Intent on transforming Britain

In the week of the Westland debate and Industry Year's launch, Margaret Thatcher devoted an hour at Number 10 to a wide-ranging interview with CBI News. George Bull encountered an ebullient Prime Minister, and tackled her on interest rates, the coming Budget, and the long list of tasks she is still keen to pursue …

‘Things carry on as normal,’ said Mrs Thatcher when she greeted me at No. 10 during a week of particularly stormy political weather. In our extensive conversation she was certainly her normal cool and assertive self, responding to questions ranging from the buoyancy of interest rates to the squalor of inner cities with pungency and passion. When I asked whether the Government is still bent on radical national reform, she said emphatically yes, there is a great deal more room for radical measures. And manufacturing industry is one of the areas where she is clearly looking with new urgency for vigorous growth and change …

‘You've got to have a lively, dynamic manufacturing industry,’ she told me. ‘I hope more of our able young people, science-based, will have the commercial flair, the ability and the acumen to create more manufacturing industry in this country. Ministers and all our excellent civil servants can't pour out of Whitehall one day, with bowler and brollies, and say now we are going to start sixty new businesses in every new town. We wouldn't know what to do! We are administrators. It is for us to create the right conditions for enterprise to thrive.

‘Manufacturing is every bit as important, perhaps more important, than service industries, because a lot of services depend on thriving manufacturing. But for about 20 years the technology has meant that one can produce far more with fewer people, and that does mean that you also have to look to services. You are going to get more people employed in manufacturing by branching out into new products or by taking a bigger share of the market. I want a dynamic manufacturing sector, with young people saying “We are going to challenge the Germans, the Japanese.” Why shouldn't we? It all started here.’

Mrs Thatcher appeals to the young talented graduates, still tempted abroad by lower taxes, to stay here and help achieve the country's industrial regeneration. Some of them, she admits, are being drawn to the City rather than industry, in pursuit of the biggest salaries and this she deplores—along with ‘the one or two very bad cases of fraud which have not yet apparently come to court because of difficulty in getting the evidence.’ She defends the ‘honourable behaviour’ of the vast majority in the City, and she stresses the enormous contribution of the City as a wealth creator ‘to the advantage of Britain as a whole’. Nonetheless, she said, ‘on salaries in the City I am the first to say that this does cause me great concern. I understand the resentment. If I feel strongly about what they are taking as compared to what Cabinet ministers are taking, then look at the people who are struggling to get work … But I think it will change this coming year when we get this terrific competition and all the fresh air.’

Mrs Thatcher is enthusiastic about boosting British manufacturing industry. ‘We've got to produce spanking new designs, fantastic workmanship, new products,’ she said, ‘to increase output and improve the prospects for jobs.’ So why not heed the CBI's calls for lower interest rates, a change in the ‘tax on talent’ (increased contributions for the higher earners on National Insurance charges), and a substantial Budget allocation to tackle unemployment, I asked. Had not opportunities been missed for cutting interest rates? Must the priority in the next Budget be tax cuts?

On interest rates, the Prime Minister stresses: ‘I do not want to keep them higher any longer than is necessary. But if you've got money going faster and faster, if you've got money going faster and faster, if you've got a great difference in the interest rate in the market and interest rate at the Bank of England dealing rate, then you have to do something about it.’ The mid-January rise had been caused by a combination of a fall in the value of the pound against the Deutschemark, very large bank lending and an inter-bank rate well above the base rate, with the danger of round-tripping. ‘There's endless argument as to why you might have a temperature. If you've got it you've got to do something about it.’ In any case, Mrs Thatcher asserts (with a side-swipe at the perils of inflation and a reminder that the effect of interest rates depends on the extent to which your business is borrowing): ‘One per cent on interest rates, if it persists for a whole year, costs industry £250 million. One per cent on wage rates is a billion …’ But, she insists, ‘I don't want high interest rates. It affects manufacturing industry, small businesses and farming, which we have to watch very carefully.’

Nor does the Prime Minister want industry to forget, she said when I pressed her about insurance and other company costs, ‘that industry, if it looks at itself as a whole, will find it has got an extremely good deal from this Government. And all the highly paid people have had the biggest tax reductions.’ She cites the new share option scheme, ‘knocking down’ the national insurance surcharge, and realigning national insurance contributions as between employee and employer. [end p1]

‘When you look at the burden on employers in Holland, in France, in Germany, I don't think you will find ours as much. Certainly the interest rates are lower in Germany, although the amount of pensions, for example, is far higher. And, if I might say it, you know why: German, like Japanese, employers keep down their unit labour costs, and that's partly why they get more business.’

But to help the country re-create the ‘lively, dynamic manufacturing industry’, which she wants to see, I asked Mrs Thatcher whether she and the Nigel LawsonChancellor should, as the CBI suggests, earmark up to £1 billion of the funds available in the forthcoming Budget to tackle the unemployment problem? And perhaps do this rather than cutting taxes?

‘All we can do,’ argues the Prime Minister, ‘is to create artificial jobs. We can do training—and we've got the biggest training scheme ever. We do community jobs, and try to get people back into the habit of work. But in the end the creation of wealth has to come from the private sector.

‘Just let me ask—and I do say this to the CBI—who is urging me to spend more money, and not to use it on taxation? Everyone in the top half … And let me tell you, a nurse on £140 a week pays £40 in tax and national insurance contributions, and I think she pays too much. So just you in the top quarter have some regard for those in the bottom half who are paying far too much tax. If they pay less tax then maybe they can spend more money on goods and products for which, if British industry is right up front, it can get the business … It's too jolly easy when you've done very well out of tax concessions to say “don't go any further” .’

After this provocative admonition, Mrs Thatcher sang the praises of British industry, as well she might. Industry is changing for the better, in its response to the new freedoms created by the Conservative Government: on prices, on wages, on dividends, on investment overseas, on where to set up plant. ‘Industry is responding well,’ she said. ‘It wouldn't be making increased profit unless it were. The CBI has been very helpful. I want more response, because I want more manufacturing business.’

Response to what? In Mrs Thatcher's view, response to the changes brought about by her Government, which she claims to be just the beginning of the transformation of Britain. Still on the agenda, she told me, is a programme inspired by her belief that ‘we still have not got back sufficiently the spirit of enterprise. A tremendous amount has been done but we must bring home to people more than ever before that democracy depends upon the acceptance of personal responsibility, personal initiative, personal enterprise.’

‘It is said I'm an autocrat—I'm the very reverse. I am the strongest believer in making men and women more powerful in their own right by virtue of their own independence.’

And in detail for the future she wants to see: ‘Still more people owning shares … we have done a fantastic amount, but not yet enough.

‘The internal market in Europe freed up—for financial services, for insurance, for young people to establish themselves, for professionals, for the transport market … that has been the spearhead of our attack. We are firmly behind companies voluntarily getting together through the Eureka programme, across Europe. They have got to be certain they have access to the whole market. Europe is not a protectionist club. If it were ever thought that being pro-European meant being anti-American, that would be the greatest disservice to this country of all. The biggest thing is to open up the internal market in Europe.

‘Privatisation taken further … There is still far too much public sector property in this country …

‘More of the housing out of municipal hands into the hands either of personal ownership or housing associations …

‘After the Roskill Report and the Green Paper on rates and the Social Security White Paper, a Green Paper on the reform of personal taxation all going in the direction of a people who are individually strong …’

But most of all, Mrs Thatcher is saying, she wants to end her term of office with Britain rid of ‘the threat of Socialism’. ‘At the end of this Parliament,’ she says vehemently, ‘we will have got back to the same percentage of gross national product coming from the public sector as was the case in Harold Macmillan 's day … Back to that! That was the extent to which the country had gone further Left.

‘Socialism is not suited to the British character. We don't like being pushed around. I think that is really the reason why we were returned in 1979 and 1983. People want two main parties both devoted to free enterprise as the support for freedom and upholding a strong rule of law.’

Most of us, I suppose, would say Amen to that.