the Government went much further than this, privatising the whole of British Gas before moving on to target electricity and water. But already, she admitted in her memoirs, this was a programme ‘far more extensive than we had thought would ever be possible when we came into office only four years before’.11
The form of popular capitalism she did enthusiastically embrace before 1983 was the sale of council houses. Michael Heseltine had enshrined the ‘right to buy’ – at a substantial discount – in his 1980 Housing Act. By October 1982, 370,000 families had already taken advantage of the legislation to buy their homes. While the Government was still feeling its way gingerly towards the privatisation of public utilities, she now knew that with the sale of council houses she was on to an electoral winner. It is probably too simple to suggest that those 370,000 families – it was 500,000 by the time of the election – were turned from Labour to Conservative voters overnight: many of them had already made the crucial switch in 1979. But more than anything else this one simple measure, promised in opposition and spectacularly carried out, both consolidated and came to symbolise Mrs Thatcher’s capture of a large swathe of the traditionally Labour-voting working class.
The limits of radicalism
Council-house sales, trade-union reform and the beginnings of privatisation were major initiatives which changed the landscape of British politics. Yet beyond these three areas, some of Mrs Thatcher’s keenest supporters were disappointed that her avowedly radical government did not have more to show for its first term.
The reason was partly that she simply did not have time to spare for social policy: at this stage the economy, the trade unions and the nationalised industries were her domestic priorities. In truth she was not really very interested in it: having served her ministerial apprenticeship in social security and education, she was happy to have escaped to wider horizons. But she was also very wary of the political danger in tackling the welfare state – particularly the National Health Service – which, for all its emerging inadequacies, was rooted in popular affection. ‘She feared that the welfare state was Labour territory – that we weren’t going to win on it.’12 The result was that health, social security, education and public-sector housing were all squeezed to a greater or lesser degree by spending cuts, which gave practical effect – as it were by stealth – to the Prime Minister’s instincts. But this was just tinkering, not the radical shake-up that Tory radicals had hoped to see.
The biggest question concerned the funding of the NHS. Almost since its inception in 1948, Conservative policy-makers had been looking at ways to switch funding at least partly from general taxation to an insurance basis. But insurance schemes had always been found to be less efficient and more impractical. Both Howe and Jenkin were still keen to explore the insurance option, however, and in July 1981 Jenkin set up a departmental working party to study alternative funding options. Mrs Thatcher was sympathetic. In her very first Commons speech as Prime Minister she had warned, with a clear echo of Milton Friedman, that ‘there is no such thing as a free service in the Health Service’.13 She never forgot that the cost of universal health care fell on the public purse and believed that self-reliant individuals should bear the cost of insuring themselves instead of relying on the state. She was keen, as a matter of principle as well as of economy, to encourage private health provision, which duly mushroomed after 1979 with an influx of American health care companies, a rush of private hospital building and more private beds in NHS hospitals. Kites flown by free-market think-tanks like the Adam Smith Institute and the Social Affairs Unit fuelled the impression – sedulously fostered by Labour – that the Tories were planning to privatise the NHS. But when it came to the point the Government drew back.
Social security was less of a sacred cow than health, largely because it was less used by Tory voters. There was no comparable embargo on radical reform; but here too policy proceeded by an accumulation of small cuts rather than a coherent programme. All short-term benefits – unemployment benefit, housing benefit, even child benefit were devalued more rapidly simply by not being uprated in line with inflation.
From her experience as a parliamentary secretary in the Ministry of Pensions twenty years before, Mrs Thatcher retained the conviction that the benefit system was a wasteful mechanism for recycling money from the hard-working to the lazy. Then at least it had been her job to face the reality of a lot of individual cases. Now she saw only the huge cost to the Treasury and a disincentive to enterprise and self-reliance. She believed that the prosperity of those in work would – in the American phrase – ‘trickle down’ to lift the living standards of all. She averted her eyes from the impoverishment of millions of families whose breadwinners were desperate to work if only the jobs had been there. Apart from throwing ever-larger sums at complicated youth-training schemes – money not for the most part well directed – the Government in its first term made no serious attempt to reform the benefit system.
Housing was the area where the Government most clearly favoured the better off at the expense of the poorer. The central plank of its housing policy was the sale of council houses. But while the best houses were sold on generous terms to those more prosperous tenants in secure jobs who could afford to buy them, rents for the rest – usually on the least desirable estates – were steeply increased. New council building almost completely ceased. Local authorities were debarred from using the revenues from council-house sales to renew their housing stock, leading in time to a housing shortage and the very visible phenomenon of homelessness which emerged at the end of the decade. Housing was another service Mrs Thatcher did not really believe the state should be providing at all: her Government’s purpose was to encourage and reward home-ownership. While cutting subsidy to council tenants, therefore, she was determined to protect and even extend mortgage-interest tax relief for home buyers – an anomalous middle-class subsidy which the Treasury had long wanted to phase out, but which she candidly defended as a well-deserved reward for ‘our people’.14
As Education Secretary from 1979 to 1981, Mark Carlisle had an unenviable task, with the Treasury demanding heavy cuts in his budget and Mrs Thatcher bullying him to punish her old department. Less than a decade earlier she had been vilified for cutting free milk for primary schoolchildren, yet she finished up as a notably expansionist Education Secretary, having announced ambitious plans particularly for pre-school education, which sadly were aborted by the 1973 oil crisis. As Prime Minister, however, she showed no interest in reviving these plans, only the memory of the Milk Snatcher. Carlisle was compelled to enforce cuts in the provision of school meals and rural school transport – though the latter was partly reversed following a rebellion in the House of Lords. The axe fell hardest on the universities, which suffered a 13 per cent cut in funding over three years.This was the beginning of a decade of confusion, demoralisation and falling standards in higher education.
‘We are the true peace movement’
The Government had given curiously little thought to the agenda for a second term. Given the enormous problems of trying to promote an enterprise economy against the background of a severe recession, it is understandable that the Government attempted so little major reform of social institutions before 1983. It is much harder to explain why, after the Falklands victory had transformed the political landscape and her own authority, Mrs Thatcher did not then grasp her opportunity with a radical programme for the next stretch of road that now extended before her. She evidently found it difficult to explain herself. In her memoirs she blamed Geoffrey Howe.
The truth is that a Government’s energy stems from its head, and even Mrs Thatcher confessed to being a little tired by the end of the Falklands summer. Just before the recess she admitted that she intended to take a good holiday ‘after this momentous year’ – quickly adding, in case anyone should see this as a sign of weakness: ‘I do not think I could take more than another ten years such as this has been.’15 She actually went to Switzerland for ten days before going into hospital – briefly and, of course, privately – for an operation for varicose veins. After the high tension of the Falklands she was perhaps mentally unprepared for her sudden breakthrough to popularity and genuinely did not know what to do next. A year earlier she would not have dared talk of another ten years. There is a sense in the autumn of 1982 of Mrs Thatcher – still only fifty-seven years old – pausing for breath, resting on her oars for a moment, until she got used to the idea of going on and on.
With a dearth of new policies to unveil, Central Office was preparing to fight the coming election on the
