Speeches, Interviews & Other Statements

Margaret Thatcher

TV Interview for London Weekend Television Weekend World

Document type: Speeches, interviews, etc.
Venue: No.10 Downing Street
Source: Thatcher Archive: LWT transcript
Journalist: Brian Walden, LWT
Editorial comments: 1200. Broadcast live?
Importance ranking: Major
Word count: 8011
Themes: Defence (general), Employment, Industry, Monetary policy, Privatized & state industries, Pay, Public spending & borrowing

Part One

Brian Walden

Hello and good morning. Today Weekend World comes from 10 Downing Street, which has now been home to Margaret Thatcher for nearly two years. In that time she has been trying to put into practice a rescue plan for the British economy. Essentially she's been aiming to restore business confidence by stamping out inflation and improving incentives. However, it's been apparent for at least a year now that the course she has chosen is fraught with difficulties. The level of unemployment in particular has almost doubled since the Conservatives' election victory. And in response to these problems, Mrs. Thatcher has taken some steps to modify her plan. So what course will she be following from now on, in the year which could determine the outcome of the Thatcher Experiment? Today, in a live interview with the Prime Minister, we hope to find out. First though, let's have the latest news headlines from ITN and Martyn Lewis.

ITN NEWS

Brian Walden

Prime Minister, after your election victory in 1979 you seemed to have the clearest idea of what you wanted to do. You've now had nearly two years to put your plans into practice, and of course some things have not gone as well as some of words missing [end p1]

Margaret Thatcher MP. Prime Minister

We have succeeded in some things. We have really begun to bring down the rate of inflation, that is not easy. We have really got-without a prices or incomes or subsidy policy—we really have got reduced amounts being demanded in pay. That was not with a statutory incomes policy, it was not by promising things to unions which gave them much more political power, it was not by promising enormously increased public expenditure that would put this country into difficulty. It was by our policies. Inflation falling is vital. Different pay attitudes so that people are very much more conscious that the amount they demand out must bear some relationship to the productivity they put in. Management much, much more willing to manage and negotiating again properly as it should always have done with the work force. A good deal of over-manning being reduced and so returning to competitiveness. All of these are very, very positive achievements, they are things which had to be done. Of course, there are things on the other side. It has meant mounting unemployment, not only in this country, though some other countries would have even worse unemployment than we have, some less. All struck by world recession, and what we had to do would have been very much easier if we had been able to get it absolutely in place before world recession. But unemployment is our worst problem, and of course we've had to try to spend more than we planned in order to cushion people from its worst effects. [words missing] [end p2] and you know there'll be no hope for the future unless they are. Can I just say one other thing? I think that it's just at this stage, when previous governments have begun to get things right but there too have been some adverse things showing, that they have cut and run. They've gone back to the old habits of reflation, which is a polite word for flooding the economy with money to try to get jobs quickly, regardless of the fact that they'd lose more later. This is just the time when we have to stay on course and say, we are a government that's set out to do long-term things, long-term improvements, we knew it would be painful, we knew it would be difficult, but we cannot evade that long-term issue if we want a good future for Britain.

Brian Walden

Well, that's clear enough Prime Minister. You've identified some things that you think are going well, you also say there are some adverse factors. Naturally I want to question you about both.

Margaret Thatcher M.P.

Of course.

Brian Walden

But let's start with the things that you think are going well. The reduction in inflation. Now would you care to give a prediction of how you think inflation is going to go from now on? [end p3]

Margaret Thatcher M.P.

Oh, we are always asked about predictions, and as I look back on the history of predictions it doesn't encourage me to give any. But in the next few months the rate of inflation will fall. One can't predict more than a few months ahead. There are two things that could affect a further fall, one is the course of the exchange rate. You know full well that if an exchange rate fell rapidly it would have an effect, all the raw materials we import would cost more, all the pre-fabricated goods, all the finished goods. If the exchange rate fell rapidly then inflation would rise. I hope it will not fall rapidly—it may fall a little—but a really serious fall in the exchange rate would have very adverse effects on many people in this country, although it's a little bit high at the moment for a number of industries. And the second thing is this; it is that company profits have been squeezed and squeezed until they're almost non-existent. What happened last year, and we warned about it, nevertheless it happened, people took out so much in pay that companies sacrificed all their profits to pay. That's going to make it very much more difficult for them to invest in the future, and they will have to restore their profits. Now I hope they are going to do it, indeed they are doing it by increased efficiency, you can see signs of that all around. They are cutting costs, their work forces and management are working together with a will, but I'm very, very conscious you've got to restore profitability, if you've got good prospects for the future and good investment. [end p4]

But they can do it by increased efficiency, and are.

Brian Walden

Let me ask you about company profits, and indeed companies in general, because of course there is one other factor in this besides the profitability that you were talking about. And that of course is interest rates, MLR. Now do you see any prospect that minimum lending rate is going to be cut again in the near future?

Margaret Thatcher M.P.

Oh my goodness me, that's a question which every Prime Minister tries to avoid in case anything we say …

Brian Walden

That's why I asked it.

Margaret Thatcher M.P.

I knew that Brian, in case anything we say should be mistaken. Can I put it this way? As you know I hate high interest rates, I really hate them, and last July we tried to move them down one point just as soon as we saw that all the figures that we get warranted it. I was slightly criticised for that. I moved it down because it was a combination of the figures and a feeling that we needed to do something psychologically just to give a little bit of boost, a little bit of improvement in morale, a little bit of hope, and it didn't do any harm at all. If anything it did good. [end p5]

We came to the next reduction in interest rates in November. By that time we really had a problem—and I haven't the slightest shadow of a doubt you'll question me about it—with some of the rapidly increased money supply that we were getting. We knew that we couldn't just move the lending rate down unless we did something else. We were very anxious to move the minimum lending rate down, and so at that time you remember Geoffrey Howe said that if we are to do that we'll have to make provision to get in more in income to the government, and announced that we would have therefore to raise the national insurance charge on employees, and also put bigger increases on oil. That meant we were going to get more money in, so government would be borrowing less, that meant we could move on the minimum lending rate. Now all these factors have to be taken into account. But let me put it this way. I watch all of them in the economy, including the exchange rate, and just as soon as we can move soundly on the minimum lending rate to bring it down, we do. But every step we take we believe can be warranted by the figures. The fact that we are experiencing difficulty in the economy, particularly with the exchange rate, makes us particularly eager to move as soon as we can. Now I hope that's enough. I know that we are not going to get improved stock building, stocks come down as you know, people have had to liquidate their stock, they've had sales all over the place, if we are to get manufacturing industry going someone has got to start building up stocks. If we are to get other manufacturing industry going someone's got to start to [words missing] [end p6] At the moment government's borrowing rather too much of the money, and people aren't going to lend it to us unless the interest rate is fairly high. But I assure you we won't keep it up for a moment more than we'll have to. And we watch the figures, we watch what's happening to industry, we watch the exchange rate, and we know that there are times when you have to give that little psychological boost, because it makes all the difference to performance.

Brian Walden

You won't keep it up a moment longer than you have to, and you know that you need to give a psychological boost. I won't question you any …

Margaret Thatcher M.P.

What is your next question going to be …   .?

Brian Walden

I won't question you any further as to what that might imply Prime Minister. Let me move on to what you quite rightly said I would be bound to question you about, and that in fact is the overshoot in the monetary figures. Now that raises actually a rather wider problem. A lot of people say, well we understand all about sound financial management that's a very good thing to have. But these arbitrary monetary targets, isn't this in fact the wrong method for sound financial management? Interestingly enough, you yourself in November seemed to imply that the broad money indicator, [words missing] [end p7] monetary control?

Margaret Thatcher M.P.

I think we indicated, really as early as last March when actually M3 was coming under control, that we were looking wider and at all of the indicators, and remember we had a very technical Green Paper out about monetary base, which happens to be an extremely important one, which people on the Continent use rather more than we do. That doesn't mean you can ignore M3 and no-one is thinking of ignoring M3. I think I would be a good deal more worried than I am at the moment if all the indicators were showing the same as M3 has been showing. They are not. Some of the others, monetary base, and the technical one, M1, have taken a very different course, and I have to look at those and also at M3, which is a wider measure, and also at what's happening in the world outside. That is to industry and employment in general. M3 itself, which we must continue to look at, was going well until July. Do I remember it? I remember it very, very well. I can remember being in the House of Commons and saying, M3 is coming under control, then all of a sudden we took off that thing known as the Bank of England corset, and it went up much faster than we've expected. Of course, I mean people will tell me, well what did you expect, a corset, it is there to conceal the underlying bulges, not to deal with them, and when you take it off you might see that the bulges are worse. We should have took it off actually a good deal earlier. But at that time it shot up, and it has been a little uncertain since. [words missing] [end p8] ignore that either. But if you look at all of them together, and if you look at the economy outside, it's on that basis that you make your judgements. And I repeat, I would be more worried about it than I am if all the other indicators were showing what that one is.

Brian Walden

Well, I want to question you about the overshoot in a moment. But in view of that answer, I wonder if I could ask you this. Are you then thinking of adopting some different kind of monetary control, or some rebasing for instance? There's been a lot of criticism, you've mentioned the corset. Now your own people say they think it accounts for about four per cent of the distortion—still leaves you way over. There are other targets, a lot of people are not happy with the way the Bank of England have had, have an odd situation in this country in which the Bank of England in fact finances the government's deficit, and not the Treasury. There are a number of things you could do to harden up these monetary controls. Are you going to do any of them?

Margaret Thatcher M.P.

Again, we put out a Green Paper about that, and about as I say, monetary base. I think that in deciding what you do next you must look at all the indicators, and you mustn't really run the economy on a graph paper basis. You can't do that. You have to look and see what is happening, what is happening to your manufacturing industry, to your service industry, [words missing] [end p9] the two up. That's why I said earlier the psychology is important. Confidence is an important factor. Yes, we do look at monetary base, yes we do continue to look at M3 and all the other M's. But you know, that M3 would not have been nearly as difficult as it has been over those last few months, all right before, over those last few months, if government hadn't been spending as much money. And you know what happens when government spends large sums, it's not covered by taxation, you have to go to the market to borrow, and there are times, and there are months, and November was one, when the amount we needed to borrow was very much greater than the amount in that month that we actually borrowed and that put M3 all out. That's a technical factor, but it's because of that that the Bank of England and Geoffrey Howe 's announcement in November indicates that we are looking at different ways of raising the amount of money, that government needs to borrow, and you will already have noticed that taking effect. Because you have got to learn, all governments have to learn, you've got to learn from what didn't quite go right, and see if you can stop it in the future. Now we are doing that. You still have to get all of your indicators pretty well where you want them to be within your target area—some have been undershooting, some have been overshooting-and when you've done all that you still have to look to see what is happening outside. Let me make that absolutely clear. That is …   .

Brian Walden

All right … [end p10]

Margaret Thatcher M.P.

That is where you keep confidence, that is where you still keep morale going, and it has held remarkably well.

Brian Walden

Let me question you about this overshoot, because in fact you are way over as you know, and I see that the London Business School says that if you intend to claw this money back, as the Financial Secretary implied in his Zurich speech you did, then you've got to take an extra two billion out. Other than anything you've announced so far, an additional two billion. Now the obvious question arises; are you going to try and claw this overshoot back?

Margaret Thatcher M.P.

We are going to get into very technical areas I'm afraid, there's nothing else for it. Your other indicators, some of them have been under-shooting, your monetary base is one, and monetary base actually has quite an important history, it's the one which some of our Continental friends use. That has been under-shooting, your M3 has been over-shooting. In that your M3 …   .

Brian Walden

The broad money base has been …   .

Margaret Thatcher M.P.

The broad money base has been overshooting …   . [end p11]

Brian Walden

And the narrow money base has been under-shooting.

Margaret Thatcher M.P.

Some of the narrow monetary bases, I'm not relying on M1, we've done that before …   .

Brian Walden

Under the Heath government …

Margaret Thatcher M.P.

The monetary base, the narrower monetary base, which so many other people …, has been under-shooting. Now some of the narrower ones are rising, and I believe that some of the broader ones are falling. I am saying we must look at them all and see how they are reflected. We must in fact get M3 down, because if we don't and at the same time your narrower ones are rising, what you would be doing would be laying the foundations for a new bout of inflation. And that we will not do. Now can I get this absolutely clear. I said when we started that it is just at this stage that other governments have taken fright and they've cut and run, and they've reflated the economy, which is that nice polite word for saying you print a lot of money and pump it in. We will not do that, because if we do we take the same path that's been taken previously. You pump money in, you get a [end p12] few extra jobs, but all your prices and all your costs rise, that affects the whole of your business, the whole of your industry, it becomes competitive and very soon the consequence is that you get increasing unemployment. And what do you do then? Pump a bit more in? That way lies madness, it, lies hyper-flation. We cannot do that. I am …

Brian Walden

All right …   .

Margaret Thatcher M.P.

I am here to change that, and if I could only get this message over, let everyone know I will not stagger from expedient to expedient, we ill not reflate. We came in to put long-term things right. I will do selective things to help, I will help people through difficult times, but reflate? No. So yes, we shall continue to watch M3, we shall bring it down. But in deciding our policies, not only that, but looking at the others and what is happening on the real world outside.

Brian Walden

All right, now let's move to what is happening in the real world outside. I take it from that that there will be no attempt at claw-back. You said earlier that one …   . [end p13]

Margaret Thatcher M.P.

I can't be responsible for your conclusions. I can only tell you …

Brian Walden

It seems likely though …

Margaret Thatcher M.P.

…   . I will look at everything and weigh everything very carefully. Because I will not lay the foundations for a future inflation, and my goodness me, the British people would be entitled to criticise me if I did.

Brian Walden

Let me move to something they might be entitled to criticise you for, because you've said it yourself in this interview. You said one of the problems has been that the government is spending too much money. Now somehow people got the idea that your government wasn't going to do that, and yet in fact it has been doing that, hasn't it? And some of your supporters are deeply disappointed. Do you share their disappointment about the level of government expenditure?

Margaret Thatcher M.P.

In some ways, yes. But in some ways again, I have to be a realist. We are spending a good deal less than the last government planned, and thank goodness we reduced their planned expenditure, we'd be in acute difficulty now. If you remember when they, put it up and up and up last time, they finished up in the IMF. We reduced that expenditure and …   . [end p14]

Brian Walden

You reduced the planned expenditure …

Margaret Thatcher M.P.

We reduced …   .

Brian Walden

You haven't actually cut expenditure, have you?

Margaret Thatcher M.P.

Point taken. Point taken. No. We haven't.

Brian Walden

Why? [end p15]

Margaret Thatcher M.P.

We reduced the planned expenditure and in many, many departments they're holding to their reductions, they're controlling it and they're controlling it well. Very well. Now, I've got three problems. Three particular problems. Take defence, they all of course have to do long-term orders, they order their tanks, they order their battleships, they order their aircraft. They order them with the expectation that they'll be delivered in certain years. The work is going ahead in the factories very much faster, and things we'd expected to be delivered next year or the year after are coming forward, they've been delivered this year. The progress payments on big things—because people get progress payments obviously—that should have been made next year are now being made this year, so this year I have got an overshoot on defence. A tremendous overshoot because we're getting all of those things delivered early. It has incidentally the side effect that we're going to have the best-equipped forces that we've had for a very long time, because they're getting these things earlier. Nevertheless, we can't hold [end p16] up industry for the payments, they have to be made. And that's a very, very real, practical problem. Not planned, but it happened and you can't hold up industry for the payments. Now the second thing is, the other thing is the constraints put upon us by having so many nationalised and public sector industries. You've seen what's happening in the world outside, the private sector is cutting its costs, improving its efficiency, it always has the threat it won't survive or go bankrupt. It always has the threat of competition, competition from overseas, competition from other companies here. It is doing marvellously in cutting its costs, in getting up efficiency, in getting up productivity. Nationalised industry is not doing anything [end p17] like as well, it's not been used to cutting its costs. After all, if it's a monopoly it can always put up its prices. After all, it can always come to government as the banker to borrow more money. Now they are, some of them, starting to increase their efficiency and cut their costs, to nothing like the same extent as the private sector, and of course being monopolies they can sometimes demand increased pay, although again it's much, much, much down from last year because even they can't go on putting up prices, because people say all right, we can't afford the same amount of electricity, we can't afford to use our telephone as hitherto we have, but nevertheless they come back to the government on a scale which the private sector simply can't. And even when they're not monopolies, like British Leyland, they can come back to government in a way that Vauxhall, that Ford, your Talbots, can't. And this has meant that we have a real big [end p18] haemorrhage on expenditure. This year, for example, we've had to spend much, much more on nationalised industries. It's interesting, you see, people not only pay out of their price pocket, they then pay out of their tax-payers' pocket, and I could have income tax four pence in the pound lower were it not for the amount we're having to pay out for nationalised industries. And when I hear Michael Foot talk about a socialist transformation I think ‘my goodness, if I hadn't had those number of industries nationalised we'd be very much better off than we are’, so that's another haemorrhage. [end p19]

Brian Walden

All right. I want to ask you about that but …

Margaret Thatcher M.P.

We'll go on to unemployment …

Brian Walden

What's the third area?

Margaret Thatcher MP

The third one is, well, two things really. First, the amount that is going out on public sector wages and also the amount that's going out in social security and unemployment pay. Now, public sector wages, you'll remember Clegg. You'll remember that in that winter of discontent, at the end of an incomes policy, people were getting fed up of being under the constraints and they got all sorts of rigidities into the system and the public sector said, look we're not getting a fair deal. So remember the sort of compromise that Jim Callaghan made; ‘look, take nine per cent [end p20] now and we'll refer you to Clegg and he'll do a comparability study’. Now we had to pick up all of those blank cheques.

Brian Walden

You didn't however have to say that you would implement Clegg, and yet you did.

Margaret Thatcher MP

Do you know Brian, we were asked time and time again at the election ‘look, the public sector's not had a fair deal, will you honour Clegg?’ I said we would, and I had to. You could say that I needn't have promised. I can't go back over that, there were cases when the public sector had not had a fair deal, and don't forget your public sector includes people like your nurses as well. There were cases when they just felt that they weren't being paid as well as their efforts warranted, so I did take it on. We none of us knew how much it would be, and we've been faced with the bills, the bills have been enormous. Can I just give you some idea … This year. Well, not in actual money but in an easy way. This year, if you take local government and central government, that pay is costing 50%; more than it did two years ago. That's the measure of it, but we're through that. That's what I want to say now. We're through that period, that's behind us and that's why we were able to say ‘right now, we've given you a really fair deal, now we're on level pegging, now in future we've got to do public sector pay on the basis of what the private sector can afford to pay those of us in the public sector’. So those things, that thing is over. [end p21]

Brian Walden

All right Prime Minister, let me come to these nationalised industries. Because I think this may be the area where many of your own supporters are least happy about what the government has been doing, particularly recently. Now, in your election manifesto you said that assistance to these industries would be temporary and tapering, and yet last week Leyland were given nearly one billion pounds, and Sir Keith Joseph said ‘well you see, it's rough, once you get lumbered with these things you have to keep them going in perpetuity’. Now a lot of people can't understand why that should be so, they can't understand why you have to pay this money out to nationalised industries, they can't understand why bits of them aren't sold off, which is what you said you might do in the election. Don't you yourself feel that something has gone wrong in fact with your policy towards nationalised industry? [end p22]

Margaret Thatcher MP

Well, now, let's take the policy as a whole. We have in fact passed legislation which will enable us to sell off some of them complete and some of them partly.

Brian Walden

Are you going to do it though?

Margaret Thatcher MP

Yes we shall. We shall, we shall follow up that legislation when the market is right for selling. We've taken the powers and then you have to in fact float them off when you think the market is right. Or when you think it's better for them to be floated off, because sometimes you know, some of them could do far better in the private sector. They [end p23] could raise capital better if they're good industries in the private sector than they could by having to come to government. So that will be done …   .

Brian Walden

Range Rovers?

Margaret Thatcher MP

… they will be floated off. Now let's have a look at British Leyland because I think that's the one you're really talking about. And I don't conceal from anyone the fact that it was an extremely difficult decision to take. Very, very difficult indeed, because I remember when I went round the Motor Show which I opened in Birmingham, you know, some of the other motor manufacturers said to me ‘you know, we have to survive in the same world as British Leyland and we don't get subsidies and government help like they do, and just keep that in mind’ and I do just have to keep it in mind because in a way we get the money to give to British Leyland from other companies that are surviving. And we have to be very careful that you don't keep jobs going in British Leyland by putting out jobs in other private sector companies, and all of that we had to bear in mind, and I have a good deal of sympathy with the view that some of these parts should be sold off. The plan Michael Edwardes has put forward, the plan Michael Edwardes has put forward is now getting them into separate companies, so if the time is right for them to be sold off he could. Alternatively, he may well take the view that it's easier to get other people to take a share [end p24] in it, or to sell the whole thing off, if he's got some of the good parts with it. Because the real problem of the volume cars, the Longbridge and the Cowley, now we put in there a very, very good manager, Michael Edwardes. He and the work force are doing, if I might say so, very well in some respects. Productivity is increasing. The Metro line has far fewer people on it than the Mini had, they are getting their productivity up, they are cutting down the numbers so they only need to keep the people, the numbers of people employed in British Leyland to give them an efficient result. They are getting rid of the wreckers. Not the government getting rid of wreckers, the government can't. Themselves. They're getting a new spirit between work force and management. They've got a new car which is a success. Now, does that really …   .

Brian Walden

They're also getting nearly a billion quid, now how did that happen?

Margaret Thatcher MP

Well, I'll come to that. Does it really seem to be the time to say to them ‘No, I'm going to chop you off at the stocking tops, when you've got a new car, you're getting enormously increased improvements in productivity. You are in fact not having more people than is necessary to do the job, you're getting rid of your wreckers, you've got a new spirit of cooperation, ‘and I know that many, many other firms that the motor car component industry, which is a very good industry, supplies British Leyland. It also depends upon having [end p25] a British Leyland during these difficult times to supply, and if we didn't keep it going you'd have trouble in the car component industry and the people who supply that. It was a difficult decision, I don't conceal that. It was difficult because I have to keep in mind other parts of the car industry.

Brian Walden

All right. [end p26]

Margaret Thatcher MP

I do not think that at this moment we could have cut it off, but I disagree that we need to keep it going by government in perpetuity. Its being kept going so it can become very, very much nearer to complete efficiency, so that parts of it or the whole can be sold off, or we can get someone else to collaborate with the British government and become perhaps 51%; owned, but we shall not in fact have all of the problems with it we have now. I never want to take on another British Leyland, we shouldn't be in it at all, but now we're in it we have to choose the time, and we have to back Michael Edwardes judgement. He's the manager, I'm not the manager.

Brian Walden

You said something very interesting towards the end of that Prime Minister, there are a number of things I want to ask you on it …   .

Margaret Thatcher MP

Oh dear …

Brian Walden

Well, it's an important issue as you know …   . [end p27]

Margaret Thatcher MP

[words missing] but honestly these decisions are very, very difficult.

Brian Walden

I know that. But I smell something of real importance there. You said you never want to take on anything like Leyland again …

Margaret Thatcher MP

No, I don't

Brian Walden

So can you firmly pledge that ICL, Talbot, anybody else who comes along with the begging bowl, you're not in fact going to put a lot of money into it.

Margaret Thatcher MP

I'm not going to take on, as British Leyland was taken on, another …   . you see we're 95%; owner of British Leyland. I just can't take that on …   .

Brian Walden

And you're not going to do that again?

Margaret Thatcher MP

No, no, no we've done it and I just, we can help sometimes, you can do selective help, but never, never, never take on the ownership.

Brian Walden

Ah, I'm a bit worried about selective help. How much does selective help cost as opposed to what Leyland has cost?

Margaret Thatcher MP

Well I think you're reading more into what I'm saying than I intend. You've got companies in the development areas. Now, you've already got a budget for saying that if people [end p28] expand in those areas there shall be help for them. You've already got a budget for that, that's what I mean by selective help. Let me give you an example …   .

Brian Walden

What about Talbot or ICL then? Supposing they come along, are you going to give them selective help?

Margaret Thatcher MP

If they're slap right in the Midlands or if they're slap right in a non-development area, they do not qualify under existing legislation.

Brian Walden

And they won't get it?

Margaret Thatcher MP

And they won't get it. If in fact they're in the development areas they already qualify for help …   .

Brian Walden

Of course.

Margaret Thatcher MP

… under existing legislation. Just let me give you an example. I also was very worried about Bowaters when they put newsprint right out. Now there were things that we could have done and that we offered to do, well within government and nationalised industries power to help well within the legislation. One of the things was that if they expanded there and really modernised they would have got help under existing Industry Acts within existing budgets. Now this is why I'm making it clear, some people say well that was government help. It was help in fact, under existing budgets, [end p29] under existing planned expenditure, to help them to expand there, where the employment was needed. We also could do help by saying, in conjunction with the Electricity Board, because they were very, very big users of electricity, by saying to electricity ‘look, where you've got big users it pays you sometimes to let it have it at a reduced tariff, because if not you lose the custom, and then the prices to everyone else goes up’. So we were able to do those things. It was not enough to keep them in, and we didn't then go and say ‘all right, we'll do what you want us to do, we'll give you a subsidy to meet your losses’. That we did not do. We're prepared to get you in shape for the future, but we will not give you a subsidy to meet your losses. Have I made the difference clear?

Brian Walden

Well, whether you have or whether you haven't Prime Minister, I think by now we've moved along to the point where we shall want to discuss what has proved to be one of your most intractable of all problems, unemployment. We have to take a break now. When we come back I want to question you about your attitudes to unemployment.

Margaret Thatcher MP

Of course.

Brian Walden

We'll be back in a moment.

Margaret Thatcher MP

Thank you. [end p30]

Part Two

Brian Walden

Prime Minister, clearly you regret the appalling unemployment figures because every sensible person does. But your traditional view on this, and this is what I want to question you about now, to see whether it has changed, your traditional view has always been that inevitably your policies would have to be pursued to stamp out inflation. You've said on this interview you are not prepared to reflate, you regard that as a dishonest policy and that therefore, putting it bluntly, though there was a lot of high unemployment and you regretted it, we should just have to grin and bear it until things got better. Now, is that still your view? [end p31]

Margaret Thatcher M.P.

You would understand if I don't quite put it in that way, because unemployment is the most difficult human problem we have to tackle and of course we feel about it deeply. But the fact is that every time governments have reflated to avoid it they have finished up by increasing it, and that is why when I first came into Parliament we did not have very much inflation, equally we did not have very much unemployment. In the Macmillan period inflation was low, unemployment was low and then, somehow, you will remember we had the first pay pause, we got into difficulty after that, inflation rose and as inflation rose so unemployment followed. And do you know what has happened? It has gone up over the last thirty years. Each government has reflated to get out of its problems and each government has lifted the basic level of unemployment. So that, during Edward HeathTed's time, the basic level of unemployment was about three-quarters of a million. During the lifetime of the last Labour government it went up to about 1.3 [end p32] 1.4 billion [sic]. Now, if I go and reflate now, what will happen? Yes, we should get a reduction in unemployment for the time being. All the costs would then rise, we should lose our business and a lot more people would be out of jobs, and we should lose a lot more jobs than we ever gain by the reflation. So I, in the long run, should be doing a disservice. What we are going through now is that difficult period when many, many industries were over-manned, they knew it, very much over-manned. They are not so over-manned now and the people who were not needed to work at peak efficiency are, I am afraid, unemployed. Some of them with reasonably good redundancy money, others unemployed. Now, what I cannot do is to reflate. What I can do is to take measures to try to look to the future [end p33] so they are going to get jobs. First, we can say the young people, if they don't get jobs we must try to take measures, we call it a Youth Opportunities programme, to get them in work. We very much expanded and extended that programme so that we expect some 440,000 young people to take advantage of it. We can do that. To try to make it less difficult for them to bear, to give them an opportunity. We can put increased resources into training because, after all, the end of the de-stocking, the end of the world recession will come, and it will be an absolute tragedy if Britain hasn't got the skilled labour to go straight back into the factories to take advantage of the increasing orders that will come along. Those two things we can do. And then there are quite a lot of people who will and are starting up on their own, an astonishing number. Some of them take their redundancy money to become self-employed and we are trying to build, sometimes [end p34] advanced factories, bigger ones, sometimes smaller ones where they can start, start a business on their own and many, many companies and the British Steel Corporation, Manpower Services Commission, all the technical colleges, are giving advice on how to start. That we can do. Sometimes if a company is just in difficulty, like some of the textiles, can keep people going for say three days a week, you can give some short-time working compensation, all that we can do. That is what I would call human selective help. It is getting us through until the period of increasing expansion comes, but it is not doing fundamentally the wrong thing; inflating on top of inflation.

Brian Walden

All right Prime Minister. Now you have listed off a series of palliatives and they may have a certain effect at the margin, even possibly a considerable effect and yet the figures keep rising inexorably. And nobody, certainly not yourself, nobody expects them to fall within the short run and an organisation as prestigious as the O.E.C.D. says that they will be up to three million before the end of this year. Now I think you are telling me exactly the question I put to you at first, namely that nothing that you can do, including the palliatives, unless you reflate, is going to bring this down in the short run, that you don't intend to reflate because you think it would have worse consequences in the long run, and therefore these figures are regrettably going to inexorably rise. Now isn't that so? [end p35]

Margaret Thatcher M.P.

When you say inexorably rise they will of course go on increasing. I don't know for quite how long, they obviously will do in the winter months. There is one month I am afraid in which they always increase. If you look at the previous figures for August they have always increased. Twice during the life-time of the last government they went up to 1.6 million, 1.6 million, I'm sorry did I at one stage before say billion? How dreadful. 1.6 million. They will go up again in August this year because we have two, three years, three years when we have an unusually high number of school leavers. So it is not only a shortage of jobs, it is an increasing number of people wanting jobs, which does in fact give us a very considerable problem. But [end p36] politics is a question of alternatives, and what are the alternatives? The alternatives are one which I have already dealt with; to reflate, which would land us up with higher unemployment in the longer run and not so very far longer run and higher than we have got now. That course I will not follow. You have a far better chance in the longer run of getting the good secure jobs by getting down your inflation, then in fact you will get your investment and your expansion. So reflation is out. So in that case I am driven to try to help young people get jobs, driven to sometimes temporary short-time working compensation, driven to try to help in some of the regional areas with investment they put in, and driven to say, I say driven to say, I do easily say, that we must keep the tax incentives in because these are the people with the ideas. And of course also, yes I did have a party of inventors and innovators here last Monday because these [end p37] are the people who create the new businesses and the new industries. Now if I keep that going, the longer-term prospects for Britain are good. If I sacrifice that, if I sacrifice it, the long-term prospects for unemployment will be infinitely worse than anything we are facing now. And the prospect for the standard of living will be desultory indeed.

Brian Walden

All right Prime Minister, let me put this to you. It is often discussed. Your view represents a particular theory; it is the monetarist view, it is the anti-Keynesian view of how employment in fact works. And you say that if in fact you reflated in the long-run you would lose even more jobs than we will lose if we do it your way. Let me put this to you. It is after all a theory. Supposing unemployment gets worse and worse and worse, it breaks through the three million barrier, it goes up to three-and-a-half million, God forbid but it might. Is there any point at which you would say, well I still think I am right, but of course I might be wrong and the human cost is becoming so great that I must now stop the Thatcher experiment? [end p38] Can I quarrel with you on one thing you said right at the beginning? It is not a theory, it is borne out by everything that's happened in this country in the last thirty years …

Brian Walden

But half the …   .

Margaret Thatcher M.P.

Just forget the theory, just look …   .

Brian Walden

Half the academics and half the politicians don't agree with it, they believe a different theory …

Margaret Thatcher M.P.

I'm not concerned with the economic theory at the moment, I'm concerned with what has happened in practice as inflation has risen, and every time we've reflated we've finished up with higher inflation, as I say in Harold Macmillan 's time we were worried about three to four and a half per cent. Then it rose in the sixties, in Edward HeathTed's time, it went up to about eight-nine per cent, the average inflation in the lifetime of the last Labour government was thirteen, round about thirteen per cent. Look, as inflation's gone up, so your unemployment has followed it, from three hundred thousand, which used to be the norm, it now went up to one point four million. It is that terrible vicious thing that I am trying to break through. [end p39]

Now the idea that to fight inflation and to fight unemployment are alternatives in the longer run just isn't true. The countries that have fought inflation, your Germany, your Austria, your Switzerland, they had sound money, that is to say the amount of money about backed by about the amount of goods and services. They're the people that have not got unemployment, they're the people that will ride through the recession, and our problem, Mr. Walden, is how in the world do we get from where we are now, over-manned, inefficient, too much inflation, too much unemployment, how in the world do we get from where we are now to there. I will tell you again and again and again, we can do it, I will tell you again and again, under this government we are going to do it. There are firms in this country, I visited one, I visited one just a week ago, last Friday. Part of a big complex the world over, I said, just tell me, how does our productivity here compare with those in Germany, in Finland, in the United States, and do you know what they said to me? ‘We are the best’ …

Brian Walden

All right Prime Minister.

Margaret Thatcher M.P.

We are the best … we can do it.

Brian Walden

[words missing] [end p40]

Margaret Thatcher M.P.

And are doing well.

Brian Walden

I'm sure, as I don't know the firm I have no difficulty in agreeing with you on that. Let me press you on this central point again, because it's quite vital, it's quite vital that your intentions should be understood on this matter, and I dare say you can think of analogies from the past where the good news is not accepted unless in fact the bad news is faced. What you are in fact advocating is the monetarist theory, there are dissentients very large numbers of people in this country do not agree with the assertion that you've just made, but you're the Prime Minister, and what I put back to you again is; you are so convinced that this is correct, you are so convinced that your strategy is correct, that you are not prepared to reverse it, no matter what the short-term problem on unemployment may be.

Margaret Thatcher M.P.

But you see just a moment or two ago, Mr. Walden, you were accusing me of giving help to British Leyland when the theory said no, and what I said to you is that there are times when I will give selective help in the development areas, which have already got legislation in, short-time working compensation, I will do that to get people through a difficult period, not all over the country, I can't, because I've got to do it where the unemployment is at it's worst, which is in the [words missing] [end p41] I will also help in every way to get the young people into what we call work experience …

Brian Walden

Of course, but …   .

Margaret Thatcher M.P.

I will also help in every way in retraining, will also help with people trying to start up self-employment, this will do … this is the message I must get over. This will do far more for future job prospects and far more to keep people occupied, than an artificial boom which will burst, and if I went the other way I would be sacrificing the jobs of future generations, and I won't do it … [end p42]

Brian Walden

All right Prime Minister, I understand your view of what you are prepared to palliate. I was asking you something slightly different, and I'll put it back to you again. There is no aggregate number, there is no three million, three and a half million, four million, there is no aggregate number of unemployed that would lead you to change your strategy.

Margaret Thatcher M.P.

We help to cushion the worst effects of unemployment in ways which I have indicated, we increased the amount this year for spending on young people to try to help them to get jobs. We increased the amount on the temporary short-time working compensation, we are doing these things, Mr. Walden. This year it comes to about eight hundred and thirty four million. [end p43] Because that is the way to help present unemployment without jeopardising the future, that is the way to get people occupied and keep them occupied now, without jeopardising the fundamental efficiency and enterprise of the future. Mr. Walden, I came …   .

Brian Walden

But no mere figure is going to frighten you off your strategy.

Margaret Thatcher M.P.

But don't you see, when we get these figures we are in fact helping people through by increasing the expenditure on young people to try to help them with work experience. Trying to persuade companies to take them on, and companies are responding, we are helping with short-time working, we are helping with investment, we are doing the right things, they will work. I came in not to have short-term expedients but to get the country on the right road for a prosperous future, and that is the way I shall go.

Brian Walden

Prime Minister, thank you very much indeed.