Speeches, etc.

Margaret Thatcher

Speech to Westminster Conservatives

Document type: Speeches, interviews, etc.
Venue: Savoy Hotel, central London
Source: Thatcher Archive: speaking text
Editorial comments: MT was addressing a lunch of the Cities of London and Westminster Conservative Association. The press release (665/77) was embargoed until 1400. The speaking text comprises a typed copy of the press release with a page of prefatory notes in MT’s hand. The speech is preceded by a message from a souvenir booklet printed for the occasion, dated May 1977.
Importance ranking: Major
Word count: 1250
Themes: Industry, General Elections, Monetary policy, Pay, Labour Party & socialism
(1) Message in Memorial Booklet

Message from The Rt. Hon. Mrs. Margaret Thatcher, M.P.

Leader of the Conservative Party

There is a rumour abroad that the Denis HealeyChancellor intends to introduce a mini-Budget in July, and that this will be followed by a general election in October. It seems clear that the Socialists and their Liberal accomplices will do everything they can from now on to present a fresh face to the public, in the hope of once more tricking the electorate into returning a Labour government.

I do not believe that the people of Britain are that easily fooled. They can see as well as any of us that, in spite of Mr. Healey 's reiterated predictions, inflation has begun to rise again. After more than three years of Socialist rule their gift to the British people is a rate of inflation of seventeen and a half per cent. And for that our people have had to pay—in reduced incentives, increased controls, and an ever-expanding interference by the state in their private lives.

Well, I do not believe it will all last much longer. Every piece of evidence available, from opinion polls through local elections to by-election results shows that voters are not merely willing, but desperately anxious for us to take over the government of Britain. I cannot say when the electoral battle will take place but, so far as I am concerned, the sooner the better. As our country sinks deeper into the mud, under the weight of the dead hand of socialism, the task of rescuing Britain, of restoring her freedoms, of producing a government which will, once more, trust the people rather than seek to dominate them, becomes all the harder. But the contest cannot be long delayed. And when it comes the Conservative Party will stand ready to rescue the kingdom from the destructive heritage of Labour Government.

(2) Speech begins [end p1] Rough notes by MT

10, Downing St. First duty to liberty is to keep it.

1) Morning after the night before. Porridge—sausages—Prices 1¼ hours.

2) Politics of E 1. Not stopped in deterioration Left can only go Left 2. Hope North Sea Oil. P.E. Inflation next year Forecasts are distinguished only by their extreme distance from the truth 3. Popular issues.—Tax—Prices —Stupidity → 13–14–15%; 5%; → 11%; T.U.

3) Economic Issues. Index of Ind. Prodn → Unemployment Inflation Profits Start of typescript [end p2]

With representatives of two of our biggest unions currently in conference at Scarborough, speculation is growing yet again as to what agreement, if any, the Labour Government and the union movement will be able to reach about the next stage of their counter-inflation policy. Some agreement may yet be possible. But it looks less and less likely that the outcome will do more than preserve the last remains of the Social Contract.

While we wait for the results of the Government's talks with the Unions, there are other questions of the greatest importance which should command our attention. What should the Government itself be doing to make sure that we get inflation under control and keep it there? How can they do this with the least damage to employment and the prospects for growth? What else has to be done to relay the foundations of future prosperity? [end p3]

On the inflation front, it has been clear for some time what any Government should itself be doing. Last July the Denis HealeyChancellor made the major decision, which we welcomed, to steer the economy on the basis of targets for the money supply. Now there is always room for dispute as to whether these targets are about right, too high or too low. That is an important issue. But it is far less important than the fact that such targets represent potentially a new, valuable and, indeed, essential set of guide posts in the fight against inflation. The Bank of England pointed clearly to the key issues in its Bulletin which was published only last week. It stresses that such targets for the money supply represent a barrier to inflation, provided there is general understanding of their undoubted necessity. The Bank go on to say that with the Chancellor's figures for monetary expansion set at 9–13%; for the year, the rise in wage costs will need to be significantly below this if there is to be any room for real growth. [end p4]

For all I, or you, may know the Chancellor may be arguing this case clearly and cogently in private. But so far he does not seem to be doing so sufficiently in public. So how can there be the general understanding and acceptance that such targets are vital? How can ordinary people see the connection between them and the chances of growth? And how can they be expected to take the tough consequences implied for collective bargaining?

I should add immediately that this is not an issue of party politics. The role and importance of monetary policy has recently become a bi—(if not multi—) partisan affair and it is important it should stay that way.

There remains the second issue of investment and growth. Here, too, the Bank of England has just published a salutary reminder of how much remains to be done. [end p5]

The key issues are profitability and its relation to the cost of raising money. The Bank's analysis shows—not for the first time—that the real return on capital after allowing for tax and inflation has fallen to about a third of its level in the early 1960's. But this desperate and, I hope, familiar fact is only half the story. Until the early 1970's, the cost of raising money was roughly the same as the profit earned from using it. However, in recent years that pattern changed. While returns went on falling, the cost of capital went up, and sharply. In 1975 the costs were twice the return. Last year the situation was even worse.

As long as this state of affairs prevails, the outlook for jobs, investment and growth must remain grim. Paradoxically the only financial incentive is to disinvest. As the Bank says:

“… rates of return will have to recover appreciably before a rapid or sustained rise in investment becomes likely” .
[end p6]

But what are the Government telling us? All we get is an endless but typical stream of euphoric forecasts, and statements that the recovery in investment will be strong, that the private sector is on the road to recovery and that the regeneration of industry is under way.

Now there are rare moments of candour when the Denis HealeyChancellor, the James CallaghanPrime Minister and his Harold Wilsonpredecessor show they understand what is really required. There was honest talk of the importance of profits in 1975 at the time of the Chequers Conference which launched the so-called industrial strategy. The Prime Minister had some forthright things to say on the subject at Blackpool in 1976. But once a year is not enough—particularly at a period when nominal profits, without accounting for inflation, are at last picking up. Until and unless all the Government make a sustained and determined effort to demonstrate that a doubling of real profits is needed for survival, let alone prosperity, any underlying improvement which may be taking place when tax and inflation are allowed for—such as it is—will be absorbed before long by demands for higher wages. And then bang will go the already slender prospect of more investment and more jobs. [end p7]

The Conservative Party can claim to have played some part in the rehabilitation of the concept of profit. So can the Bank and the C.B.I. Once again financial reality is breaking through. But concepts are not enough unless they are put into effect in economic policy.