I would like to start with foreign affairs and Mr. Gorbachev , Mr. Yeltsin , whom the Sunday Times saw recently, takes the view that perestroika is in dire jeopardy because the President has not rooted out the Communist Party apparatus from top to bottom. If that is the case, of course, it makes the odds of perestroika winning, succeeding, all that much more difficult, perhaps impossible. What chances do you see, looking from your perspective, of Gorbachev winning through? Prime Minister
I think Mikhail Gorbachev he will win through. I do not think you can expect a change of that magnitude to take place that quickly. You are dealing with people who have never been given responsibility under any regime, never been given any initiative and who have been punished if they did anything that they were not instructed to do. And I think to expect a turn-round of that magnitude in a short time would just be totally unrealistic.
I think they have had a big political turn-round, far greater than most people ever thought, far greater than I thought, which has been terrific. And I think the people there, because of their background, somehow thought: “Well now, the government has given us the big political turn-round, the government will fill the shelves with goods” . And that is not so, you have got to have a totally different form of work, you have got to have a totally different organisation.
But they have not got managers who ever really managed a company in the sense that they have been able to decide what they produce, decide what they buy in raw materials, decide what they pay people and have the responsibility for marketing and selling. That is a very big change in attitude and the change in attitude is the biggest thing to achieve.
They will do it because they will have some extremely bright and enterprising people who take advantage of the new freedom. But it will take quite a time to spread.
I think Mr. Gorbachev has the most dominant personality, added to the most visionary ideals for the Soviet Union. That combination I do not quite see in anyone else. He is pursuing policies which will bring the Soviet Union a prosperity and an importance, far greater than they have ever had before, and I believe he will get through. Interviewer
But you did preach patience when you were last in Moscow, maybe the people will not be patient? Prime Minister
That is possible, but I think that they will have a kind of deep common sense and say: “Well, if Mr. Gorbachev, who has such authority as a world statesman and who had the vision and courage to see what was wrong, is taking this amount of time, together with the people, whoever else is likely to be able to do it quicker? And any alternative, would they not be rather likely to take us back into the dark ages from which we have emerged and would we not then be likely to lose some of the political freedom that we have gained?” Because the political freedom they have gained is enormous.
So I think you know, life when it comes to making a choice is a question of alternatives and when you actually come to the point of decision then I think that they would not wish to lose the enormous new freedom of speech, discussion, movement which they have got. Because the atmosphere there is totally different, you feel it, you feel it. Interviewer
And if he succeeds, do you see Russia or the Soviet Union, whatever form it takes, being a totally different member of the world community than anything we have known, obviously in the military sense, yes? Prime Minister
Oh yes, because there have been no elements of democracy there, the only element of democracy they had was under Kerensky when he did have an election. And people forget that Lenin had a coup against Kerensky . Interviewer
So you see this as a democratic country maybe one day? Prime Minister
I hope to see it as a fully democratic country, yes. Interviewer
Under Mr. Gorbachev 's influence? Prime Minister
Yes, I hope to see it a fully democratic country. Interviewer
Really? Prime Minister
You sound surprised! That is the aim, that is the aim. He started the whole revolution, it is a revolution towards freedom, but really tried to do it in the first place as reforming communism. That is impossible, and so now he is going to a multiparty system and has of course been preaching a totally different philosophy. Communism is a philosophy that government's decisions are the only source of authority, they did not recognise human rights as coming from anything more fundamental than the state, which they do. So much has been changed. Interviewer
But does not Mr. Gorbachev remain a communist, or is he the first of the post-communists? Prime Minister
Mikhail Gorbachev He does not remain a communist in the strict Marxist-Leninist sense. You have only to read his speeches to see that he is trying to reduce the control at the centre and give more initiative and power to the people, including private property. It is an enormous change. Interviewer
Because he realises the old system does not work? Prime Minister
The old system does not work and he realises that people have to have some incentives. But they also need some kind of knowledge and experience of how to do it. You frequently in life know what you should do but you do not know how to do it and it is the how that is the difficulty. He is trying to get much more initiative, people to take responsibility, more private property, people to have their own land and to cultivate it. But at the same time you have got to get rid of quite a lot of the bureaucracy and then you have to put a general framework of law in its place. That does take a time.
I think we do not realise how long it took our institutions to develop and how lucky we are that they have never been broken down completely. When you think our system of law developed from the old equity, the King's Council, the Common Law Judges, by precedent, developed over the years. This institution, the majesty, the development of the law, the increasing freedom, the increasing equity, has taken place over hundreds of years. Parliament has developed over hundreds of years. So we have one of the oldest legal systems except that ours came to some extent from Roman Law, for which we are eternally grateful, from the Roman-Dutch Law, quite different from the Napoleonic Code which later took a hold on the continent.
We have had this majesty of the Common Law and of independent judges developing over the years, it has never been ripped apart, we have never been occupied, and we have had the Parliament. Interviewer
It took us long enough, did it not, with antecedents? Russia has none of those antecedents. Prime Minister
All our institutions are intact. This sometimes is why we differ from Europe. Our institutions are much older and so the institutions of freedom, the institutions which are there to make freedom work are so much older and they are absolutely ingrained in our personality. A lot of Europe has not got that. Interviewer
So how can he win quickly without any of those. Prime Minister
I think you are getting an advance already, you are getting an advance in the political liberty, people can come out and leave, they can travel, they can discuss openly and freely. You have seen things that we would never have seen. Interviewer
You think it will be self-generating? Prime Minister
If he were to fail, all the bets would be off in terms of our attitude to European affairs, East-West affairs? Prime Minister
If Mikhail Gorbachev he were to fail, the uncertainties would be far greater even than they are now because when you get great changes, you do get a period of great uncertainty. Yes, we should have fundamentally to reassess everything. Interviewer
Which brings us to the German issue, why that is important that it is resolved with everyone happy with the result? Prime Minister
It is important that it be resolved, resolved is not quite the right word, it is important that it is carried through, the unification of the two parts of Germany, the Federal Republic and East Germany. It is important that it is carried through, taking into account and planning for all the other international institutions, of which Germany has been a part, NATO, it is important that the Four Power nature of Berlin and what it has done in keeping Berlin a free city, be fully recognised. Everything that the Allies have done to protect freedom which we re-won, or which we in our country held, everything there which has led to us being stable, secure and bringing freedom to many countries who had never had it before should not just be thrown over or disregarded.
All of those things must be taken into account and taken into account now. This argument is winning, I am happy to say, this argument is winning. The Douglas Hurd Foreign Secretary and I worked extremely hard at it, with all our counterparts, saying: “Look, you simply cannot just say that Germany will unify and everything will have to adapt afterwards” . There is far too much at stake for that. I am happy to say our view is predominating, the Foreign Secretary saw, after the George Bush President and I spoke on the telephone when he was making his proposals for further reductions in armaments and we got it quite clear that the 195,000 was a floor, not a ceiling, a floor. And also they had a discussion when the Foreign Secretary went over there about getting the framework. We were the first people even to be talking in this way.
Isolated we were, yes, isolated and right. And everyone is now coming along with us. Interviewer
Why the German popular press says: “Maggie doesn't like us” ? Prime Minister
Isolated and right, because you cannot just disregard NATO, you cannot just disregard what the Four Powers have done for Berlin, isolated and right, and everyone now coming our way.
So yes, when we were at Strasbourg, Francois Mitterrand and I kept in very close touch and it was there that we decided to have the first Four Power meeting of the Berlin Four, of the Ambassadors meeting together, because he and I were worried that these things were not being taken into account.
We have been absolutely clearly in the lead and now everyone is following us. And it was a great victory that we managed to get the basic framework in Ottawa, which I am afraid was far too little reported in this country, far too little. Sky reported it and CNN, the country's television here had its eyes turned totally on South Africa. But there were fundamental things going on in Ottawa and we decided to set up this framework and that framework is good because it is the United States and the Soviet Union and Britain and France, and then we discuss with Germany. Whether it is two Germanies or one Germany, that is the five or the six, does it really matter? It is that that is the framework on which we work out the implications of the unification of Germany.
And then immediately Tadeusz Mazowiecki the Prime Minister of Poland came here and said: “Look, you know full well the difficulty about the Oder-Neisse Line and that there are some people in Germany who will not affirm it, although it is in the Helsinki Accords,” which is another thing that we said in Strasbourg, it was put in the Communique—the unification of Germany will come about but it must be done bearing in mind the commitments to the other Alliances and the Helsinki Accords. But it is not enough to say it, someone had to do it, and that is what we are now doing. And so Tadeusz Mazowiecki the Prime Minister said: “It is no earthly good, the Helsinki Accords were not a Treaty, our borders have no guarantee because we have never had a Peace Treaty with Germany. And when we had an agreement with Willy Brandt and Poland then the German courts overturned it because they said it was not legal in German eyes. So we have got to have a guaranteed Peace Treaty with Germany.” I said: “We will support you” . And then the other neighbouring powers say: “Well we do not want to be left out of this” .
Now this is vastly different from, if I might say so, when I started, several weeks ago, to say: “German unification, we have to work out what it means in terms of security” . Mr. Gorbachev was saying the same thing after his meeting with Kohl . You saw what was written in Tass, Bernard Ingham Bernard will give it to you, because he was saying the same thing, you cannot ignore the reality of what has happened in this century and you have to get worked out the security and stability. And this morning he has come out the same way.
And now we are also saying and starting to work out ourselves, we must work it out in the Community, before it happens. And my feeling, a very strong feeling, was, look, Germany has sensitivities and ambitions, I understand that. But so has the rest of Europe, you cannot just ignore the history of this century as if it did not just happen and say: “We are going to unify and everything else will have to be worked out afterwards” . That is not the way. In Europe it is going to be an enormous upheaval. Interviewer
But that will happen, will it not, they will unify? Prime Minister
But we have got to get it worked out, look, worked out for the Common Agricultural Policy which at last we have got under control. With Germany there will be a lot of farm produce coming into Germany and even more when it gets efficient. The Common Fisheries Policy, a lot more people, precious little water. Look at the problems that will give for all our fisheries in the waters. What about the financial problems, we have structural funds. Unless we make it quite clear that the Federal Republic of Germany must do pretty nearly all of what needs to be done in Eastern Germany, the structural funds would just go entirely to the Federal Republic. Look at all of the difficulty on standards of goods, they are not there. Look at all the difficulties of free competition, they are publicly owned, it is subsidy after subsidy there, there is no such thing as a cost, there is no such thing as a price. Look at all the other goods, there is no effective boundary between them and the rest of Europe, all the other goods which will stream across. It can cause chaos in the Community if we do not get these things worked out. Interviewer
But it will take years. Prime Minister
Well, we have got to start now and we have got to make it quite clear. Because if the unified Germany expects the whole automatically to come in, it is the same as taking in Belgium, Denmark and Ireland combined. But much worse than that because this would be taking a state that has been either communist or Nazi since 1930. And you cannot just say: “Well, we will have to work it out” . You have got to know who is going to be responsible for the money. You have got to say everyone else who joins has a transition period. Now what are we going to have? How long is the transition going to be? We simply cannot have free circulation of goods which are highly subsidised, that is flatly against our competition laws.
All this cannot be ignored. It cannot be done away: “Oh well, it will have to be worked out afterwards” , it has to be worked out now and we are now working it out. Interviewer
So in a sense we are talking, apart from the EC and the security aspects, we are also talking about really … Prime Minister
And other people are now talking in the same way. Once again President Gorbachev , this morning. Once again, we know from all our contacts, and we know that the Agriculture Ministers are very worried, they are starting to begin to talk things out. We have got our own very careful study going because we realise the enormous consequences.
So actually, yes we were isolated at first because we were the first to realise it, now everyone else is following. But we were isolated because we dared to say the realities and talk the sense which other people are fearful of saying lest they should be misinterpreted. I understand their fear of being misinterpreted, I have lived with it for eleven years, but I still think it is necessary to have someone to say what must be said.
And it is interesting, everyone knows that they can rely upon me to say it and they can rely on me to say it honestly and to articulate what other people feel. And so, now we are getting our own way on the security. We have Mr. Gorbachev fully behind us. We have President Bush , now that is a floor, and fully working with us, fully working with NATO, and we have various proposals if German unification comes about quickly. And then we are working and I think now the Community is working, together.
We have to watch British interests. It is only just recently we got the CAP and the budget sorted out. Interviewer
What do you say to the argument that with 90 million Germans unified, more prosperous if they attain West German standards of living and all the rest of it, and a potentially huge military power, that the rest of the EC must get together even more closely down the federal route to counter-balance this? Prime Minister
No, I think that is absolute nonsense. If your argument is true, and I must say that if you have that sized Germany in the present European Community, it will dominate, then that argument would be even more true in a federal state. Interviewer
Because the Deutschmark would be even more dominant? Prime Minister
Yes, and it would be even more powerful because with everything else actually linked to it, it would be by far the most powerful country in the federal state and everyone else's freedom of action would have been diminished. If your argument is true, it is actually an argument against a federal state. Interviewer
Reinforcement for the Bruges line? Prime Minister
That is right, a very strong reinforcement for the Bruges line, very strong. But you are right, 80–90 million, it would dominate totally. And if you want really to have a counter-weight to that, you want to have the counter-weight of sovereign countries able freely to cooperate together, still, and to limit the duties of the European Community to that which really the people intended when it was first set up. Prime Minister
You had not got a Common Agricultural Policy, a Common Market, we have not even got a Common Market, free movement of peoples, but otherwise a cooperation between sovereign states so that they pool their sovereignty in some things but they keep their fundamental accountability to their own sovereign Parliaments.
It is as well that we have kept our accountability and we are the oldest sovereign Parliament, by far. Interviewer
It sounds like a long transitional period for East Germany to come into the EC? Prime Minister
Well I do not know, not necessarily, I think it will be different perhaps for different things. Certainly you have to watch the Common Agricultural Policy and we have to get rid of the subsidies. In some things, yes, the transitional period will be long. In others I think it could be quite small. Otherwise you are going to have quite considerable difficulty, with much much lower wages in Germany, goods freely coming out, it is going to be very interesting. Interviewer
Can I switch very briefly to South Africa? Have you had a telephone call yet, are you expecting one, are you agreeable to have one from Mr. Mandela ? Prime Minister
I usually take telephone calls that come in. I have not had one yet from Mr. Mandela . I think you know it is quite something to come out of prison after a long time, even though you have prepared for it for a long time, into the full shaft of publicity. So I think some of the things that have been said really have been, what I would call, ritual. And I think different things will develop because he is a considerable person, of considerable distinction, and I think different views will develop and I hope they will.
I was very disappointed that Nelson Mandela he confirmed armed struggle. Let me put it this way, the people who have achieved most in terms of political change in my generation have been the dissidents and refusniks in the Soviet Union and in Eastern Europe—the Sakharov s, the Shcharansky s, the Amorik s, the Bukovsky s—and they took a decision right at the beginning, they would never resort to violence, the Orlov s, all of them, there are so many of them and thousands whose names we do not know, they would never resort to violence, never. And look what they have achieved.
Similarly, look at Gandhi , you are quite right, those were the two things in the post-war generation, it was the non-violent that commands total respect from the whole world and has achieved far more than the violent movements. And I was deeply disappointed that he, and presumably others who adopt the ANC's beliefs, say armed violence.
Armed violence means that you are prepared to kill and main innocent men, women and children. In other words, you want more freedom and you are prepared to extinguish theirs and their lives in order to get your own. No wonder the big men, like the Sakharov s, the Shcharansky s and the Orlov s and the Bukovsky s rejected it totally. So I was very disappointed that they said the armed struggle. It means bombs and guns aimed at innocent people. Interviewer
So any retaliatory action against us lifting voluntary sanctions within the EC by saying: “We lift sanctions against Libya or Syria” could not be more offensive? Prime Minister
That is right, that is right. Interviewer
But nothing will come of that, surely? Prime Minister
I do not know, I do not know. The only sanctions we are lifting are the voluntary ones. The ones where we are pledged by order, for that we have to get full agreement. But I do think that we were all asking for the things that we have got now, all of us asking. President de Klerk had the courage and the vision to do it. Interviewer
Is he a man of sincerity do you think? Prime Minister
Yes, and that indeed is what Mr. Mandela also said. Interviewer
They can do business? Prime Minister
Yes, they can indeed and he is doing business. And all of the things that he has done, far more, and then to say: “We are still going to treat you as if you had done nothing” . It does not help anyone.
Just look at the people I have on my side—the Buthelezi s, the Helen Suzman s—they have been fighting apartheid far longer than some people over here. Interviewer
And now President Bush ? Prime Minister
Oh yes, and President Bush , oh yes. We are not isolated. And just look at the polls run by the Guardian and the Independent among the black South Africans and published. “Do you think they should put on sanctions?” — “Yes” . “If sanctions cause unemployment, do you think sanctions should be put on?” — “No.”
Sanctions only work by causing unemployment and starvation and misery. And the people who regard themselves as civilised and compassionate should proceed by wanting to increase unemployment in a country where there is no social security, poverty, hunger and starvation, then I do not think very much to their sincerity and I think that they should take a different view. Interviewer
Do you think people allow you to speak for them again on South Africa, as you do on Germany? Prime Minister
Oh yes, of course they do, they frequently hide behind my skirt. But mind you, Helen Suzman does not hide behind anyone's skirts, like me she leads. She wrote a letter to Herr Genscher and to the European Community: “I ask you to lift your economic sanctions.” Interviewer
And they did not do it. Can we turn now, Prime Minister, to the economy? Do you subscribe to the view that we are in for a year's hard slog? Prime Minister
I would not exactly put it that way. We have planned for growth this year, over growth last year, over growth the year before, over growth the year before that, over grouwth the year before that. We have more jobs in this country than ever before in our history because the kind of economy we have been running has been job-creating when people were able to get their enterprise together and we have got more jobs than ever before.
We have a higher standard of living than we have ever had before in our history. We have a higher standard of Health Service than ever before, more patients being treated, more operations being done, more hospitals, more doctors, more nurses than ever before in our history.
We have lower income tax than at any time in the post-War period and it is bringing about this prosperity. Manufacturing industry had a record year of investment in 1988, in 1989 it beat that record, it set even a new record. We have got record investment in other industries.
So it can all come good in terms of the other … Prime Minister
This is record output, record standard of living, record Health Service, record social security. £1 billion a week on social security. This is.
Yes we have two problems, related one to another, that inflation is 7.7 per cent which for us is very very high indeed. That is inflation as judged on the Retail Price Index. If you compare it with other people's inflation, when you judge it on a different basis which cuts out mortgages, because only two countries put in mortgages, it is 6.1 per cent—lower than Italy at the moment. But it is still too high for us and that is having a particular effect on people who bought especially, say, in the last three years and have taken out very high mortgages and that is affecting them and it is very difficult for them and one understands that. It will be a good investment, nevertheless, in the long-run because people who have put their money into bricks and mortar of their own home have done far better than people who put their money into savings in building societies. Do you see what I am getting at? Interviewer
Absolutely. Prime Minister
Now, young people who are wanting to buy their home for the first time and have not yet done so, they are benefiting at the moment because they are putting their savings on deposit in the building societies with a very high rate of interest so their deposit is going up far faster than it would have done otherwise and also the price of the house they want to buy is coming down.
Other people, old people who have savings, and they are a much more saving society than the modern society, are also benefiting from the high interest rates because they are saving. And I know when the interest rate went down before, Nigel Lawson the Chancellor and I got quite a lot of letters saying we had cut the income of old people.
It is not that actually which determines the interest rate, it is whether we have got too much money for the output and therefore the only thing to do is to raise the price of money. And the thing that grieves me most is that it is coming very heavily on those people who in the last three years have purchased their home. But in the long run it will still be a very good investment for them.
So it is the money supply which, being greater than what we are producing, is in fact going into increased prices and so you have to take that extra out. And because it was going so strongly, and the economy going so strongly, it is taking a longer time to turn around than we thought.
Now that is the real essence of the problem, that is the main underlying problem and that is the most important thing to get right. Interviewer
Bill Deedes this morning, I do not know if you have seen his piece in the Telegraph, says the Government looks trapped on the economy and that between now and the election, to get interest rates, mortgage rates down to what you had in the last two elections is going to be very difficult? Prime Minister
I am devoted to William Deedes Bill, who would not be, anyone who knows him of course is devoted. I sat in the House of Commons with him, I am devoted to him, I think he writes in a dream of a style. But we are not trapped, if you know the remedies to inflation they do in fact consist, you have got too much money, the only thing to reduce it is to put up the price of money which is the interest rate. And anything which you otherwise propose in the end puts up the price of money and this will work, as it did work before.
The reason why it is taking longer this time is not because we are in a difficult state but because industry, of all kinds, was growing so fast and it is like a big battleship, the faster it is going and the better it is going, the longer it takes to slow it down and turn it round. But we are not trapped, we are pursuing the right policies and we continue to pursue the right policies.
The right policy is, yes, you have to give incentives so we are right on taxation. You have in fact to look primarily at your money supply policy, at getting the money supply down so you get your inflation down, and do not let anyone accuse us of having a loose fiscal policy because, as you know full well, we have actually got a surplus. Name other countries in Europe that have got the surplus? I am sure the United States would wish that she had a surplus on her budget.
When we could not get down our public expenditure in the early 1980s as quickly as we wished, we said we would not finance it by borrowing, we would finance it honestly, by taxation, and we did. So we got the long-term thing right. We did not say that we will do what is popular in the short-term, knowing that it is bad for the long-term. We said we will do what is right for the long-term because that is much the more honourable thing to do. And we have done it. And as a result of that we have been able to repay some debt, as a result of that we are paying out on today's public expenditure, something like £2 billion less in interest rates.
It is like repaying your mortgage and as the result of that we have been able to put more into the Health Service. So it was right to take the tough short-term decisions to get it right in the long-term, and it is right in the long-term. And it is right now to take the tough short-term decision to eradicate that factor so again we are right for the long-term. Interviewer
We have got a London Business School Survey going in on Sunday predicting 1 per cent growth this year … Prime Minister
Yes, but it is growth over a very good growth year last year. Interviewer
And a bigger growth next year. Prime Minister
Yes. Last year, look, we have grown, grown, grown, grown—eight years—and we are still, after all that compound, expecting growth. Interviewer
So it is not recession, is it? Prime Minister
So it is not recession, that is right, and it is not slog. For some people it is difficult, yes it is, and you can imagine how I feel about it when we have above all concentrated on getting more people owning their home and a wider distribution of wealth. We have created more wealth and we have got it distributed more widely. But this is temporary … Interviewer
That is a fairness point Labour thinks that they have got and you have not got about the distribution of wealth, their argument is the rich get richer and the poor get poorer. Prime Minister
That is nonsense, that is absolute nonsense, we have got a wider distribution of wealth than we have ever had before. In England 68 per cent of people own their own homes. It was 11 million when we came into power and it is now 15 million. One in five own their own shares. There are something like 17 million savers on building societies. And, is it not very interesting, that these days if you have your house plus anything less than £8,000 in savings, you rank for social security? That is a new definition, is it not? Interviewer
I did not know that. Prime Minister
You see anything less than £8,000 will enable, according to what your income is, you can still have up to £8,000 and still claim social security. It shakes you does it not? Interviewer
Maybe you should lower the limit? Prime Minister
No, no, I am sorry, that is for housing benefit, you can claim housing benefit, it is £6,000 on social security and £8,000 still to be able to claim housing benefit or rate rebates or Community Charge rebates. It is a very very different world, a very different world. And our growth, my ambition is for our growth to go on. It is not as fast at the moment because we have got this other problem to deal with. We keep the right policies going, the growth will start to rise and the productivity will start to rise and my ambition is that we catch up with France, we were almost very nearly level with France, we catch up with France on our output and productivity, although France has got 9.8 per cent unemployment. And then we catch up with Germany because we have done so much of the fundamental things, we have this hesitation at the moment, this problem at the moment which we will deal with but the outlook is good. We shall have difficulty this year until we have dealt with this temporary problem, we have dealt with this before and it will be dealt with. Interviewer
Some of your colleagues in the House worry that if you do not get inflation down to what you had it in the last two elections, at least below 5 per cent, you are in big trouble. But can that be done? Prime Minister
It is important that it is coming down, the trend is down, and when it comes to an election you look at the records of the two parties and you look to see what is the alternative. And the fact is that the inflation rate which we call far too high for us—7.7%;—is the rate which they only got down as low as that for a few months. Interviewer
But a lot of voters do not even remember it. Prime Minister
Yes I know, yes I know. But when you look at their alternative to Community Charge, which as you know is a charge on the capital value of the house, whether or not you own it or are a tenant, and then they look at the income tax you pay, which would mean revealing all your personal affairs to the local authority, people would recoil from that. Interviewer
I do not think their policies will come into focus until about the last six …? Prime Minister
Are you suggesting that they go back to their nationalisation policies? They are supporting Mr. Mandela on his nationalisation policies apparently. Interviewer
Do you regret now anything to do with the Community Charge, the way it was introduced, the arithmetic? Prime Minister
The Community Charge is right. Interviewer
In principle? Prime Minister
In principle and it will be right in practice. The first year people are trying in fact to put on as much as they can so they can reduce it in successive years and they are trying to blame the Government. And we are able actually to take the figures apart and expose what they are doing. Interviewer
Why not let them do it and let the voters judge them in the local elections? Prime Minister
We cannot cap that number but we are able to say what would be a reasonable rate of expenditure and compare it and it is going out on their demands for payment. And we are also able to say what that increase in expenditure would have meant had domestic rates been substituted for the Community Charge.
So we have got all that. But you ask why we do not just do that and say: “Well now look, there is nothing wrong with the Community Charge, indeed it is much fairer than anything before. If it is high, it is your local Councillors. And that you must take into account when the next election comes” .
Why, because why do we think of Community Charge capping, as we did on rate capping? For this reason. The whole origin of Parliament was to protect the people against the government of the day, which then was the Monarch, is now the Government of the day, against expenditure that was too high and therefore taxation that was too high. That is the purpose and origin of Parliament, to protect the people against the Government taking too much of the people's money.
So that is really why we exist. The local authorities only have powers Government say they can have, they have no others. So if local authorities use those powers to take too much of the people's money out of the people's bank accounts into the local authorities' bank accounts, it is our bounden duty to protect the people against that excess. That is right up and down our Parliamentary duty and we must carry it out. Interviewer
It is away from the original idea that at last local councils were going to be accountable? Prime Minister
No, it is not away from that, most of them will be accountable and will stand, and the ones that are charge-capped will also be accountable. It is just that their excess will be so great that we really could not let it pass in full measure.
You just imagine some local authorities wanting to build up their reserves. What they are doing in fact is taking money out of people's bank accounts, it may be a young couple with a mortgage, taking more money from them to put into a local authority reserve account and we stand idly by and watch. No. So the excesses we have to deal with. Even after the charge-capping I am afraid it will still be heavy in those areas. But many many people will be better off.
Let me point out that had they spent the amount they are considering spending now, judging by some of the Community Charges, as I have said, there would have been an average increase of 35 per cent on domestic rates. Then there would have been a colossal revolt. Everyone, but everyone, would have been a loser and a big loser except those who get rate rebates. But the Community Charge rebates are higher than the rate rebates ever were and on top of that they are means tested. On top of that we have another form of relief, where it has gone up too much, called transitional relief, and that is not means tested.
So it is the right tax and it will, when people have got it, they will wonder why we did not have it before. It is right, it is equitable. The tax-payer pays far more to local authority than the charge-payer so the person who is a high tax-payer is paying far more for his local authority services. So it will work out. It is going to be difficult this year and the difficulties lie at the feet of the local authorities not having due and proper regard for the interests of their residents and really being quite harsh in how much they take from their residents when they could take a good deal less. Interviewer
But the difficulty you talk about is political as well as financial, because you have got a combination at the moment of high interest rates, high mortgages, and a new tax which is unpopular because they do not know what it is and they fear that the councils are going to take advantage of this, and the troops are jittery over the road, which they have been before of course in mid-term. Prime Minister
I think when you have a change, again of this magnitude, it always takes a time to go in. But the rates were the most unfair system that could ever be devised. There are 35 million electors to local authorities and only 17 million rate-payers, the most unfair tax that could ever be devised.
This will be much fairer. For those who cannot afford to pay they get the most generous Community Charge rebate, more generous than on rates, and we could not leave the old rating system. Because people who are in new houses have their rateable value determined according to the year in which they are built, people who are in the older houses going right back to the last revaluation. So it was inequitable.
In two years time they will realise it is a very much better tax. And you can in fact look at the economy and value for money of some local authorities who are actually improving their services while reducing their charge, compared with others. But this sort of cycle they got into, “Let us take in a big reserve in the year after an election and spend it the year before” . It is not right.
What would you think if you were a young person who is having difficulty with the mortgage and your local authority is taking in quite a big Community Charge from you because they want to put money into a reserve? That is not right. Interviewer
I should be very angry and I should be angry with the Government for allowing it. Prime Minister
This is why you know we are having to look at some charge-capping. You are giving me one of the reasons. You see the other thing you would be saying is that we should keep control over every local authority on the amount it spends. That would really be the negation of local government. You simply have to give them powers and you give them obviously authority to use those powers … Interviewer
You have set your face against taking education out? Prime Minister
I really do not think that central Government could deal with the education service. You would have to set up a whole new structure, rather like the Health Service. We have always looked at it from time to time. The Education Department has what, about 2,000 people in it and about 500 Inspectors. We just could not do it.
But do not forget, the tax-payer pays the majority of education, not the rate-payer, through the great revenue support grant to local authorities, it pays the majority, pays the majority of teachers. Then business pay a good deal of education through the business rate. The Community Charge payer only pays a small fraction of education. Interviewer
That increases the arguments for taking it into government. Prime Minister
No it does not, that would be taking it from decentralisation to centralisation. Interviewer
Well, you have got a national curriculum, you might as well do the whole thing. Prime Minister
But you have to have a framework always, that is our bounden duty as a government to see that every child gets a good education, you set the framework. Because the local authorities were not in fact doing the curriculum right and because in some inner cities and in ILEA, for example, the biggest expenditure on education and the worst results.
We had to say: “We will set a new framework and that will include a national curriculum” . So we set the framework and they in fact carry it out. But when you are not satisfied with the services in some schools that local authorities are delivering, you still keep the framework of law and you hand over the power not to the central government but to the Board of Governors and to the parents and say: “Would you like to run this? You have got in fact to come up to certain standards and there will be Inspectors, you have got to come up to certain standards, and you cannot charge” , but you disperse the power and the rights and the authority and the duties.
No government in post-War history, apart perhaps from the 1951 one which took over from socialism and took a lot of powers out of the hands of government and gave them back to people, apart from that no other government has taken more powers away from itself and given them to the people than this one.
Less tax, so more power to the people. Denationalisation, so taking industries out of the power of government back to those who know how to run them. Fewer council houses because we have in fact given them the right to buy them—more power to the hands of the people, less in the hands of local authorities. On hospitals, less power in the hands of government, would they like to become self-governing, they have to come up to certain standards but they would make much better use of their money self-governing. So many of the teaching hospitals used to be self-governing. Schools, not more power in the hands of government, we set the framework of law and more power in the hands of the people. No government has taken away more powers from itself and given them to the people. Interviewer
So why is Norman Tebbit quoted in Bill Deedes' article, I did not see this original Norman quote, saying the other day he thought a clear sense of purpose seemed to be lacking in this government? Prime Minister
I was mystified, totally and utterly mystified. We have the same sense of direction as when Norman Tebbit Norman was with us, the incentives of taxation, the enterprise, the creation of more wealth, the wider distribution of wealth, and the enlargement of opportunity. This is what we are doing in education now. It is absolutely scandalous that some children come out of eleven years of compulsory education not properly equipped for the world of work, not able properly to express themselves, to express their views, not able to speak and write the language properly, not numerate in the simplest of ways. It is getting better and we now have computers and so on.
Oh yes, that sense of direction and the enlargement of opportunity. Now we are looking at training again. We have done more training than any other government and the Labour Party has tried to up-end both our Youth Training Scheme and our Employment Training Scheme. We have still not got a big enough proportion of our young people trained because the new industry will require more training.
It is enlarging opportunity and spreading responsibility more and more to the people and spreading power. There is a colossal sense of purpose and direction and momentum. And I am amazed because the press say we are “losing our sense of direction” and “doing too much” , “can't she ever stop!” Interviewer
What is the answer? Prime Minister
I shall always go on believing, doing and saying, with a totally united Cabinet behind me, forming the policies of enlarging opportunity for the people who have not got it and leaving them more and more within a framework of law to create more enterprise and more wealth.
That is the way we get a higher standard of living, it is not governments who create a standard of living, that is what the Russian people have got to learn, it is not governments who create a standard of living, it is the people. And our people are able and talented and it is going faster, quite fast, slower this year.
You know they hate me giving the facts in the House of Commons, they hate it, that is why they make so much noise. At least now it is televised they cannot wholly drown it out. They hate me giving the facts. Interviewer
My last question is, you have got lots of willpower obviously left and a clear strategy, the time element is difficult, maybe, on the economic front to get it right within two years on those indexes which people worry about in their budgets, and also you have got “a new model Labour Party” , a lot of people never remembering the old Labour Party, and the collapse of the centre. Prime Minister
Let me say something about that. Nothing like so new as they are trying to give the impression. You see it, all of a sudden it comes out. You see it again over Mr. Mandela , armed struggle, they accepted everything it seemed to me, the armed struggle, they did not condemn that, they did not condemn the nationalisation, you will not get actually any investment going in if you get nationalisation. They are not nearly as different as the impression they are trying to convey.
Every time they put a policy we can puncture it because it does not stand up. They are now trying to say that their tax will go up to 50 per cent and then on National Insurance Contributions, now that is an insurance scheme, not a true taxation scheme, and they say: “Right, it should in fact go right up the income scale so the man who has much more pays much more for his basic pension” , he already does, an increasing amount more. That is really not right because it is an insurance scheme and certainly the person who is better off pays more, but not that much more, that is what an insurance scheme is. And if they were doing that, that is treating it as a tax, it would be a 59.5 per cent tax.
They are fighting every single denationalisation. Just look at them, they do not know how to run electricity, how to run water, how to run steel, how to run telecommunications, all the things which we have denationalised which are doing very much better.
Do you know, telecommunications, telephone calls, if you take it right across both local and trunk calls have gone down by 17 per cent since nationalisation, in real terms? Interviewer
Still more expensive than elsewhere. Prime Minister
On local, yes, but not on trunk. And they can only put it up by RPI minus 4 per cent next year.
So there are still, nationalisation, high taxation, more powers. No, they have not changed that much. When you sit where I do at Question Time and you see the true Labour Party, they have not changed that much. We see the faces behind the masks. Interviewer
But the centre has collapsed has it not? Prime Minister
The centre has collapsed, yes, and we have to make certain that we get more of the centre. And when they look at the whole record, when they look at the sense of purpose, and no-one ever accuses this government of not having a sense of purpose or sense of direction, I do not know what Norman Tebbit Norman was saying, and what it has done for Britain and that Britain does count for something in the world and wherever I go they know that I will not fear to speak up, and honestly.
Well, it is up to the people to choose.