Ten Myths about Thatcher
1. Britain became ‘great again’ by leaping up the international output table. In fact, the IMF table of economies listed by nominal GDP put Britain sixth in 1979, where it still was in 1990 – it had overtaken the Soviet Union but also been leapfrogged by Italy.
2. Thatcher presided over a dramatic contraction of the state. Despite the privatisations, industrial policy led to a countervailing increase in the welfare bill.
3. She cut taxes. In fact, as a proportion of GDP tax receipts went up between 1979 and 1990, from 33.7 to 34.6 per cent. This had to happen to avoid drastic budget deficits caused by unemployment and associated ills. Thatcher did cut taxes for the well-off, but financed them with regressive indirect tax rises, notably the VAT hike of 1979.
4. Her premiership saw a steep decline in UK manufacturing, while the service sector boomed. Manufacturing as a proportion of GDP fell from about 24 to 21 per cent, a trend followed in other major economies like the US, Germany, France and Japan.
5. Thatcher balanced the budget. The government ran a persistent deficit through the 1980s till the ‘Lawson boom’ at the end of the decade. By the time Thatcher resigned the deficit was again soaring. The deficits would have been much bigger without the twin windfalls of discounted public assets sales and North Sea oil revenue.
6. She ‘got Britain working again’. Unemployment rose sharply during the Howe recession, to three million. The later fall in jobless rates partly reflects persistent massaging of the figures, which still showed two million jobless in 1990.
7. She ‘stood up to Europe’. In 1986 she signed the Single European Act, a major derogation from UK sovereignty extending qualified majority voting in the European Council, which her government (unlike Denmark's or Ireland's) accepted without putting it to a referendum.
8. Her government ‘beat inflation’. The rate in May 1979 stood at 10.3 per cent; in November 1990 at 9.7 per cent. In October 1990 she took Britain into the Euro’s precursor, the Exchange Rate Mechanism; the UK’s exit from the ERM on ‘Black Wednesday’ in 1992 was partly due to speculative pressure, but also the gap between UK and German inflation rates.
9. She stood for ‘sound money’ and kept an iron grip on policy. She junked monetarism after the 1980-81 bust, and in the subsequent Lawson boom, high interest rates failed to curb inflation. Meanwhile, in an effort to keep prices down, Lawson was shadowing the Deutschmark (£1 to 3 DM), a policy of which Thatcher was apparently unaware.
10. Without Thatcher, no Blair. Well, even myths can have a grain of truth.