The dollar is losing value, oil prices are falling, what future do you foresee for the international economy?
Although growth in the major industrial countries has been disappointing over the last six to nine months, the outlook for the world economy is favourable. The short term effect of the fall in oil prices has been reduced exports to oil producing countries and depressed investment in the energy sectors of the major economies. But it has also contributed to a reduction in inflation rates in industrial countries to their lowest levels for twenty years and this has allowed nominal interest rates to fall. In the second half of 1986, therefore, we can hope for a resurgence of growth—without a pick up in inflation—first as consumers' expenditure accelerates in response to lower inflation and increased income of oil consumers, both individuals and companies, and then as investment responds to higher consumption and lower interest rates. Some delay before the benefits of lower oil prices become apparent should come as no surprise: output responded with a similar lag following the oil prices rises in 1974 and 1979.
Continuing major current account imbalances and the debt problem still represent risks to a favourable outcome, and the leaders of the Summit countries agreed in Tokyo in May to continue to develop and implement policies to diminish these risks.
Do you think that the cut in oil prices will be irreversible?
Few price changes are ever irreversible. The oil market is particularly volatile and I would not wish to forecast prices for the next few months, or years. Present low prices, however, and the possibility that oil prices will for some [end p1] time be lower than we experienced in the early 1980's, offer important economic opportunities for industrial nations like Italy and the UK.
Unemployment is still a major problem for the European economy. What measures has your government taken to combat it?
The level of unemployment obviously concerns us greatly, but it is very important to realise that except to a very limited extent, governments cannot create jobs. Real, long term jobs are only created by business and industry. What government can do is help to provide an economic climate in which businesses can grow and entrepreneurs can thrive. We have pursued firm financial discipline and have contained government borrowing. As a result inflation, which had been so destructive of employment in the past, is now at its lowest level for nearly twenty years.
That is not all. We have been reducing the role of government in many areas of the economy, and have swept away much needless regulation, allowing markets to operate more freely and efficiently. It is clear that our policies are working. More than one million new jobs have been created in the United Kingdom since the Spring of 1983, which is more than is in the rest of the European Community combined. The reason this has not yet shown up in the unemployment figures is that over the same period there has been an even faster growth in the labour force with a bulge of school leavers and many married women returning to work.
We have introduced measures to help those groups who have been most severely affected by unemployment. We launched a two year Youth Training Scheme earlier this year which will be a large step towards our objective that no young person under eighteen need be unemployed, and we have also expanded our [end p2] Community Programme to help the long term unemployed, offering them work for us to a year on projects of benefit to the community.
Protectionism is still thriving in the Community. What are your views on this subject?
Protectionist sentiment may still be thriving in the Community, but insofar as the British Government is concerned protectionism certainly is not. Together with your own Prime Minister, I agreed at the Tokyo Summit earlier this year that trade liberalisation is the best way forward. I support fully both the completion of the Community's Internal Market and the early launch of a new GATT round of multilateral trade negotiations.
It is now a few years since your Government has adopted the policy of privatisation. Can you give us a resume of the results achieved?
We have already succeeded in transferring to the private sector more than 20 per cent of the state-owned industry we inherited in 1979. Twelve major companies employing around 400,000 people have been privatised, including British Telecom, British Aerospace, Jaguar, and Cable and Wireless. One of the important results of our programme is that more than 80 per cent of these employees have become shareholders in their companies. The general public has also seized the opportunities we have provided to become direct shareholders in some of our major businesses. The number of people in Britain directly owning shares has doubled in the last few years, and the privatisation programme has been one of the main reasons for this.
The competitiveness of the countries of the Third World on the international market is increasing due to cheaper labour. How do you plan to make Britain compete? [end p3]
Third World countries are able to produce labour-intensive products more cheaply than we can in the major industrialised countries. We also should not underestimate their competitiveness in products using standard technologies and capital equipment. It is in these products that their comparative advantage lies.
Ours on the other hand, lies in producing knowledge, technology and design-intensive goods and services using our highly skilled labour-force and management and the exploitation of our technology. This is the direction in which we must be continually moving.
Both in competition with the Third World and industrialised countries, it is important that our businesses must be constantly alert to market opportunities and technological possibilities. This requires an attitude of enterprise, flexibility and willingness to change.
The UK's Government's policy is to provide a climate which encourages enterprise and greater responsiveness to changing market conditions. This requires a macroeconomic policy geared to the reduction of inflation and greater incentives through the tax system and a policy on the supply-side of the economy which reduces rigidities in capital and labour markets as well as product markets (for example, in the creation of small firms).
Mrs Thatcher, what is your definition of Europe: a conflict of interests or a common destiny, a geographical entity or a political experiment?
Europe is a family of nations growing together. And far more important than the occasional family quarrel is our growing sense of common purpose, the realisation that the Community is vital to preserving our freedom and prosperity; that we can only compete on world markets by creating a single large market of our own and by promoting technological [end p4] collaboration; that when we speak with one voice in world affairs we carry much more weight than any of us could do on our own. So rather than defining Europe I want to get on with the job of making Europe work for all its citizens.
Is there a growing awareness in Britain of “being European” ? What is your government doing in order to encourage this feeling?
No country has a finer record this century than the United Kingdom in the sacrifice it has made to defend the cause of freedom and democracy in Europe. So we need no lessons on being European. But a generation that takes peace in Europe for granted will only identify themselves as Europeans if the Community counts for something positive in their lives. They will not support a Community which simply adds to the already heavy burdens of bureaucracy and taxation. That is why, during our current Presidency of the Council of Ministers, we are concentrating on policies designed to create jobs and prosperity; policies designed to remove barriers to trade; and policies to give value for money from the taxes we all pay to the Community.