Speeches, Interviews & Other Statements

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

1985 Feb 1 Fr
Margaret Thatcher

TV Interview for Channel 4 A Week in Politics

Document type: Speeches, interviews, etc.
Document kind: TV Interview
Venue: ?Channel Four Studios
Source: Thatcher Archive: COI transcript
Journalist: Peter Jay, Channel 4
Editorial comments: The interview began at 1700. It was broadcast later that evening (2015-2115).
Importance ranking: Major
Word count: 10221
Themes: Conservatism, Conservative Party (organization), Conservative Party (history), Economy (general discussions), Education, Secondary education, Employment, Industry, Monetary policy, Privatized & state industries, Pay, Public spending & borrowing, Foreign policy (USA), Health policy, Labour Party & socialism, Leadership, Society, Social security & welfare, Strikes & other union action, Famous statements by MT, Famous statements by MT (discussions of)

Peter Jay

Hallo, and this is how it is this week in politics. A week of political drama and economic crisis, and with us in the studio to talk about it, the Prime Minister, the Rt. Hon. Margaret Thatcher.

Prime Minister, has not your economic strategy been blown off course this week now that you have had to increase interest rates by 4½%; within two weeks?

Prime Minister

No. We had to increase interest rates in July because we had a difficult time then. Fortunately, they were not up too long. But interest rates, as you know very well, are a weapon which you have to use now and then. We do not like using them. We do not like putting interest rates up, but the situation you saw was one in which we needed to do so to restore confidence. We did it, and it would seem that immediately it had that effect, but of course, one has to wait a little longer to see. [end p1]

Peter Jay

How quickly do you expect them to come down again?

Prime Minister

You know full well, as an economist, one never predicts interest rates.

Peter Jay

I think there is a puzzle, however, in the public's mind, reading the comments that have been made in the newspapers this week, and it is this: that the rates are put up in order to restore confidence, as you implied, in the Government's policies, and that presumably means confidence that the Government really will sit on inflation, control public expenditure, not print money, and yet it is also hinted that those rates can come down again almost within a matter of days or weeks once that message has got home, but would not that undermine the confidence?

Prime Minister

But I deliberately refrained from responding to your invitation to say how long I thought they would stay up, because I am very much aware of the point you just made.

There are three reasons, I think, why we had to put them up; three reasons which came all together at one time: a strong surge in the dollar, which had been against all European currencies and then, because we had managed to act together to [end p2] try to prevent that, it turned on Sterling for the second reason, which was the OPEC meeting. But there was, I believe, an underlying reason—which you have indicated. I think the markets were looking at Britain and seeing that there were demands for more public spending and they were saying: “Where is the money going to come from? Are they going to print it?” And therefore they were getting a little bit worried that we would not keep quite such strict management of the economy, as we have been doing in the past, and therefore confidence went.

Now, you do have to do something when that happens. We hoped we had done enough with the first lot; we had not, so we had to do it sharply with the second.

I do not know how long it will take. They will have to stay up as long as it will take and, as you know, we have to make a judgment then. What you have to demonstrate is that you are prepared to act under those circumstances—and we have.

Peter Jay

But the action you have taken—if you stick to it and if you have meant it, and that is the message you are trying to give—is an action which must deter, to some extent, industrial investment. Now, would it not have been better to have cut Government expenditure, rather than to cut the investment which is the basis of new jobs and the competitiveness of British industry, on which you have always laid so much emphasis? [end p3]

Prime Minister

Well, let me try and take those two points.

First, industrial investment. I do not think, in the present state of companies, that that will be affected at the moment by this increase in interest rate.

The CBI came to see me the other day. They presented two extraordinarily interesting graphs. One was a graph of the profits of companies year by year. The second was a graph of the investment of companies, and if you put the two together, if you put the investment and the profits together, you found that where they had good profits they were making investment in the next two years and their investment almost followed their profit eighteen months to two years later. That indicates that if they are making good profits, they are prepared to go on investing. At the moment, they are making those profits and I believe they will continue to invest.

Now public spending. I think you are right to say: “Mrs. T., isn't it on the high side? You believe in not having too high a proportion and it has gone up!” Yes, it has, but it is not very easy suddenly to cut public expenditure, as you know, and the tendency is that where you have to do it quickly, you cut the capital. That has always happened historically. I do not want to do that. We will have to watch, coming up to the new year, very very carefully wage rates in the public service, because that takes a great deal of public expenditure. So we will have to try to keep a grip on it, but if we took it down very rapidly, then it would fall on capital and we do not wish to do that. [end p4]

Peter Jay

Well, let me press you a little on that very question, without calling you “Mrs. T.”

You said on television last week that you would love to have public expenditure down to the kind of level Harold Macmillan had it—33%; rather than something like 40%; as we now have it. You said that the economy would thrive much better if we did have it down at that level and you urged the Leader of the Opposition in the Censure Debate yesterday to support you in getting it down to that level, but may I put this to you: you are Prime Minister; if you believe it ought to be at 33%;, you have a majority of 140 people or more in the House of Commons, as you demonstrated last night; why don't you do it, rather than say, as you said: “I can't, the House of Commons will not stand for it'” ?

Prime Minister

Because you cannot start now where you were twenty years ago. Twenty years ago, I was in Harold Macmillan 's Government—it is more than twenty years ago. I was a Parliamentary Secretary at the Ministry of Pensions and National Insurance, and eventually that was telescoped in with the Ministry of Health. Now, just let me give you one quick example.

In those years of Harold Macmillan, the National Health Service had 500,000 employees. Twenty-five years later, it has 1,000,000. You cannot just go back to 500,000, and the Health Service is different. In those days, it took one-third [end p5] of the yield of income tax. Today it takes nearly a half of the yield of income tax. You cannot just do that.

Yes, we are trying to get very much better value for money in the Health Service, because look at the increase in the number of people, and we are entitled to say: “Are we getting that much better a Health Service?” and so we are trying not to put more and more money into it—although we have put a good deal—but to look now and say: “Are we really getting value for it?”

We have, for example, many Social Security payments now that we did not have then. Let me give you an example:

Heating—I am often asked this week about heating allowances. On top of Supplementary Benefit, there are heating allowances. There were no such especial heating allowances in Harold Macmillan 's time, nor in Ted Heath 's time. They now cost £400 million a year, half of which go to pensioners. We are constantly being asked to increase them. That you cannot suddenly do anything about.

Can I take a third example? Housing benefit. Housing benefit is costing enormous sums—£3.7 billion and rising. Now, last year, we had to cut some of it, because it was rising and rising and rising, and you found that some people on £9,000 or £10,000 a year income going into the household were getting a housing subsidy. Now, you cannot suddenly chop. You have to start at the margins and say: “Look! If we are going on to do too many subsidies, then the people who provide the subsidies are going to say ‘Is it worth it?’” and so, yes, we are in fact [end p6] looking already at the long-term Social Security and Norman Fowler has a review on. We are looking at it, but you cannot do it suddenly.

The other way—if I might have just one more point—I am so sorry, I know you are anxious to get in another question. If you get expansion; we have had growth now, but a small growth, for a few years, then I think we have to hold the amount of Government expenditure so that the expansion goes into people's pockets—after all, it is their money—and therefore the proportion we take of the national income in public expenditure diminishes.

Peter Jay

But Prime Minister, in that long answer, properly a long answer, you made two points: one, you cannot start from twenty years ago; secondly, that you cannot do certain things overnight.

I put it to you that you did start six years ago—nearly six years ago—when you became Prime Minister. At that time, in your Manifesto, you said the amount of the nation's income taken by the Government was too high and must be steadily reduced. You have now been there nearly six years; the level is now higher, and in the White Paper which you published last week you project that even by 1988 it will still be no lower than it was when you started. So that is not just a matter of not being able to do it overnight. After six years—indeed after eight years by 1988—it appears you will have achieved nothing by the standard you set yourself. [end p7]

Prime Minister

Not quite! There has, after all, been quite a severe world recession, the second one starting with the high increase in the price of oil because of the Iranian/Iraq situation. As you know, when you get a recession, you cannot suddenly reduce your public spending, so of course it takes a bigger proportion.

Peter Jay

Are you expecting there still to be a recession in 1988 to which the figures relate? I apologise for interrupting you!

Prime Minister

No. One moment! As you now know, the proportion is coming down. We have growth going again. The proportion is coming down, and we are bringing it down steadily. We are making a tremendous effort and every time I make that effort, what people say is: “We are having cuts, cuts and more cuts!” That actually is not so, but we are trying to hold some public expenditure. Others, I must confess, we have increased. Defence, I said we must increase; law and order, I said we must increase—we needed to—and therefore you have to look in other areas to take the reductions.

We have tried to hold it throughout that period and we are now steadily reducing it as a proportion. You will be very very well aware that I do not get a great deal of help on this from the media. The moment … [end p8]

Peter Jay

Are your policies dictated to you by the media and the Opposition, Prime Minister?

Prime Minister

No, they are not dictated by the media; they are not dictated …   .

Peter Jay

Do you mind what they say?

Prime Minister

They are not dictated by the media; they are not dictated by the Opposition, but in government you have to carry people with you and what I find being described as cuts is when we have increased expenditure, but not as much as people expected, then everyone is crying cuts, cuts, cuts. It is inaccurate, but we have to have a balance between people who are needy—and there are—and I made certain pledges to pensioners and I have honoured them. And there are more pensioners now than there were when we took over. So we have to balance those pledges and the needs of people who are unfortunate with the tax-payer who also has to be considered, because we are taking his money, and I think, all up, we have done a good job.

Peter Jay

Even though, on the Treasury's own figures published this week, the burden of taxes by 1988—nine years after you came to [end p9] power—will be higher than it was when you began?

Prime Minister

That will depend, of course, on how successful the country is on producing growth. We can try to create the conditions. I hope the people will take advantage of it.

Peter Jay

Let me turn then, if I may Prime Minister, to the exchange rate, which has been very much in the news this week. Now, monetarists—a phrase that you are very familiar with—like Professor Milton Friedman, an economist you have admired from time to time, believe and have written that the right value for a currency is the value which the market gives it, but you said—this week and last—that the markets are wrong and they are undervaluing Sterling at this time. So I ask you: how do you know better than the markets what the value should be?

Prime Minister

You know full well that the market will determine the general value of your currency, and there is nothing you can do to stop that. From time to time, you will get speculation and you will find that it either rises or goes down too swiftly.

In times of speculation, you have certain weapons you can use. You can use intervention from your reserves, either alone or in concert with others. We have done both. Or, if you can only do it on a very very small scale compared with the amount of reserves moving around, you can suddenly move in and [end p10] use it, because a speculator never knows when you are going to and can get his fingers burnt.

The other thing you can use is the interest rate weapon.

Now, there are two things: one is the general level of your currency. Yes, that will rise and fall. The other is what you can get from speculation for particular reasons, either the OPEC meeting or because they looked and thought that they were not very happy with perhaps the demands for more public expenditure, and then you have other weapons to use. In the long term, no power on earth can get away from the general value of the markets, but you can do something about …   .

Peter Jay

What—if I may put it this way—is the present general value, to use your phrase, of Sterling?

Prime Minister

You see the general value. I think it is too low on speculation. You look at the prices for some particular item in the United States and you will find that when you come over here and translate the dollars into Sterling it is very very much cheaper, and I do not think it will hold. I think it is a slightly artificial level. The markets will tell in due course of time, but I believe there has been speculation and it seemed to them to be a one-way street for some time and they were gambling on the rising dollar and we were taking it on Sterling, so I took action. [end p11]

Peter Jay

So you believe that there is a value different from the value that was obtaining last week at which Sterling should have been, despite the fact that the Chancellor told the House of Commons in November that it was quite wrong for the Government to have targets for the exchange value of Sterling?

Prime Minister

I did not say we had targets. I said …

Peter Jay

You imply one if you say the present value is wrong. You have some other value in mind.

Prime Minister

No. No, I do not, Mr. Jay. I do not imply a specific target. I may imply a movement, but I do not imply a specific target. You are very well aware of the difference. Yes, I do think Sterling is undervalued and I still think it is undervalued and I think in due time there will be a change. I may be right, I may be wrong. I have had both things during my period of office. I have had a very very weak dollar, for reasons not wholly because of things we were doing in this country, but because of things that were happening there, and as you know, the pound went up to $2.50 and I was blamed then because that was doing grave damage to some British industries. Now we are faced with a very very strong dollar. It happens also to give advantages and opportunities for industries in the United States, [end p12] but it has certain disadvantages for industries too, which is that anyone who has to buy raw materials invoiced in dollars faces an increasing raw materials bill in Sterling terms. So I had both, and we have had the currency going up very f* we have had it coming down very fast.

Yes, in due course of time, it will find a certain level and that level will depend not on particular things of international movement, but that level will depend upon what the world thinks of the performance of the home economy, and I think the performance of the home economy warrants a higher value at the moment, but other things are affecting the value. I cannot duck the other things, except that if they are speculated against, then we can move either on a small amount of intervention suddenly, or we can move on interest rates.

Peter Jay

Well, let me ask you this question, again at the philosophical level in a way. You say, with all the authority of your office, that the pound has been undervalued recently by the markets. Now what is the difference between you saying that the pound is wrongly valued by the markets and, for example, Mr. Scargill saying that coal is wrongly valued by the markets?

Prime Minister

A very very great difference. He is not having to deal on exchange control. He is not having masses and masses and masses of money moving around the world suddenly buying coal and suddenly moving …   . [end p13]

Peter Jay

But there is a market for coal, as for Sterling.

Prime Minister

The market for Sterling is very different and you know full well the markets are very very different indeed, and if I might say so, we are not very successful at selling our coal on international markets and have not been because it is too highly priced compared with other coal which people can buy.

Peter Jay

But isn't that just what the markets thought of the Sterling we were trying to sell—that it was too highly priced and the price fell?

Prime Minister

Yes, for a time, yes. Yes, speculators were coming in, but speculators were using mechanisms of making a killing for themselves—and they were—and so we moved in and they are finding it much more difficult at the moment. I need hardly explain these things to you, but you know full well it is entirely different from coal.

Peter Jay

I was surprised when, in the course of the answer before that, you said that the markets will judge on the performance of the British economy, which is now doing very well, because as you know, Prime Minister, over the last five years since you [end p14] have been Prime Minister …   .

Prime Minister

I'm sorry. Did I say it was doing very well? I said it was doing better, I think, than Sterling against the dollar warrants. As you know, we are actually higher against the whole basket of EMS currencies than we were the day we came into office … against the dollar … against Europe we are actually higher. Not against the Deutschmark, but against the basket, so you have got both sides to look at.

Peter Jay

I was talking about the real performance of the economy, which is what you talked about in the Debate yesterday and earlier.

During the last five years, national output—the GNP, national income, call it whatever one likes—has risen slower in those five years than in any five-year period in British history since 1903 to 1908. Now, isn't that a miserable performance?

Prime Minister

And so it has in many other countries. Indeed, in some other countries it went down. We did not go down so much. Because there was a world recession. I am quite prepared to be judged by other countries at the time of the condition of the world economy. There was a very bad recession. We did go down. So did some other countries. We are pulling out. Our output is now higher than at any time, any previous time … [end p15]

Peter Jay

But it is always higher, Prime Minister, a bit, isn't it?

Prime Minister

One moment! Productivity is higher than at any previous time—15½%; per head per person better than at any previous time. Investment is at an all-time high. These are good things, because it means that when your productivity per person is rising rapidly, when your investment is good, it means that you are beginning to deal with some of the deep-seated problems—only some of them.

On unit wage costs, yes, we have been getting better but other people are getting much better than we are, much faster. We cannot run away from those problems. I cannot solve them all without cooperation, but we cannot run away from them, and I do not intend to do so.

Peter Jay

But other people do not have, Prime Minister, do they, the highest unemployment in their history and the lowest pound in their history and they still have, in many cases, a better inflation record now than we have?

Prime Minister

A number of currencies have the lowest value against the dollar in their history.

Peter Jay

But not against the basket of other currencies to use your [end p16] phrase … our average level is lower than it has ever been.

Prime Minister

Ah, but you have now switched! A number of other countries have gone down to record lows against the dollar.

Peter Jay

Against the dollar, yes, but not against each other! Against the average …   .

Prime Minister

We are higher against the average of the EMS than we were when we came into office. In spite of all the problems, we are higher against the EMS than we were when we came in. Down against the Deutschmark, but higher against the basket.

Peter Jay

I do not want to get bogged down in statistics, but we are actually this week at the all-time low we have ever been against the average of all other major currencies, which is the measurement usually used.

Prime Minister

When you say “for all time” , it only came in in about 1971.

Peter Jay

It did indeed, December 1971, but before that we were at a higher rate. We are even further down since dates before that. [end p17]

Prime Minister

Look, if you are going about the net effective rate …

Peter Jay

Yes.

Prime Minister

… you are not necessarily only going against the basket of EMS currencies. You are going against them all.

Peter Jay

That is right, including the dollar.

Prime Minister

Including the dollar. Not just against the EMS, against them all. All countries, all countries, have gone down in net effective rate. All. Including Switzerland, whom you think of as normally very high. Including Germany. All countries have gone down in net effective terms save the dollar, all of them, all of them.

Peter Jay

Not to their all-time low, but let me turn to another issue.

Monetarist economists, again, believe in something called “the natural rate of unemployment” which is supposed to be the rate at which inflation stops or ceases to accelerate. Now do you think that we, Prime Minister, with all-time record unemployment figures this week, have yet reached that natural [end p18] rate, even though inflation is still proceeding sufficiently to halve the value of money every fifteen years?

Prime Minister

It is not a doctrine to which I have ever subscribed. It is one which I think actually came in with Milton Friedman. I used to read about it. I used to look about. It is not a doctrine. It is a theory to which I have never subscribed.

At the moment, in spite of three and a quarter million unemployed, we have a current account surplus. We have had a current account surplus for five years in a row. I would like, obviously, every single person to be employed. No Government, as you know, can bring that about unless you have direction of labour and a totally controlled East European-type economy, and when you look at those, they produce neither freedom nor the prosperity of the West, without that type, without that kind of …

Peter Jay

I do not think anybody seriously wishes to debate the attractions of Eastern European economies, Prime Minister, but I am amazed that you say you do not believe in the natural rate of unemployment, because I would have thought, insofar as any one clear economic proposition runs through the basis of your policies over the last six years, it is the belief that you cannot deal with the problem of unemployment by spending your way out of it, i.e. there is a natural rate of unemployment. [end p19]

Prime Minister

You cannot deal with the problem of unemployment by spending your way out of it. That I agree.

Peter Jay

But that is the natural rate doctrine, isn't it?

Prime Minister

Well, let us not bother about a doctrine. You cannot deal with unemployment by trying to spend your way out of it. That I agree with; so do you.

Now let us go on from there!

Peter Jay

Very well, Prime Minister. Well, I do ask you why you believe that unemployment should ever fall below its present level, without inflation accelerating again?

Prime Minister

But if inflation accelerated, you would only sooner or later accelerate the rate of unemployment. Of course, you would … one moment … you have already said to me … you have already said to me that Germany has a lower rate of inflation than we do. She does. She is about 2½%;. Japan has a lower rate and she is a competitor. So we also have to watch that. But I fail to see why there should be any implication that if we have higher inflation we should have higher employment. We might for a few months but after that, as you know, we should have higher unemployment, and we will only achieve a higher … well you know the [end p20] answers. This is the difficulty. You are asking me the questions and you know the answers.

Peter Jay

I ask them on behalf of the viewers. I thought they were interested in your answers, Prime Minister, not mine.

Prime Minister

I tend to look at you as a very great expert. You know full well the only way we are going to get higher employment, more jobs, is by the quite simply old-fashioned way of by companies, businesses, starting up to produce goods or services that other people will buy. The right design, the right price, the right value. I believe we could be much better at that than we are. I believe we have lost a lot of the elements of enterprise. We, after all, were first into the Industrial Revolution. We were first to make so many inventions, but I look at the difference between us and the United States now and one of the differences between us and Japan. They have the creation of far more small businesses. They have far more personal enterprise. They have far more enterprise culture. They have people looking far more towards their own effort for their standard of living than they do towards the government.

Yes, I am very much trying to get that back here. It is trying to roll back a whole attitude of mind for many many years. We are starting, but it is going to take a time, but we ought in fact to have a bigger share of our home market. We ought, I believe try to get a bigger share of export markets. We do not [end p21] do it by government diktat. We do not do it by debate in the House of Commons. We only get it by someone saying, as I heard someone in an agricultural business saying the other day— “I wanted to build a business, I wanted to create a business.” We have not enough people like that, and unless we can persuade more of them to stay in this country—and we lost an awful lot about twenty years ago in the brain drain to the United States and I have tried to get them back by having tax incentives, by having share option schemes—it is going to take a time, but we will only get more people employed, other than by shuffling round the money that we have got, we will only get more people employed by the creation of more small businesses and more self-employment.

Peter Jay

I do not think I made the point to the question quite clear, Prime Minister. Excuse me. Suppose you did get more employment as a result of all those things that you have described happening. What is it that makes you confident that when employment rises sufficiently for unemployment to fall, that under those conditions inflation will not start accelerating again?

Prime Minister

Well, it has not in the United States and it has not in Japan.

Peter Jay

Are you confident that it is not about to in the United States? [end p22]

Prime Minister

Well it has not in the United States.

Peter Jay

If you are confident, why not have a huge budget deficit like President Reagan?

Prime Minister

Because you know full well that I could not in fact finance it by capital monies from the rest of the world.

Peter Jay

Why not, Prime Minister?

Prime Minister

Because we just could not. Because we are …

Peter Jay

Pay the right interest rates. That is what President Reagan does. You can borrow in the open market.

Prime Minister

No, no. The United States is a very very different country. She has free enterprise built into her constitution. She has no Socialist Party and no danger of ever having one.

Peter Jay

She borrows in the same market that all the rest of us do internationally! [end p23]

Prime Minister

She is the last safe haven—everyone's safe haven for their money. She is a very strong enterprising economy. She is never going to have a Socialist Government which is going to nationalise things left, right and centre and impose high taxation. She is the land of free enterprise; she is the land of freedom; she is the country of last resort and of safe haven for money. One moment! She has got all that going and I must tell you that I am surprised that she has had to pay quite such high interest rates for the money she has borrowed.

But just look! We are not borrowing so much, and yet we do not always find it easy to get money in, even at the present rate of interest, and we simply could not act as if we were the United States. We could not.

Peter Jay

Are you seriously suggesting, Prime Minister, that the international money markets are at this time haunted by the fear that at any moment you are going to resign, there is going to be a general election and Mr. Kinnock is going to take over and socialism is going to be imposed on Britain, because I am sure there are not many people who have that expectation, whatever their wishes might be.

Prime Minister

Let me put it in more broad terms. Part of the strength of the dollar, I think, is what I might call the relative weakness of Europe. One of those things is the fact that we have from [end p24] time to time been subject to Socialist governments which put on a tremendous lot of controls, which are not concerned in the creation of wealth but only in its distribution. That is a factor which people have to take into account and it happens elsewhere over Europe too.

Secondly, we have not been as enterprising on the new electronic industries as the United States. That we are trying now to recover from and trying to have more of them here. We are much much more resistant to change and also we do not have quite the same attitude as the United States people who work in manufacturing industry have: here, perhaps from years and years of prices and incomes policies, people expect an automatic increase in wages every year, regardless of circumstances. Today, before I came along, just on the tape, there was news from one shipyard: it has not got any orders, it wants some orders. It is Austin Pickersgill in Sunderland. I know it wants orders. We cannot just provide them, but it looked as if it was going to get some, if it had a pay freeze. What I saw on the tape was that they would rather go out than have a pay freeze. That is a fundamental attitude.

We are trying to get rid of some of these things in Europe. We are nothing like as strong an economy as the United States, and if we were, then our currency would be as strong. Right. I am struggling to get back some of those features of self-reliance, some of those features of enterprise, and I believe that we can; if we can get those back—and it is attitudes and it is changing—it is rejecting the form of philosophy that for every problem there is a subsidy—all you have to do is queue up [end p25] to Government and bring industrial muscle to bear. I am trying to get rid of that. We are succeeding. I think if we do succeed that we shall get those underlying things and it is not the deficit that made the United States much much higher in employment than we are. It is their underlying strength of the economy. Those jobs were created long before they had a high deficit, millions and millions of them, and going up.

Peter Jay

Prime Minister, one last quick economic question. You have constantly said that the only way to restore employment is to create real jobs, not phoney jobs. Can you define the difference from the point of view of somebody who is actually in an actual job, between a real job and a phoney job?

Prime Minister

Yes. I mean, if we turn round and create a lot of jobs, as I do in order to help the long-term unemployed. The Community Programme is to help people who have been out …

Peter Jay

Are those phoney jobs then?

Prime Minister

Well, look! They are jobs which are created by taking tax from other people and the tax might have gone elsewhere. Of course we have to have some of them. There are jobs sometimes we take on young people to do to give them something to do, but [end p26] they are not jobs involved in producing goods or services. In government, yes, we do have to produce a certain amount of services. You could double up the amount of people you employ in government. The taxation on the economy would be enormous and you would cut down a lot of the productive jobs. Do you see what I mean now?

Peter Jay

Well I am trying to. Do you produce goods and services? Is your job a phoney job?

Prime Minister

We produce services. What I was indicating was, yes, that Government does have to produce services. It does, it, I think, reasonably well, but if we were to double the amount of people employed in government, those I think would be phoney jobs.

Peter Jay

I was not talking about doubling the number, Prime Minister.

Prime Minister

But you asked me what I would say is a phoney job. There will be people who say: “Right … put everyone …   .” I have people coming to me sometimes from former British territories and how have they solved their unemployment? They say: “Anyone who is unemployed, we have to take on the government payroll.” I say: “But you simply cannot do that unless everyone's salary is halved, because otherwise you are taking all the money out of productive [end p27] industry and in the end you will only be the poorer for it.”

Peter Jay

I thought, Prime Minister, that you might say that a real job was one that justifies itself in the market place but then of course the jobs of politicians would be phoney and I am sure you would not want to say that.

Prime Minister

No, no, no. I think you are doing a circular semantic argument!

Peter Jay

With your permission, may we now take a break, because I know you approve of advertising on television, and then we will be back.

We will back in a moment! (music)

Peter Jay

Welcome back! Before the break, I was talking to the Prime Minister about the pound and about the economy. Now, I want to talk to her about her ten years as Leader of the Conservative Party and the philosophical change she has made during that time.

Prime Minister, your predecessors, for example Mr. Macmillan and Mr. Heath recently, seem to think that you have very fundamentally departed from some of the things they believed in. Let me ask you this: Supposing—and you will, I [end p28] suppose, one day have them—your successors were to make fundamental changes in what you have emphasised as the main stream of Conservative philosophy, what would the things be that you would be most sorry to see scrapped from your period?

Prime Minister

Well, one day I shall have a successor. I think that the divisions between the Socialist side of the House and the Conservative side of the House are so much greater than any differences among Conservative sides that I shall loyally support whoever it is.

Peter Jay

Though they may be greater, the differences between you and the Socialists, nonetheless, to judge from what Mr. Macmillan was saying in the House of Lords the week before this last week and what Mr. Heath has been saying and others, there are some pretty important debates going on within the Conservative Party, are there not?

Prime Minister

Yes, but they are very small compared with the differences. Look! Everyone, I think, agrees that we have still got too much regulation. We have taken a great deal of it off: prices controls, income controls, exchange controls, office building controls, industrial development certificates, some changes in the Employment Protection Act, and so on. I think there is a good deal further to go and we are looking at the Regulations now. CBI last week sent, I think, a whole list of them which [end p29] they would like us to have a look at. Everyone agrees that.

Secondly, everyone agrees that we had far too big a proportion of the British economy in nationalisation and State ownership. I think everyone agrees that we were getting to the stage when for every ill in manufacturing there was a subsidy and people therefore had come to believe that no matter how they run their business there would always be a subsidy. They all agree on that.

Everyone would like to get taxation down, and we shall not be able to do so unless we manage to get much more growth. We shall not be able to do so as fundamentally as we would wish unless we manage to get more growth.

Everyone believes that you have got to look after the unfortunate; you have got to look after your elderly, and the National Health Service and Education as a service continues.

So I do not really think that there are going to be very great differences. I am not quite sure whether you see what I mean.

Peter Jay

Well, all right, let me illustrate it. Mr. Macmillan, Lord Stockton as he now is, said in the House of Lords: “I have long realised that the great figures in my old Party” —and I think he was talking about you, Prime Minister— “have long ago given up Toryism and have adopted Manchester Liberalism of about 1860. Apart from that,” he went on “all this is completely out of date.” Now, isn't that a pretty fundamental issue? [end p30]

Prime Minister

Well, would you like perhaps to translate it, because I am not quite sure what Harold Macmillanhe was alluding to.

Peter Jay

Well, I think you have got to ask him, Prime Minister.

Prime Minister

Well, I cannot. I think it is a generalized issue. If you have particular things, I will try to answer them.

Peter Jay

Well, I will give you what Mr. Heath said. He said: “Every business firm recognises the need for such capital investment by borrowing.” He says that you are not interested in borrowing and this, he says, is of course the difference between the kitchen sink economics of the housewife and the business economics of the entrepreneur. Sounds to me like a fairly fundamental difference.

Prime Minister

Well, it is a totally and artificial distinction isn't it? Of course …

Peter Jay

I think not. He is implying …

Prime Minister

One moment! [end p31]

Peter Jay

I beg your pardon!

Prime Minister

Of course, if you want to buy a house, you borrow. but the amount you borrow is within your income—to be able to repay both the interest and the capital. So in a nation. Of course you borrow. We are borrowing now—as both of those gentlemen know—we are borrowing now; we are borrowing this year, we borrowed every year. You try to keep your borrowing well within your capacity to pay the interest and, as you know, if you do not, then public expenditure rises because of the cost of your debt service. So, whether you borrow or not is not in doubt, but you borrow within certain limits and that we are doing. At the moment, I believe that the amount of borrowing we are doing is about … amounts to about 3%; of our gross national product.

It is not really very different, actually, from the United States, which if you take it on the most nearly same basis is about 4.1/4%; at the moment. So we are not really arguing about whether you borrow or not. We are arguing about how much you borrow, and if we tried to borrow too much and could not get it, then you know what would happen. Governments, in effect, print the money, and that is really why I will not go that way.

Peter Jay

You spoke about loyalty to the leader and you said that when you have a successor you will be loyal to him or her, though you do not presumably yet know what he or she will stand for. [end p32]

Let me ask you about loyalty. When you stood for the leadership of the Party against Mr. Heath, who was then the leader, was that in your opinion an act of disloyalty?

Prime Minister

No. The Party had decided that there should be an election for the leader after the 1974 election.

Peter Jay

The leader of the Party did not seem to think it a good idea that people should stand against him!

Prime Minister

If the Party decides that you are to have an election for the leader, does it not seem to you strange if no other candidate will stand?

Peter Jay

Would you consider it loyal or disloyal if somebody were to stand against you?

Prime Minister

I should not mind at all! I should not mind at all! I came up that way. I cannot deny that way to others. Mr. Heath stood in an election for the leadership of the Party. He was chosen. He was chosen. It was between he and Mr. Maudling. I remember it well. Then there was another election between myself and Ted. This is what we all have to face. It happens when you are at the top. I remember saying to someone comparatively [end p33] recently—we were talking about going down a steep hill—and he said: “Oh, it is very much easier to walk down than up!” and I said: “No! Sometimes it is easier to walk up than down. It is much more difficult to walk down gracefully!” That applies very much to politics, but you cannot deny the very process which brought you in—none of us can.

Peter Jay

When you did stand against him, was it because you had policy objections—there were things you wanted to do with the Conservative Party or was it because you doubted his competence as a leader, or was it simply because you were ambitious to become leader?

Prime Minister

When we were in Opposition, yes, we did have policy differences. I thought that prices and incomes policies had not worked. I did not like them. I thought that they were ruining management and I thought that we had become a much too controlled economy.

Peter Jay

Did you think that while you were in the Cabinet that did those things?

Prime Minister

There were some things that we managed not to do, because some of us did not wish to, but we discussed those things and [end p34] thrashed them out then, and so long as I was there I loyally carried them out, because if I had not, I would have then said: “All right! I have to resign!” but sometimes, some of the more detailed aspects of control, a number of us said: “Look! We are not in government to do this!” and they were not done.

But then we had a pretty traumatic experience in the 1974 Election. I wish with all my heart that Edward HeathTed's government had won. We so very very nearly did. It was, in a way, that particular incomes policy that I think—and a particular schedule to an Act—lost it for us. I wish … I really wish that we had won, because it was very courageous to have that Trade Union Bill right at the beginning, and I agreed so much with everything that we set out to do at the beginning and, of course, I was a loyal member.

Yes, after the election, we had to re-fashion our policies. You have to do that in Opposition, and when we came to refashion our policies at the beginning, then there were certain things—emphases which I had—different from what Ted had. There was an election. I stood and I won.

Peter Jay

When did you first think that you might challenge him for the leadership and stand against him? Was that while you were in that Cabinet and having doubts about these policies?

Prime Minister

No. [end p35]

Peter Jay

Though loyally carrying them out?

Prime Minister

No, no, and I have said so a number of times. Indeed, I have told the story. I thought that Keith Joseph would probably stand. When it was announced that there was going to be an election, frankly I thought that quite a number of people would stand, quite a number, because there were a number of people who could have been leader of the Party. I thought in particular that Keith Joseph would stand. He came along one day to tell me that he would not and I knew then that I must stand. It had not been a long pre-conceived ambition, but I just knew I had to, and so I did. I had not sat and thought about it and had a great ambition. Indeed, I think I doubted whether a woman would ever become leader of the Party which I represent and I doubted very much whether there would be a woman prime minister.

Peter Jay

So it was a fairly spur of the moment decision and not a decision based primarily on questions of political philosophy or ideology. Simply on opportunity. Is that fair?

Prime Minister

No, that is not what I said. I did have different views from Edward HeathTed and we were refashioning the whole policies of the Party. You do that in Opposition. If you have lost, then you have to reconsider. You do not go away from your principles—the strategy … [end p36]

Peter Jay

And Ted Heath had, in your opinion?

Prime Minister

No. You do not go away from your principles is what I am saying, but there are different emphases and you have a look at them again.

Keith Joseph and I were holding very similar views and there were a number of other people who were too, and I thought that view would be represented in any election for the leadership. If it was not going to be represented by Keith, then someone had to do it, and I felt that if no-one else was going to do it, I had to, so yes, it was a difference of emphasis. It was not just opportunism. It was because I felt that that view had to be represented. The result would not depend upon me. The result depended on what other people thought.

Peter Jay

Keith Joseph said in his book that he did not become a Conservative in the true meaning of the sense until 1974. He thought he had been a Conservative but he realized afterwards that he had not.

Now, did you have a conversion or did you just continue to believe the same simple truths that you have always believed? [end p37]

Prime Minister

It is very very easy, I think, when you are in government—and I think this applies to all parties—to get into a position where you take too many powers. I think we had got into that position and I thought that we had therefore to some measure retreated from our fundamental philosophies, and I know Keith felt that too.

You see, we had a prices policy, an incomes policy, exchange control policy, dividend policy, industrial development certificates, building control certificates …   .

Peter Jay

Regional policy.

Prime Minister

Well, we still have some regional policy and will continue to do so. But we just had too many and that very creativeness, that very enterprise that we were talking about which still operates in the United States we were losing, because people were tending to look to government for the decisions and not do them themselves and if you lose that enterprise or lose that sense of personal responsibility or lose that self-reliance, then you lose gradually your freedom, but you also lose your standard of living because the enterprise goes.

Peter Jay

Let us look at the way in which you have changed the language of politics, which is one of the things said about you— [end p38] I think as a compliment—by analysts and historians during your period of leadership.

When—as we are told that you frequently do—you ask “Is Mr. or Mrs. X one of us?” what do you mean by “one of us” ? Are you thinking in terms of identity of political opinion, or in terms of blind personal loyalty, or just in terms of the kind of person like yourself who gets things done?

Prime Minister

Are they hardworking? Do they believe in personal responsibility? Do they believe in endeavour? Do they believe in the voluntary spirit? Do they believe fundamentally the same philosophy I believe in?

In a strange way—no, it is not strange and I suppose it is one reason why I am in politics—those things run across the political parties and it is only when they have superimposed on them a kind of political dogma which consists of the State controlling, that those things tend to become hidden from view.

Peter Jay

Does that mean there are people in the Alliance Parties or in the Labour Party who you would regard as ‘one of us’ in that sense? [end p39]

Prime Minister

Do you know, when I was Secretary of State for Education and I believed passionately in keeping the grammar schools, because I believe they gave opportunity to people from whatsoever background. The one thing, if you went to a grammar school, you had absolutely equal was you got there by virtue of your own ability. Not by what your father was or who he was or anything he could do. By your own ability. And do you know, the people who supported me most were many many people in the Labour Party—not only politicians and councillors, but ordinary people, because they saw it as a ladder of opportunity.

Oh yes, I can see now when I go to some authorities. You will see in the Labour Party two distinct kinds of people. You will see the Trotskyite extreme left who seem to want to control other people's lives into what to me is a horrific way, because that is not what I am in politics for. They want to control them. They almost did control them by 1979. There were so many State jobs. So many people depended upon subsidies. They want to control people's lives and have them in power believing they can make the decisions. And then you get the other kind, which I believe is the kind which I have a lot in common with and I believe they have a lot in common with me. They really were people who I believe became Labour because generally they wanted to support the underdog. They thought that there were some people who should get a better deal and that is why they took that political viewpoint and, of course, in history there were and we were some of them. I mean, things are very different today. They did believe in exactly the same things as I do. [end p40] They did believe in hard work. They did believe in reward for hard work. They did believe in self-discipline. They do take responsibility. They do want home ownership. They are prepared to take responsibility for their families and for their future.

Yes, that goes right across, right right right across political parties and I said that it is the one thing which I believe in ultimately, it is what I believe in in the British people. It is that very ordinary people have extraordinary qualities and it comes out in our history time and time again. It is because we have this individualism that we are the kind of people we are, and it must not be submerged or extinguished by some of the politics which I cannot stand.

Peter Jay

Let us pursue this question of political philosophy. Your Home Secretary, Leon Brittan, said to the Bow Group, I think, last month or the month before: “In the sort of society in which we believe, inequalities flow from talent.” Now, do you, Prime Minister, think that the less well-off in Britain today are less well-off because they are less talented and therefore deserve to be less well-off?

Prime Minister

In the kind of society in which I believe in, it does not matter what your background is. We try to give you the education and if the education is good, it will bring out the ability you have. My worry is that it does not always do so. [end p41]

No, we try to give opportunity to whatever background you have, whatever background.

Peter Jay

And do you think we are in that society today in that people who are disadvantaged and poor are so because they are less talented?

Prime Minister

Not always, oh no. There is such a thing as bad luck. No, not just because they are less talented. Sometimes because we have not brought out the talents within them; sometimes because they may have talents which they cannot translate into use, into the market, because in the end, even here, we are all making a living by selling goods or services to someone else. And there are many many people who have a talent which is marketable. Then they turn their talent into hobbies and they have a very high quality of life, but you earn your own living by doing something for someone else, which they pay for.

I am sometimes bothered that in education there are some talents we do not bring out. We do sometimes bring out the academic talents, but we do not bring out sometimes the talents of salesmanship, the talents of entrepreneurship, the talents for example of getting on with people—terribly important in industry, very important. Perhaps it is that we do not have nearly as much in and out from industry in the education system as they do in other countries. [end p42]

Peter Jay

Another thing that Leon Brittan said—and it raises the question of how successful you have been over these ten years in conveying to people what it is that you are really trying to create in Britain—he said many thoughtful and conscientious people still misunderstand and distrust the Government's ultimate objectives.

Now, after ten years as leader, nearly six years as Prime Minister, isn't that a terrible failure of communication?

Prime Minister

Well it may be, in which case we must try to get them across better.

Peter Jay

Because there was an opinion poll only this month in which 74%; of people thought that Conservatives had failed to solve Britain's most important problems, 64%; thought Conservatives look after the interests of the rich, not ordinary people, and 64%; thought Conservatives do not care what hardships their policies cause. Does that worry you?

Prime Minister

Yes, it does, because it just does not accord with the facts. It was a party which I lead which tried to give ordinary people opportunity; opportunity to own their own homes; opportunities many of them would never have had; opportunities to own their shares in their own industries or other people's; [end p43] opportunities they would never never never have had. It is we who are trying to disperse ownership far more widely among the people and trying to give those things, those opportunities, in which people that start up in business keep a larger proportion of their earnings. We have taken down personal tax; we have given share option schemes. We are doing those things to give opportunity. I do not care two hoots what your background is. What I care about is whether we are trying to give you the opportunity.

We cannot see that people take advantage of it. We can try to give the opportunity. We cannot create new businesses, big businesses. We can try to give loans to people who will start up and in the end, it depends upon—let me say it again—the creation of jobs in large measure depends upon whether people still have that initiative, still have that enterprise to say “I want to start up and in the end, it depends upon—let me say it again—the creation of jobs in large measure depends upon whether people still have that initiative, still have that enterprise to say “I want to start up on my own!”

Peter Jay

Prime Minister, another part of your political vocabulary—who are the “enemies within” ?

Prime Minister

The enemies within are those who do not believe in the democratic system, but who will use violence or intimidation—some other means that democracy—to attain their ends. [end p44]

Peter Jay

Do you think that that kind of language is the best for a Prime Minister—I am not talking about some rabid junior politician—but for a Prime Minister to use, given any Prime Minister's duty so far as possible to unify the nation and to heal the wounds?

Prime Minister

Under the circumstances under which I used it, yes. People could see the violence. They knew of the intimidation. On they knew! they knew! It found an echo. They were watching it on their screens. It was the violence and the intimidation, the absence of a ballot, trying to coerce people to do things which they themselves would not choose to do.

Peter Jay

I know that you do care about uniting the nation. You yourself quoted Winston Churchill saying “We must find a means and a method of working together not only in times of war and mortal anguish, but in times of peace with all its bewilderments and clamour and clatter of tongues” . You said that in July …   .

Prime Minister

It is a marvellous quote isn't it? Absolutely wonderful.

Peter Jay

If you feel like that, why don't you grab the opportunity [end p45] now for talks with the miners without pre-conditions on either side, because isn't it obvious now to everyone—except perhaps you Prime Minister—that they are looking for a dignified way out?

Prime Minister

You made a jump from the last question to this.

Peter Jay

I wanted to link the two ideas.

Prime Minister

May I just say this. You never compromise with violence. You never compromise with intimidation. You never compromise by those who want to use those to extinguish freedom and democracy, because if you do then the very things for which you stand are extinguished.

Peter Jay

But talks without pre-conditions …

Prime Minister

You never … let us go on to that. There have been seven rounds of talks. You might say they have been without pre-conditions. They have all foundered on the same thing. That this leadership of the National Union of Mineworkers will not accept what has always been the case, namely that the greatest loss-making pits, indeed uneconomic pits, shall close and that after due procedures have been gone through and after consultation [end p46] with those in the area, the National Coal Board shall have the right to make the decision. The procedure has been in existence since Lawrence Daly Mr. Daly was at the National Union of Mineworkers. It was put out in a circular to the miners. He accepted that uneconomic pits would have to close. It has always been so since then under all governments. It has foundered on that very thing.

Now, you cannot compromise with the right of a management to manage. You cannot compromise with that.

Peter Jay

Prime Minister, nobody is asking you to compromise on that.

Prime Minister

But they are! There are pre-conditions from the management side to talks. It is that the management shall act in accordance with Acts of Parliament, in accordance with their statutory rights and their objectives and the Labour Party put into law grants, they called it, for the elimination of uneconomic capacity.

Now, I do not want another round of talks to fail. I want them to succeed. I know that there are many many striking miners who would like to get back, who want to get back, and who I believe would accept the normal past procedures …   . Actually, they have been enhanced by the agreement with NACODS, and would like to get back on that basis. Now, I want them to go back. I do not wish their hopes to be dashed by another round of talks which is doomed to failure unless the leadership of the National Union of Mineworkers in any settlement accepts that uneconomic pits will [end p47] have to close and the National Coal Board have the right to manage and to make the final decision. It is because I want those talks to succeed that I do not believe in going in on a false basis.

Peter Jay

Prime Minister, thank you very much for joining us in our studio at the end of such a busy week.

Prime Minister

Thank you.