appropriate place to talk about these things than your Annual lunch. After all, your Association is a good example of a smaller firm.

You do not have vast resources, but you have certainly made a big impact on the market for which you are catering.

Your untiring efforts, Mr. Chairman, and those of your colleagues throughout recent years have meant that the special nature of the problems of small firms and independent businesses are now much better understood than ever before. [end p1]

Your own writings and others from your colleagues are some of the ways in which you have brought this about. It is a pity that so many of your recommendations to Government have been largely ignored. But at least in the Budget there has been some attempt to put right earlier wrongs.

First, let us look at the Denis HealeyChancellor's strategy as a whole. The question is whether it meets the needs of our economy at the present time. Will it help to overcome the problems of record inflation, record unemployment and record debt, and a rapidly depreciating currency? Will it do anything to solve these critical problems which are largely the consequence of two years of socialist measures and Socialist mismanagement?

The blunt answer is NO!

Mr. Healey's strategy seems to rest on the twin pillars of procrastination and abdication.


The continuation of Government borrowing at the proposed levels is insupportable. The cry should be: “Action this day” .

But what is the Chancellor doing about it? This year he proposes to borrow a further twelve billion pounds. Only next year does he plan to make cuts.

The cost of borrowing is already enormous. In the current financial year over half the budgeted deficit must go to meet the interest on Government borrowings. Or looked at another way, that interest at nearly six and a half billion pounds is equal to the whole yield of Value Added Tax and Corporation Tax combined.

Mr. Healey is propounding his Theory of Perpetual Borrowing. The practical effect of that is to head us for a position of being permanently in debt. [end p2]

We shall be working more for our creditors than for ourselves. Like Alice and the Red Queen, we shall have to run as fast as we can in order to stay in the same place.


While postponing the surgery which is so essential, the Chancellor has also abdicated authority.

Of course, Government should consult with outside interests when formulating its policies; to explain, to listen, to take advice, to canvass support. But the final proposals must come from Government; the ultimate real decision must rest with Parliament, exercising its judgement in the interests of all the people.

Mr. Healey's new doctrine apparently is to let the TUC decide not just wages and salaries, but also the levels of personal taxation to apply during the coming year; the amount of tax to be paid not only by Trade Unionists but also by non-Trade Unionists who are in the majority.

What the Chancellor has produced is not a Budget, but only a draft budget.

Business and the Budget

A budget should determine the economic climate in which all other activity operates. If the economy looks Set Fair, or Stormy, businessmen can act accordingly. In the present case, the Chancellor has set the barometer spinning like a propeller. It is not surprising that any real confidence in our long term future is lacking.

What the Chancellor did for Business in his Budget has to be seen against this background: of national indebtedness and uncertainty. His so-called help has been more a case of restitution for damage previously inflicted. [end p3]

The raising of the Corporation Tax limits for small businesses is welcome, so far as it goes. But to recover the ground lost by inflation, the new limit should have been nearer £40,000 rather than £30,000. As for the changes in Capital Transfer Tax which follow on the numerous amendments which were made to last year's Finance Bill; these really show what a thoroughly ill-conceived measure this was originally. The proposed valuation discount for family businesses will serve only to prolong the lives of many of them. It will not ensure their ultimate survival.

The basic principle of this Capital Transfer Tax is wrong, and we are pledged to repeal it. The Chancellor has also seen the error of his ways in regard to the “luxury” rate of VAT. But not before it has caused the loss of many thousands of jobs. He is not man enough to go back to what he knows to be right—namely, a simple, single rate of 10%;.

By keeping the exemption level for turnover at £5,000, he has ignored the inflation which he himself has created. More and more businesses are being sucked into the VAT whirlpool. Does he not understand the genuine difficulties encountered by small traders in grappling with this tax?

Inflation has played havoc with the financing of all business.

The amount of working capital needed for the same level of activity, has risen sharply. This reflects increases in wages and material costs, the higher charges of nationalised industries—postal and rail charges, fuel and electricity; now the added burden of the increases in petrol and derv. All these have to be met before you start to get your money back in sales. Inflation has increased paper profits, but reduced real profits; and has soaked up the funds needed for investment. Proposals are urgently required to take account of the effects of inflation on Company accounts. We shall give every encouragement to their early implementation. [end p4]

If the Government still remains largely deaf to the plight of small businesses, the Conservative Party is very much alert to it. Many of you know, for instance, of the work of our Parliamentary Smaller Businesses Committee. This keeps a watchful and constant eye on proposed legislation—almost a full-time job with this Government. And it ensures that I and my Shadow Cabinet colleagues are fully and constantly aware of your needs and problems.

The value and importance of independent business

I do not believe, however, that the value and importance to the nation of independent businesses, or indeed their scope and extent, are widely understood. The facts tell part of the story. Small firms and unquoted companies provide more than a third of all the jobs in Britain. That is nearly 10 million jobs; in 800,000 or more firms. The return on assets made by the small business section is greater than that of large businesses. Together, these two parts of the whole private sector provide—directly and indirectly—the bulk of the resources which go into our ever-needy welfare and social services.

The economic case for free enterprise has been proved over and over again. I would prefer today to give more emphasis to other advantages of independent businesses. Some of the hall-marks of independent businesses are self-reliance, opportunity and knowing and caring about the people you work with and the people you sell to.

You need to be concerned about them to survive; you want to be concerned about them because you work together and you sink or swim together. Your prosperity is their prosperity. Theirs and yours. In the world of independent businesses, the individual is not lost in an anonymous wilderness of numbers. He is a real person and his own character,, skills and ideas count. He can see the results which flow from his own efforts.

Government willing—and this one isn't—he is entitled to extra reward for his extra skill, initiative and responsibility. [end p5]

Another feature of small businesses is their good industrial relations. Size and numbers are undoubted causes of disputes, as the recent Department of Employment survey has confirmed. Small firms are more personal and more satisfying in every sense.

These, too, are features of the Conservative world. Indeed it might be said that independent businesses represent the Tory philosophy at work.

Then, we must remember that small businesses provide choice: choice of product for the consumer; choice of job for the worker. [end p6] Competition ensures value for money. Monopolies do not; and today these are found mostly in the public sector.

Again, it is the unrestricted atmosphere of independence which make possible and encourages innovation and inventiveness. Only a healthy private business sector can stimulate the pursuit of new ideas, the sowing of seeds which may grow into tomorrow's giants. But the young plants need nurturing!

You, Mr. Chairman, have drawn my attention specially to the difficulties encountered by many growing businesses in obtaining funds to add to the original private investment. You are debating overseas experience of this, this afternoon.

And I know that you find the American system attractive.

One has to be careful, though, in proposing further Government involvement because this can so easily become Government interference.

This would be anathema to you and to me.

Certainly we must ensure that resources for expansion are as freely available as possible. And Government may be able to help by encouraging the best institutional structures for this.

But Government should concentrate on creating the conditions in which you can feel confident to invest.

Socialist Failure

Two years of Socialist Government have brought two records: the largest number of bankruptcies since figures were first kept in 1914; and the largest number of businesses which have simply decided that it is not worth battling on, and have therefore given up.

Capital Transfer Tax has destroyed that most human incentive of all, the inspiration and the drive to build up a business so as to pass it on to the next generation, so they in their turn can add to it. [end p7]

Then there is the threatened Wealth Tax. The half of the Labour Party who voted for Michael Foot is not going to let the Government forget that one. No wonder that businesses are being deliberately slimmed down.

No wonder that money is being taken out. For many, growth would sow the seeds of destruction, for as the business grows, the liability to Wealth Tax and other Capital taxes would pass beyond the capacity of the owners to pay. Who is there who knowingly harnesses a horse to ride to his own destruction?

Socialist policies have made large areas of business unprofitable. Socialist taxes have taken away the incentive to build up a business, or to work hard. The reaction by entrepreneurs and workers alike is “Why Bother?”

It is this attitude which is stultifying Great Britain. It is this attitude which has to be changed.

Central to our Conservative philosophy is the belief that Britain will only recover by unleashing the natural talents of our people, by encouraging enterprise and by rewarding those whose energy and hard work create the prosperity of our society.

In this, our objectives and those of your Association run parallel.

We support you, because those who serve the cause of independent businesses serve the cause of paying our way, of creating jobs, of creating wealth.

Above all, they serve the cause of Britain and her people.