Mrs Thatcher: First may I apologise for keeping you waiting. As always happens the meetings on Capitol Hill over-ran just a little bit because there were so many questions. We've had really a wonderful day, the centrepiece of course, after the welcoming ceremony this morning, was the talks I had with President Reagan and Secretary Haig which ranged over most of the major international problems of the day, and of course also naturally I am not a little interested in some of the economic programmes which have been announced. I think one is very impressed indeed with the amount of care and thought that is being given to working out the policies of almost each and every one of the international problems. And the care and thought not to pronounce before those policies are fully worked out. It is a conservative, with a small “c” approach and if I may say so, I think it's absolutely right. There are a tremendous number of really big issues, some of which have so far defied elucidation which do need the steps to be carefully analysed before they are embarked upon. You would naturally expect that there has been a meeting of minds. Where you have an Administration which is so much in tune with the views that we take, both internationally and on economic matters, its not surprising if the dialogue does go rather well and rather easily. The points of time of course, of approach is slightly different. I'm in the period where one has embarked on the policies and one is having to stick to them through some of the difficult times that we are getting. And here of course the fortunate thing is that the policies here are being embarked upon, I think, must feather [sic] through the world recession from the one which I had to face and that undoubtedly will be an advantage. But we very very much enjoyed the day. More than enjoyed the day. We do realise that the lines of policy have been laid down in general and are now [end p1] being worked out steadily, systematically and deeply in detail. Now I think it may be as well if you ask questions, and I will try to answer them as briefly and quickly as I can.
Q (Associated Press)
… differences in the American and British economic policies. What to and not to look out for?
No indeed, I think Ronald Reaganhe's chosen just those very things which we also embarked upon and I think he's chosen to do them very boldly indeed, particularly the programmes to cut expenditure and it is the one thing which I could have wished that we had been even more successful at. It would have helped us very much more now, had we been able to get more off current expenditure than we have. We were faced with a number of problems which do not affect him. We were faced with an end of an incomes policy at which all the distortions induced by that policy unwound and put very heavy burdens on the Treasury. He is not faced with that and I think therefore the chances should be greater than ours of securing larger reductions in current spending. He is also not faced with a number of other problems but I won't go on about those.
Q (Wall Street Journal, Karen House)
Regarding US/UK/European Security Pact in the Gulf.
I'm not sure that we're quite of one mind about this, or I've fully understood you. Because I don't quite see the difficulties which I think you see. Because obviously you can only do it with the consent and co-operation of those in the region. If you've got the consent and co-operation and facilities there, then it consists of co-operation between certain members of NATO. It cannot be done by NATO under NATO command. Because NATO's writ does not by definition run beyond NATO boundaries. It can nevertheless be done by members of NATO acting together for any rapid deployment force with which we would be [end p2] interested in trying to help. But I don't quite see the subtlety thats in your mind.
With due respect, we have some ships there, although most of our naval forces are seconded from NATO. For example 30%; of the force, the NATO naval forces, comes from Britain. Nevertheless we still have some ships in the Gulf. Our French friends do, though of course they are not seconded to NATO so they were able to detach theirs more quickly. We keep our secondments to NATO, we've still got some Naval forces in the Gulf. So of course, does the United States. So you've actually got the naval forces there. We do of course have contacts in the area for a very long time, and there would be nothing new to Britain about the Gulf, and indeed of course we do do a certain amount of co-operation with Oman as it is. So it's not new to us in any way. And I think you are perceiving difficulties which I am afraid I don't visualise at the moment.
Q (Westinghouse Broadcasting, Jerry Edwin)
Whether the Government should help the weak industries.
Well now, we have a whole series of a kind of industry which you don't. We have a number of nationalised monopoly industries and a number of others which are in the public sector but not monopolies. Let's deal with the nationalised monopolies like coal, electricity, telecommunications. All of these are nationalised monopolies. All of them suffer through a recession. If they were in the private sector they would probably have had to adapted before that recession came … . Being in the public sector it is very much more … they don't adapt so well because there's no substitute for competition. And inevitably it [end p3] does mean it is a considerable drain on the Treasury, first, which of course is financed by the tax-payer. So we have to meet some of those while urging them the whole time to slim down their labour force. Now when it comes to the other public sector industries. Like for example British Airways, is a public sector industry, but not a monopoly. British Leyland is a public sector industry but no a monopoly, British Steel Corporation, public sector but not a monopoly. Now we're tackling British Steel and British Leyland again, though it had enormous investment put into them, by trying to cut down their over-manning, to get rid of demarcation disputes and for the first time to have the right number of people suitable to the latest investment and technology. That will be the first time that that has happened. One of the endemic problems of Britain has been over-manning and demarcation disputes. And one of the side effects of the really rigerous economic policy or disciplined economic policy which we are pursuing is to get the manning levels where they should be. So those we indeed have to help. But we do it on the basis that they slim down to a size at which they will become viable and profitable. Now others, there are a number of pieces of legislation under which we could help. But it's rare for us to do so outside what we call a development area. A development area, being one of course where we have unusually high employment which signifies the development area where we have special legislation to see them through a difficult period. The policy that we have followed is, yes, we will try to see them through a difficult period provided we're working with the market and not against it. That is to say, we're not just prepared to subsidise yesterdays jobs if they haven't a future tomorrow. We will look at those industries and say—we'll try to help you through the effects of change, but you must in fact make the change. Is that clear? Good.
Q (Eaton… .)
Would the Prime Minister be rejected by her own party in six months time due to her economic policies? [end p4]
But I don't expect political defeat. Look what we are doing economically, its top priority—we have to fight inflation. Now Britain was the first, I think, to adopt the reflationary policies time and time again through the last thirty years. And what has happened in Britain is that as we've had each main Parliament, we were in for about thirteen years and then the Labour party was in for a time, then were in, then the Labour Party. If you take each of those periods you'll find that the average rate of inflation has gone steadily up. We started with about 3%; in Macmillan 's time and even before that and now the average rate of inflation in the last Parliament was about 15%;—average—the heights of inflation under Socialism was 26.9%;—the average was 15%;. You have the average rate of inflation going up and it's been followed by the average rate of unemployment going up. Now if we were to follow the same policy we would still have that average rising of inflation and unemployment. What I set out to do is to break that steady increase, and the way to break it is to break the inflationary grip first and then you will have the basis of building up more investments and the confidence to develop and get real jobs and get your unemployment down. So the way to tackle that terrible grip, that terrible upward turn of inflation and unemployment is really to tackle inflation, which we are doing now, down now from its height which this time was 22%;—we're down to 13%; at an annual rate and you can take it over the last six months and annualise that, it's about 9%;. So we really are getting that down. And then we believe that eventually the unemployment rate will come down. But it will take a little bit of time, because we could of course produce a very good deal more than we are even with the present force of employed people. One further thing. We in Britain have a very high proportion of the population of working age, age sixteen to sixty-four, seeking work and in work. If you take Europe as a whole only Denmark has a higher proportion of the labour force from sixteen to sixty-four. Only a higher proportion than we do actually seeking, I say seeking, IN the labour force. The reason is we have [end p5] a large proportion of married women in it. And even with our levels of unemployment we believe that after Denmark we have the highest proportion of the sixteen to sixty-four age group actually in jobs. So I shall persist in trying to get down inflation much further. If we don't we shall not be competitive with Europe, where German inflation is about 5%; and you can't be competitive if you've got an inflation rate of 10%; or 13%; and they're 5%;. You've got to get British industry to be competitive. And thats the only way through to get more genuine jobs and a higher rate of prosperity in the future. Sorry, that was a long reply.
Q (The Times, Patrick Brogan)
How would the U.K. help the U.S. in El Salvador?
We did in fact issue a statement before we came which has been very well received.
Q (A. B.C., Bob Clarke)
At what date did you decide to scale down taxes? Should a tax decrease take place regardless of what happens with the economy?
Well, there never anything of regardless of what happens to the economy. There can't be because no Government can avoid some of the realities that you face. So no-one can ever say regardless of what happens to the economy. You can have a very firm strategy, sometimes you can get it in the time scale you want, sometimes you can't. And what happened in our case was that we came into power and the increase in oil prices was starting then and as you know proceeded apace since and I think the actual oil prices have gone up by about, dollar per barrel, as we of course have kept to the world price of oil all the time—gone up by about 50%;. Now that has caused a world recession [which?] [end p6] has affected our industries. As our industries were over-manned we suffered worse than some of our continental competitors. It has in fact reduced the revenue coming in, it has at the same time increased the expenditure going out because of the nationalised industries which I've explained. We've got defence where all the orders were completed earlier and therefore the bills had to be paid earlier and also because there was a higher level of unemployment than one had anticipated. So you have got reduced revenue, increased expenditure, and you could obviously just not cut your taxes to the same level as you would have wished to have done. Had we come in not at a time of world recession it would have been easier. But the world recession was a reality. It hit our car industry, it hit your car industry. It hit our steel industry, it hit your steel industry and the same on the Continent. Now these are realities. That is why of course the level of taxation has not come down as much as one would have wished. The level of expenditure is higher than one would have wished. But in fact we did take down the direct rate of tax in our first budget. But I'm the first to admit that we've switched some of it, or most of it, to an indirect rate of tax. But there's no way of avoiding the world reality. There just isn't.
Q (Peggy Simpson … .)
With the Prime Minister's experience of her economic policy could she predict what the U.S. unemployment and inflation rate will be in nine months time?
My dear, I have one rule—never predict these things. You can't, you'll be wrong. [end p7]
Q (Peggy Simpson … .)
Has there been a backlash against your policies
Well, I wouldn't necessarily say that there has been a backlash against one's policies. Of course when you're getting rising unemployment and a number of bankruptcies, of course there is great concern and I'm one of the first people to be concerned. But I know that if we are to break that terrible rising curve of inflation and unemployment … I have to break it, if we're ever to have any hope of having something much more akin to a stable currency and a higher level of jobs than we've got now, I know we have to go through with it and I think that one of the worst things a government can do is to take the short term easy popular road, knowing full well that it is sacrificing the longer term future of its people. And it's because I think many many people in Britain realise that, many knew the over-manning, they knew the demarcation disputes. They knew that, though they thought they were efficient, some of them, they were not and they are in fact becoming efficient. They know that they'll be more competitive and fitter and they know that they will in fact have a better future and a better chance of prosperity but in fact we still have a tremendous support for the road that we're on. I must leave President Reagan to take responsibility for his problems.
Q (Wall Street Journal, Walter Mossberg)
Why was there a European initiative on the PLO/Middle East?
Well, I never discuss details of what was said. Of course one discusses the Middle East and may I make clear the position on the European initiative. It is not meant in any way to compete with American negotiations. It was taken at a time when there was not likely to be a great deal happening on the Middle Eastern front as it was coming up to an election period. Nevertheless at that time there were clearly a number of factors which needed to be clarified and [words missing] [end p8] Eastern problems been using old series of words—the legitimate rights of the Palestinian people, self-determination, a home for the Palestinian people, the right to Israel to exist behind secure borders. No-one had in fact translated those general phrases into actual practical propositions which could be reached by a series of options. No-one had in fact gone round and discussed these terms with a number of the adjacent countries or the countries interested. We thought we could do that during that particular period and that process is under way. It is in fact a slow process—it's a complementary process to the American negotiations and how the American Administration wishes to continue its negotiations in the Middle East is I believe, being very carefully studied at the present time. There is of course an election in Israel and doubtless not a great deal will happen before that election is over but then I expect the American Administration will carefully consider how they can go ahead. We're not in a business to compete with it. We are in a business of trying to elucidate some of these problems so that when they are elucidated we might be better able to go ahead on this very difficult and long-standing problem.
Q (Toronto Star, Jack Ward?)
What is the present situation in regard to the constitution between the U.K. and Canada?
We have not yet received a request from the Canadian Government for the patriation of the Canadian constitution. In the meantime a Select Committee of the House of Commons has considered the matter and has produced a Report and the Government will have to reply to that report in detail as soon as we are ready to do so. I don't think it would help if I went very much further. When we get the request from the Canadian Parliament we will try to deal with it as expeditiously as we can in accordance with precedent and the law of the land. [end p9]
Q (St. Louis Post-Dispatch, Richard Dudman)
What is the Prime Minister's view of the Brezhnev speech and the possibility of a Summit meeting resulting from it?
As a speech which must be very very carefully considered in all its aspects before any reply is given. But when one goes to Summits the steps and every aspect must be very very carefully prepared. I know journalists tend to love Summits and they've a tendency, especially on the part of our people, who think that if only everyone gets round a table all the problems which have not been solved will miraculously be solved. That is not so, and it's absolutely vital that the steps be very very carefully prepared and that each and every aspect of [word missing] is carefully considered before an answer was given. I had to reply in the House of Commons to a similar question and said virtually what I said now, but I really thought that you must bear one of two things in mind. First that if there is a genuine wish to improve relations it could so easily done by a withdrawal from Afghanistan which would have been something very tactical which goes a great deal further than rhetoric. Secondly that I have noticed the apparent desire to have a moratorium on Theatre Nuclear Forces. But I noticed that that desire for a moratorium came at a time when the Soviet Union had vastly superior Theatre Nuclear Force to the West. Vastly superior, and that those Theatre Nuclear Forces, multiple war-heads are coming into operation at the rate of one every five days. And third that I noted what you said about [confidence?] building measures which of course has been one of the great proposals of our French allies as they've said the confidence measures must go down to the [word missing] and there must be an enlargement of the area by the West but as you know the whole of Western Europe is involved, it didn't seem to me that that made—we didn't quite know what that meant, because we would be in the sea. If all [end p10] of western Europe was involved in those we would like to know just exactly what some further response from the West meant in that connection. So there are a tremendous number of things to be considered and really it would be wise to do before any reply is given.
Q (Marjorie Hunter
Well, I have a lot of Summits as you know. I have all the European Summits and I think it's absolutely vital that various of the European countries will of course confer with President Reagan. We, the European Heads of Government, meet three times a year—I'm here now and I have not the slightest doubt that other heads of Government will be here so we will keep in regular contact as regards to those Summits. The main Summit of course that is also attended by the President of the United States is the economic Summit, the next one is held in Ottawa in July, which President Reagan will be there, and we shall also be there.