Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
We are grateful to you that now you have spared your time. You have been so busy; we very much appreciate it.
Prime Minister
Thank you
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
We would like to mainly ask four items and the first question would be your evaluation on the Summit in Toronto and the second one would be Mr Gorbachev's relationship between the Eastern world and Western world. The third question is about so-called &oq;Thatcherism’, and fourth Mr Takeshita is coming very shortly and we would like to ask your view on his visit.
Regarding the first question about your view on the Summit in Toronto. You are one of the most leading leaders of the Western world and we would like to ask your view and most important view on some of the agenda in the Toronto Summit.
Would you also be able to tell us about your view on the strength of economic power in the Western world and the third one would be … [end p1]
Prime Minister
Can I just go through some of the answers first? Otherwise I am going to forget the questions.
First, every Economic Summit which I have attended has always concentrated on making it clear that the best way to get stable conditions in the world is for each country to run its own economic affairs in a sound way. Now there is no substitute for that so you have to run your own economic affairs in a way which keeps inflation down, in a way which constrains your public expenditure to within what you can afford really without having too big a deficit and which tends towards freer trade - that is getting rid of trade barriers - and genuine free trade because there are many many artificial barriers which are not like tariff barriers. Now all of that is absolutely fundamental economic strategy.
Now the fact is that nevertheless some people do not always run their economies in a sound way, and we, for example two years ago, when we were in Tokyo, we started on discussing agriculture, which is a very important part of the world economy.
Now there is not the slightest shadow of doubt that we in Europe subsidise agriculture heavily. We are on about twice to two and a half times the world price. The United States subsidises her agriculture very heavily. Japan subsidises her agriculture very heavily. Now we have said “We simply must discuss this because we are all doing a similar thing” and in fact by doing that, we are upsetting the economies of some of the Third World countries and they can only export agricultural things to us but we have so far not got very far with that and we have put it into GATT. [end p2]
The GATT round is very important for all of us and in Europe as you know, we are going to try to get rid of all trade barriers within Europe by 1992. There is, I think, one other thing which I ought to mention that if you expect other markets to be absolutely open to you to export your goods to them then you must be similarly willing for your own market to be open to other countries to export to you. Now as you know, that is not so. And even with an enormous increase in the value of the Yen which we recognise has changed things quite considerably, you still have an enormous balance of trade.
Now whether this is a cultural difference or whether it is an organisational difference or whether it is in fact that there is still quite a lot of barriers there, but if any countries set out to run their economy in such a way that they expect to have a permanent balance of trade, then it is not fair on others and that still has to be discussed.
At the Economic Summits, we have also discussed other things, for example, when we met after the Chernobyl accident, we had to discuss that and what action we took internationally. When we meet after a bad hijacking or terrorist incident, we discuss that and I expect that we shall discuss it again at Toronto. The difficulty is to get people always to live up to the communiques that we issue because if you are deciding, you see, not to let airlines fly into a country where they have let hijackers go then everyone has got to agree with it otherwise some merely pick up the business.
We have also discussed things like drugs, at the Economic Summit, and also we always have dinner or an evening session [end p3] discussing the great political East/ West problems of the day. So although it is an Economic Summit, it really is a getting together of the Heads of Government with Seven Nations.
First to try to keep the economy sound in the long term because you have to do that, and then to try to get trade to move towards openness because that is in the interest really of us all but it has to be fair as well as free trade. Thirdly to discuss any great political issues of the day which we always do and fourthly to come together to discuss any immediate problems that have arisen of which terrorism, international terrorism, is one.
The tragedy is there are so many people - well too many people - who abuse freedom and the awful tragedy is that it is easier to abuse freedom in a democracy where the other side of freedom is accepting responsibility than it is in a tyranny where they can be much tougher on these matters.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
Recently you have warned us that the Western world should not have too much an optimistic view or approach to Soviet policy, particularly Gorbachev's policy, Government, and regarding this we would like to ask whether you have greatly changed your view on Gorbachev's policy or his Government since you met Mr Gorbachev in London?
Prime Minister
No - I have not changed it at all. I think that what Mr Gorbachev is trying to do in the Soviet Union is very hopeful, very bold, very courageous.
First to admit that the system which they have had for [end p4] seventy years is not producing the kind of standard of living or standard of technology or standard of social services which they had expected, but only a military standard.
It is remarkable to admit that and then to go on to say that the Soviet Union must changes so that people are more involved in the system, there is more personal initiative, there is more personal responsibility. That is an enormous change, it will take some time to bring about and there will be great difficulties as there always are in any major change. And I think it is hopeful.
My task has always been to say that you do not necessarily judge on hopes and intentions. You judge on facts as you see them and in a world in which weaponry takes a long time to design and produce, any wrong decision now or sudden letting down of one's guard could in fact weaken us for many many years to come and so yes, although I am hopeful for the Soviet Union, the reason why I can afford to be hopeful and say so openly is that our defences will always be sure because in my Government we shall always see that they are.
So if by any awful chance things went wrong in the Soviet Union and one got back someone who does not take those views, we should still have our defences sure because although I believe that they wish to concentrate on raising their standard, the fact is that their military might is enormous and continues to be enormous. The fact is that it would still suit them to have that military might and try to separate Europe from the United States which must never happen and the fact is that they are still are very very active politically all over the world and we must be aware of that too so I [end p5] have the two sides, yes, I welcome change when it is bold, when it is courageous. I hope it succeeds. If it does it will be good I think for the whole world but at every single stage the defence of freedom under a rule of law must be sure and that is why I say, “Never let your guard down.” NATO has kept the peace for forty years and it must go on keeping the peace and the only way to keep it is to keep your defences sure.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
And also, the next question regarding to this second question: with regard to your hope for the Moscow Summit between Mr Reagan and Mr Gorbachev, and you have mentioned also about a nuclear weapon regarding the first question in number two, but could you extend your opinion about nuclear weapons particularly the English attitude towards this nuclear weapon?
Prime Minister
Let us deal with the nuclear weapons first. The nuclear deterrent is a fundamental part of NATO strategy and it is such an appalling weapon that it has been, I think, the most effective safeguard and has been the most effective way to keep the peace.
Secondly, you can never disinvent the knowledge of nuclear weapons and this is why I disagree with some people who say that they want to see a nuclear-free world. I want to see a war-free world. If it is necessary to have nuclear weapons to ensure a war-free world, I would keep nuclear weapons.
Now just supposing that you tried to say “No-one should have them”; first the verification would be extremely difficult, secondly, if in the absence of nuclear weapons another conventional [end p6] war started, it would be even worse than the last one because conventional weapons are worse - and since the Iran-Iraq war, chemical weapons have been used - and the race would be on as to who got the first atomic weapon, who produced the first atomic weapon so do not think that you can ever get a nuclear-free world. You cannot dis-invent knowledge. You had far better have the weapon there as a nuclear deterrent and if you are going to have a sure defence, then you do not have a sure defence if your weapons are obsolete. They have to be kept up to date because the defences change.
You know every new weapon induces a new defence, every new defence induces a modification of a new weapon so you always have to, if you are going to be sure, have to keep up to date with your weapons so that is the general nuclear approach.
And as far as we are concerned in Britain we have had our own nuclear deterrent; it is Polaris. It must be modernised. For the reasons I indicated, it will be modernised. We keep it for the reasons I have indicated.
Now on the Moscow Summit, I think it will be a great occassion when President Reagan returns Mr Gorbachev's visit to Washington and President Reagan goes to Moscow. I hope that it will be enormously welcomed by the Russian people because they will see a very friendly President, a very warm and humane President and that should be very good because you know, the general atmosphere matters enormously in politics and I am sure it will be a great success.
I doubt whether they will get the START agreement fully ready for signature because it is much more complicated and time is running along. They may get it far enough for a memorandum of [end p7] understanding but I believe that the strategic weapons agreement will eventually be signed and I hope while the Ronald ReaganPresident is still President. So I am optimistic about that.
Then I am quite certain that they will discuss regional problems because I think one of the very hopeful things that has been happening in the last year is that in the Security Council, the Five Permanent Members are working much more closely together than ever before. Still we are very much aware that some of our interests are different but nevertheless, we are working a little bit more closely together and that too is hopeful. So generally I think that it will be a successful visit even if they have not got all the details of the START agreement ready. They will be well on the way and when the will is there, they will find a way through the detail. But you have to be sure. I would rather have a good agreement which took a longer time that we could have confidence in than one which was not quite right and therefore did not command the requisite degree of confidence for us both.
It has got to be right for the Soviet Union and it has got to be right for the West because whether one agrees with the Soviet Union's system, the Communist system or not - and we do not - they have as much right to defend their own systems as we have to defend ours.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
How do you see in general the prospect of East-West relations and could you tell us something about the present Gorbachev regime which seems to be facing a little trouble inside, like ethnic problems, some resistance against his &oq;open’ policy? [end p8]
Prime Minister
Look, as you free up discussion, &oq;glasnost,’ so of course you are bound to get people who have not been free to talk before and express their views so you are bound to get a good deal more of that coming out. It is not surprising. As you take fundamental economic change, you are bound to get a number of people who want things to stay the same because some of them have a vested interest in staying the same. If you run a thing through the party, then many many people have a vested interest in keeping their jobs through the bureaucratic system. So they will not necessarily be particularly pleased. Others will be pleased. But you always have the two things; when you bring about change some people will welcome it and other people want it to stay pretty well the same because that suits them. There is nothing unusual about this and often the difficulties will emerge before the benefits so I do not find that that is unusual.
I find that many people who go to the Soviet Union now visit it who have not been there for some years, who already find quite considerable change in atmosphere in openness with which people can discuss these matters and that too is very good.
But you know when you said for years - for seventy years - to people “Now, you cannot do anything unless you are told to do it or allowed to do it”, then all of a sudden you say to them “No, you have got to use your own initiative, your own responsibility, we are not automatically going to buy everything you produce. We will buy a certain proportion but then you must decide what you are going to produce, the wages you pay, the price you command and where you are [end p9] going to sell.” It is quite a big change isn't it? Quite a big change.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
Number three question is in Japan many people have been greatly interested in your various views and so it may perhaps be called “Thatcherism”, including various reform in taxation, and particularly we are interested in what sort of programmes might be in welfare society, particularly our society is getting more and more aged with so many aged people. Regarding the above-mentioned matter, could you tell us about your tax reform main points?
Prime Minister
Yes. Let me really say what “Thatcherism” consists of.
First, getting the relationship between Government and people right according to your philosophical beliefs. That means to me Government must run its finance soundly. I say “Get inflation down, live within means and try to leave a bigger proportion of the nation's income with the people who earn it”. So first you run your own finances soundly. That is not enough.
If you are going to get the growth, you have to have a tax system which gives incentives to people to work harder and incentives to your most talented people whether they are in science, in management, in the arts, in entertainment, in services, to stay here. So incentives are very very important because it is ordinary people who create enterprise - not Governments - ordinary people, so it was very very important to get our high rates of tax down.
When we came in on earned income, the top rate of tax was 83&pcnt;. We have brought it down to 40&pcnt;. When we came in, the top rate [end p10] of tax on savings income, investment income, was 98&pcnt;. We brought that down to 40&pcnt;.
When we came in, the top rate of corporation tax was 52&pcnt;. That has come down to 35&pcnt;. When we came in, there were about seventeen different rates on capital transfer, gift taxes or estate duty - capital transfer taxes - we brought that down to one and we also have brought down the capital gains tax to the same as whatever level of income tax you are paying. We brought down the standard rate of income tax, which is the one most people pay, from 33 pence in the pound to 25 and we simplified the whole thing so there are only two rates or tax: now 25 pence and 40 pence. We replaced seventeen rates of capital transfer tax which ran up to 75&pcnt; by a single rate of 40&pcnt; on inheritance. We have also abolished five different taxes. So it has been a simplification of the tax system plus a tremendous boost both to enterprise, to earnings and a tremendous boost to savings and investment. Now that was the second thing. First, get Government finances right, second, incentives to enterprise at every stage in the tax system because industry is a living structure of human beings so you need personal incentives and company incentives.
And the third thing is that you have to get the general framework of law and regulations right. People have not the capacity for enterprise if they are tied up with too much red tape and so we had to go through, do a lot of deregulation: prices policy, control on prices went, control on incomes went, control on foreign exchange went, control on dividends went, a lot of small industrial controls went as we began to free up the whole system.
We also have been quite strong to ensure that we continue to [end p11] get competition and one will find that both the professions and industries will make quite nice cosy arrangements between themselves if they like, you know to what we would call “carve up the market”; we do not allow that because it is our policy to ensure that we get competition. So we have freed up both the professions, cut out some of the contracts in restraint of trade so that we get competition.
And also in the background of changing law, the trade unions had enormous powers which enabled them to hold certain industries to ransom and as you know, we have fundamentally changed trade union law so they can do what is reasonable but not merely use naked power to try to deprive other people of a living. So that has been quite a major change in the law; to have a right framework of law within which people can operate.
And the fourth thing is: because we believe that Governments do not excel at running industries themselves and if they did, most of them would be in business, not in Government; we have privatised seventeen previously nationalised industries and they are going much better. They are freer. They can determine their own investment, they can determine what they do, they have got incentives and all of a sudden they have got pride and a good deal more success, so all of those four things have been part of Thatcherism and it is really to restore the things which made Britain great.
What made Britain great was the character of her people, the initiative, the integrity, the enterprise and it is all coming back and it is too and it has been a great philosophical point which is happening, which if I might put it this way, is the fifth point, that by the time we come to the end of this century, one wants [end p12] everyone to own some capital. We call it a &oq;capital earning democracy’. Sixty-five percent of them now own their own homes. About one in five own shares. There are massive numbers of savings accounts, as you know, building society accounts, bank accounts and it is whereas when I was young, very few people had what we call expectations from their parents - that meant they would be left something - most people now, and by the end of the century will have expectations as you know the house comes onto the market for sale and then they will have something to leave to their children. This makes an enormous difference across generations.
I might go onto a sixth point as we are talking. It has been part of one's philosophy that you look to yourself first for your standard of living and responsibility for your family and the state comes in when, if you are sick, unemployed, too old, you cannot look after yourself but we have a system now under which everyone has to contribute to one state basic pension - everyone - that is a basic pension. But everyone has to contribute to a second occupational pension and if they do not have that second pension where they work, they have to contribute to a second state pension. So 70&pcnt; of people retiring now have two pensions: the state pension and their second pension. Fifty percent of them now retiring own their own homes so you see with increasing older population we nevertheless have 50&pcnt; of them retiring own their homes, 70&pcnt; of them now retiring now have two pensions. We have got inflation down so their pensions keep their value and the state basic pension is inflation proofed. I think myself, quite a lot of people do part-time work … after they have retired which I think is very good for them. It obviously keeps [end p13] them with an interest and sometimes, you know, you find that the older population has some skills which the younger population do not have but certainly you are right in that we shall be coming up to a time when the population of retirement age will be bigger in proportion to the population of working age. This is one reason why one tries to arrange that it is right to expect people during their working years to make considerable provision for their retired years.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
Looking at a kind of silly question maybe: now seeing that we are admiring the success of “Thatcherism” presently, what is your goal from now on and the goal of “Thatcherism” in the future? Is there any specific theme or …?
Prime Minister
It is the wider extension of the &oq;capital-owning democracy’. It is by people out of their own efforts, able to build up more and more greater security for themselves, it is the wider ability for initiative and opportunity. It is to extend opportunity to those people who have not yet fully profitted from it. That is why we are concentrating very much on educational opportunity, why we have some problems in some of our older cities where they were built upon industries or in a geographical position which had immense significance at the time, either their geography or their industries and that same enterprise which developed it, seemed to fall into disuse during what I would call the &oq;the Socialist years’ and so they did not naturally rejuvenate themselves by producing the goods contemporary to our times as their forefathers produced the goods [end p14] contemporary to their times. Now you know, you are very very good at managing change.
We also have one other thing which I am not sure that you have had. I do not think any other country in the world has it to the same extent that we do in the Western world. Immediately in the post-war period we had a fantastic housing programme and I do not think we got it right. We built enormous council estates - that is, as you know, owned by the local authority - so that something like 30&pcnt; of our houses are owned by the local authority and these great big estates are people all mixed up together, people of all backgrounds and so on mixed up together, and it really is not the best housing arrangement and many of them built in very tall blocks. They are producing all kinds of problems that we did not have before and so we are having to tackle those, and that was one reason why I said, “Look, these tenants must have the right to purchase these houses because otherwise you are going to get great groups of people who can only rent where as you know, otherwise they can buy their houses.” And we are tackling this too. Sometimes, the very tall blocks, it is not very easy for a mother with a young family to live on the 12th, 13th, 14th, 15th floor of a block of houses.
We have learnt a lot from our past errors and we are trying to steadily redeem those things so really, at the moment, it is extending this philosophy and opportunity to people who so far have not been able to profit from it but all the time saying to people, “Look, you are primarily responsible for your own future. The state gives you the framework within which you can do it. It is there to give you an excellent education because this is how you learn to use [end p15] your own talents. We will be there doing a certain amount of training because all of industry is getting much more skilled. We can only do it in conjunction with industry so by the time you have got - the state with us has a basic income if you are destitute or unable to help yourself - we have something that we call now &oq;income support’; it was &oq;supplementary benefit’ so they do not need to worry about that and they have to be housed. And it is extending opportunity to those people so they might use it themselves.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
The Japanese Prime Minister, Mr Takeshita, is coming very shortly and could you tell us what sort of things you expect from his Government and are there any special problems - specific problems - between Japanese Government and the English Government?
Prime Minister
First, we shall discuss the general world economic situation obviously but as far as the relationships between us - I am very pleased that Noboru Takeshitahe is coming, very pleased indeed and that we are to have the chance to talk before the Summit. Second, we are very pleased with Japanese investment in Britain. When your companies come here with the kind of management they bring, your kind of management and your approach goes very well with the response it gets from our people. We like the way you tackle it particularly when you have young people coming to apply for jobs, you know, you see them with their families, you explain what is expected of them and they respond. And you have done an enormous amount by saying “Look, we want one union” and you got it usually but it is excellent. Japanese management together with British response works [end p16] extremely well. They are very successful, they are very happy and I went round the Nissan plant and as I went round I was most impressed with everything I saw and on the shop floor, as I went round, one of them said to me “You see, Mrs Thatcher, everyone is given responsibility here”. You know it did not depend upon an inspection at the end. Everyone was responsible for the quality control for the particular job he did. Everyone was dressed in similar boiler suits. There was no difference between management and workforce. It was very very good indeed and we welcome more. We are very glad that the second language in Japan is English because it really does make us a very very good base for Japanese companies straight into Europe.
We are a very stable country. We are. We are very stable politically which is extremely good. So I am extremely pleased about that and we will welcome more.
Obviously we are going to talk about trade because we still feel - as I said to the Japanese businessmen - we have a thing called UK Japan 2000 - Japanese businessmen and British businessmen, they come to me here for lunch once a year, and I said to them, “British people have been used to an open market system for years. We had an empire; it was an empire built on trade. People went out from our country to do trade. The flag followed the trade. It was not the other way round. When we got there we found that we had to do certain things and the flag followed trade, but for years we sold goods to them and they sold goods to us so the British housewife had goods coming into very shop from everywhere in the world and she did not look and say, “Well, this comes from India, this comes from Kenya, [end p17] this comes from South Africa”, she looked at it in terms of value for money. She did not look as far as its country of origin was concerned. “Do I like that?” and then she would buy very much on terms of value for money.”
So we are used to having an open market. I think it is very different from the Japanese culture. We are also used to having an excellent system of distribution.
Our retail system of distribution is one of the best in the world. If your goods come here, they can almost plug straight in to a system of distribution of shops all over the country and get them in very easily and distribution of cars. So I shall talk about that because I said we are much more open and I think we are the world's pre-eminent financial centre because we are much less parochial than anyone else. New York is terrific but it is not quite at the centre of things the same as we are. We are used to dealing with the whole of Europe, we are used to dealing with America. We are used to it.
We have had to be international. Our very essence has been international. At the time of Elizabeth I Britain became international. It is just in our bloodstream. So we are used to dealing on a world basis. Now that gives us a fundamental welcome. I mean Japanese banks, stockbrokers pour into London and this openness has made us one of the most powerful financial centres in the world. But we do not quite get the same reciprocal arrangements in Japan yet. Have we got two or four licences on the Tokyo stock exchange? Four licences on the Tokyo stock exchange. You have got masses here.
We still have the problem with whisky. You know ever since I [end p18] have been here we have been trying to tackle it by quiet negotiation. We did not get anywhere so we had to go to GATT and then you come up against a kind of less than international outlook in your Parliament in Japan. We are internationally minded. That is part of our strength, it is part of our influence. But we do try to say that we must get the same kind of response from other people as we give. It takes a time.
But I say to our Japanese businessmen who come here that we as a country, we are worth knowing, you know, because of this terrific international approach. And whenever I go to NATO, when one goes to a big international forum, you do recognise very quickly those nations who have historically an international approach, I suppose because we have kept it more than anyone else. Of course it has been taken over by the United States now. Let me say I think we should all be immensely grateful to the United States as the biggest most powerful free country devoted to free enterprise and freedom in the world, for the role in world affairs that she takes, tremendously grateful and we should be prepared to say so more often.
So we shall talk very generally in these terms but you see we must think much much more of the world on a global scale. I fly around the world now calling in - I had to go and sign the agreement with Hong Kong, over to Peking, one year. We did it before Christmas December 1984 and we flew from here stopping in Karachi, Delhi, and then over to Peking, signed that there, and then down to Hong Kong and then I wanted to see President Reagan so we went round the other way. We had to stop at Guam, Honolulu, and then a [end p19] leap over to Washington.
Well the whole thing, stopping to do the signature, to do banquets, receptions, what have you, in Peking and then a couple of days in Hong Kong, and then a quick visit to Guam, Honolulu and President Reagan, I was back in six days! You know that really was right round the world. You know, I think it brought it home to me more than anything else; six days - my goodness, the number of countries I have called into!
So we have to start thinking in global terms much more and it is happening. People are travelling much more; it is happening and that is good so I am quite optimistic.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
Is there any specific problem you would like to raise and resolve in discussion with Mr Takeshita?
Prime Minister
No more than I have indicated: the kind of freeing up of some things.
Hamhisa Kato and Tosnio Omata, Yomiuri Shimbun
Let me have one short question on your daily life here. Could you tell us a little bit about your daily activities No 10 Downing Street?
Prime Minister
We work most of the time. Tuesdays and Thursdays I am always in the House of Commons to answer questions in the afternoon. Thursday morning it is always our main cabinet meeting of the week. We have usually at least two other big cabinet committees in the week, one the economic committee of the cabinet, the other the [end p20] overseas and defence committee of the cabinet, both of which I chair. I should think in any week we will have seven or eight meetings on future policy concerning some department or another where the ministers get together formulating future policy or dealing with any problems that have come up. I try to go out and do things usually on Wednesday. For example this Wednesday morning I shall be going out to Great Ormond Street Hospital to do something.
There are several things on a Wednesday that I will go out and do. And on a Friday - every third Friday - I am in my constituency or out, for example last Friday I was out on a regional tour in Nottingham. Yes, so one Friday I will be out on a regional tour over the country as a whole, one Friday I will be in my constituency, and the other two we cope with whatever happens. But the week is pretty well set.
All internal things on Monday mornings: something with the party, something with ministers, we might fit in one thing like this and usually a luncheon of several ministers so that we can just get together and discuss things, and then it is a massive number of meetings, a massive number of speeches - I will be visiting Scotland shortly, twice, very soon - speeches to dinner, to organisations and every night a massive amount of paperwork which I think - Monday nights and Wednesday nights are the worst because we have questions and a lot of meetings the next day, it can take two and a half, three hours every night.
Weekends I think I am usually working at least eight to twelve hours at weekends on paperwork either to catch up with the correspondence or things one has not done in the last week and [end p21] prepare for the next week. And of course do not forget we have constituencies which is why I say we go to mine. But the constituency correspondence comes in every day.
We have about 4,000 letters in here a week and we have a policy unit in here which I see once or twice a week. Then I have a political group as well and they come in on certain meetings as well. That is quite apart from interviews, television, et cetera, so we keep going.