earmarked electricity and water as the next targets. Both posed special problems: nuclear energy on the one hand, and the public-health implications of commercialised water on the other. Still she was determined to press ahead. At the same time, however, she had not abandoned her habitual caution. She was no ideologue, but a canny politician, and she foresaw only trouble in trying to privatise the railways. Nicholas Ridley,Transport Secretary from October 1983 to May 1986, accepted the Prime Minister’s veto. But his successors were all keen to grab a share of the privatisation glory. There is no better example of Mrs Thatcher’s shrewd political instinct than the fact that she persistently warned them off. She was happy to see British Rail forced to sell off its profitable assets – hotels, ferries, hovercraft and acres of undeveloped trackside property – which only made privatisation of the rest of the business harder; but she had the good sense not to try to sell the track or the trains.
For somewhat similar reasons she would not touch the Post Office, pleading the Queen’s attachment to the Royal Mail as an excuse, or the remaining coal mines that were left after the trauma of the miners’ strike. In fact, with her usual mixture of timing and luck, Margaret Thatcher triumphantly rode the first wave of privatisation, accomplishing all the easier sell-offs where public opinion, though initially sceptical, was fairly quickly persuaded of the benefits, while leaving the really hard cases to her successor.
A single phrase in a characteristically nostalgic speech by Harold Macmillan did more damage to the idea of privatisation than all the outraged anathemas of Neil Kinnock. Speaking to the Tory Reform Group in November 1985, the former Prime Minister was said to have likened privatisation to a once wealthy family fallen on hard times ‘selling the family silver’.43 Despite the remoteness from most voters’ experience of the aristocratic world he conjured up, Macmillan’s words touched a chord. In vain the Government’s supporters retorted that the industries being sold off were not assets at all, but liabilities which the Treasury was well rid of. Six days after the original speech Macmillan himself explained in the House of Lords that he was not against the principle of transferring loss-making public utilities to more efficient private ownership.‘I ventured to criticise the fact that these huge sums were used as if they were income.’44 In other words, what he was warning against was not privatisation itself, but the way the proceeds were being spent on consumption, not investment. In this he was voicing a critique that was beginning to be widely shared.
Unquestionably privatisation yielded real benefits, to the consumer and to the Treasury. The level of service to the customer undoubtedly improved. Arguably this reflected the spread of a more commercial culture generally and the loss of power by the unions, rather than simply the change of ownership. The major efficiency gains in both British Steel and British Airways, for instance, occurred while they were still in the public sector. But the privatisers would argue that the crucial factor was the removal of the safety net hitherto provided by the bottomless public purse.
The result was that the Treasury, instead of endlessly subsidising losses, now actually drew revenue from the profits. As Mrs Thatcher boasted at the 1989 party conference: ‘Five industries that together were losing over ?2 million a week in the public sector [are] now making profits of over ?100 million a week in the private sector.’45 Beside this, the argument that the shares had been sold too cheaply paled into irrelevance.The real criticism of Lawson and Mrs Thatcher is that they blew this windfall on a short-term consumer boom, instead of investing it on long-overdue repairs to the crumbling national infrastructure.
The Government’s other great boast – that privatisation had created a nation of small capitalists – also turned out to be something of an illusion. On paper the number of individuals who owned shares certainly rocketed, from around three million in 1980 to eleven million in 1990. But few owned very many; and this was anyway a smaller number than appeared to have been lured into the stock market in the heady days of 1984 – 6. Many of these new investors immediately cashed in their allocation for a quick profit; others proudly retained their original small purchase of BT or British Gas shares but bought no more. The number who went on to build up portfolios of shares in different companies was disappointingly small, so that the proportion of shares owned by private individuals actually fell.
Finally, disappointment with privatisation, particularly among those who had most supported it, focused on the failure to promote real competition in most of the newly privatised industries, and on the fact that prices were still not properly subject to the market but regulated by a succession of unaccountable bodies appointed by the Government and still in practice sensitive to political pressure. This was perhaps an inevitable function of the way privatisation happened – pragmatically, opportunistically and piecemeal. There was an aspiration, but never a clearly worked-out blueprint – any more than there had been for nationalisation forty years earlier. Nevertheless it turned out – at least in Mrs Thatcher’s time – to be an outstanding political success: the problems only revealed themselves over the following decade. Moreover, the idea had universal application. In the global retreat from socialism of which Thatcherism was merely the British reflection, it was Britain which pioneered both the concept and the techniques of moving state-owned industries into the private sector. As early as 1986 Mrs Thatcher was boasting that privatisation was on the agenda in countries as various as Turkey, Malaysia, Japan, Mexico and Canada. At home Thatcherism had many strands and different connotations; but around the world the word was synonymous with privatisation.
An enterprise society?
Meanwhile, there were signs of real cultural change at all levels of the economy, from the City of London to every provincial high street, a tangible liberalisation of all those attitudes and practices which had held back the performance of the British economy for decades. In large part this was the deliberate result of the Government’s ‘supply-side’ strategy of cutting regulation, cutting taxes, increasing incentives, curbing the unions and generally freeing up the labour market. But equally important was the fact that all this coincided with an explosion of new technology, above all communications technology – the so-called ‘third industrial revolution’ – which was rapidly making the old ways obsolete by promoting small-scale consumer-driven service industries in place of the mass- employment heavy industry of the past. In this respect Thatcherism merely reflected and facilitated the march of global progress. Nevertheless the revolution in British life was palpable.
First, there was ‘Big Bang’ which transformed the City in October 1986, sweeping away centuries of tradition by admitting foreign brokers and jobbers and switching to a global standard of regulation in place of the gentlemanly conventions – ‘my word is my bond’ – on which the Square Mile had hitherto prided itself. This was an overdue recognition of a technological imperative which was pushed through by Nigel Lawson in alliance with Cecil Parkinson during the latter’s brief time at the DTI. As with the abolition of exchange controls in 1979, of which ‘Big Bang’ was a natural corollary, Mrs Thatcher was initially cautious, worried that the Government would appear to be intervening to rescue its friends in the City while manufacturing industry went to the wall. But the political flak was short-lived and the outcome was a spectacular success, allowing London to join fully in the emerging computerised global economy by enabling it – just in time – to compete successfully with Tokyo, Frankfurt and New York.
The effect of ‘Big Bang’, combined with Lawson’s tax cuts and the bonanza of privatisation, which offered huge rewards not only to the merchant banks which bore the risk but also to an army of consultants, advertising agencies and public-relations companies which rode the wave of lucrative new business, meant that quite suddenly the City became glamorous. In the mid-1980s, as never before, it was in finance and related activities, not in industry or the professions, that big money was to be made. The new wealth was manifest in the rise of huge new glass and steel towers. But the phenomenon which caught the public imagination was the new class of computerised whizz-kids – dubbed ‘yuppies’, an acronym for young upwardly mobile professionals – who suddenly materialised to populate these palaces of mammon.
But it was not only in the City that money was being made. Out in the real economy too, things were changing. Deregulation, the easy availability of credit and the rapid proliferation of personal computers created a climate in which small businesses flourished, helping to create more than three million new jobs (mainly in the service sector) between 1983 and 1990 to make up for those lost in manufacturing at the beginning of the decade. More people than ever before left their employers – often involuntarily but in many cases voluntarily – to strike out on their own in small desktop enterprises which identified a gap in the market and set out to fill it. By 1989 three million people – 11 per cent of the workforce – were self-employed. Enterprise flourished not only in the south of England but in the north and Scotland as well, irrespective of politics.
Not only yuppies had more to spend than ever before: everyone in work benefited. As income tax fell,
