Liz Truss’s reheated Thatcherism won’t work because she can’t see that our present crises are the result of Thatcher’s legacy and failures, argues Tom Whittaker

The new Tory Prime Minister Liz Truss has been keen to pitch herself as the heir to Margaret Thatcher. With inflation at levels not seen since the early 1980s and signs of a resurgent trade-union movement, might this seem an appropriate moment to revive the ‘Iron lady’? 

Thatcher, so it is claimed, not only won three elections, but also carried out a radical and lasting transformation of Britain’s economy, reasserting its position in the world after decades of imperial decline. The scourge of inflation was defeated, taxes were lowered, and home and share ownership increased among all social classes. An entrepreneurial spirit was unleashed across society, ‘popular capitalism’ as the Thatcherites termed it.

Above all else, Thatcher finally crushed militant trade unionism in Britain, most notably in the 1984-5 miners strike, something that no other Prime Minister in the post-war period had been able to do.

The Thatcherite strategy

Thatcher became Conservative leader in 1975 following Edward Heath’s electoral defeats in two general elections in 1974. Key to the fall of Heath were two miners’ strikes in 1972 and 1974 that destroyed his incomes policy, which had sought to limit wage rises in order to tackle inflation.

For the Thatcherite ‘New Right’, high inflation and militant trade unionism were twin evils that had resulted from the Keynesian policies of full employment during the so-called post-war consensus. Therefore Thatcher and her supporters settled on a set of economic ideas called monetarism to defeat inflation; this would involve a restriction of the money supply and large cuts to public spending.

In addition, a political and industrial strategy to break the unions and to privatise the ‘public-sector monopolies’ was also devised: the Ridley Plan. The National Union of Mineworkers (NUM) was identified as a particular threat and Ridley recommended building up coal stocks at power stations, training police to break up picket lines, and an initial caution by taking on weaker unions first – ‘salami-slicing’ – before confronting the NUM.

When the Labour government of James Callaghan collapsed following the so called ‘Winter of Discontent’, in which low-paid public-sector workers staged large-scale strikes against Callaghan’s incomes policy, Thatcher got her chance. Initially, she focused on economic policy and sought to avoid open conflict with the most powerful unions, as recommended in the Ridley Plan. Cuts to public spending, combined with high interest rates, led Britain into a deep recession in the early 1980s. Unemployment hit two million in 1980 and over three million by 1982. The manufacturing industry was particularly hard hit and riots erupted in throughout the inner cities during summer 1981.

Yet inflation remained stubbornly high. Britain was again experiencing stagflation (rising inflation combined with stagnant economic growth) like it had under Heath in the early 1970s. In reality, inflation was mostly being driven by a series of supply shocks that affected world oil prices and to which monetarism was no solution. Monetarist policies had been quietly dropped by the mid-1980s, but revived inflation would return to haunt Thatcher in the late 1980s, playing a part in her eventual fall from office in 1990.

The assault on the working class

However, the sharp rise in unemployment in the early 1980s had significantly weakened the position of the trade unions and, following her victories in the Falklands war in 1982 and at the subsequent 1983 general election, Thatcher was ready for open battle with the NUM. The appointment of Ian MacGregor in autumn 1983 as chair of the National Coal Board was the trigger for the conflict. In March 1984, MacGregor unilaterally announced the closure of twenty collieries. The Yorkshire coalfield came out first and the strike soon spread to most of the other coalfields across the UK.

Thatcher deployed huge resources on behalf of the state to ensure the miners were defeated. A massive policing operation sealed off the still working Nottinghamshire coalfield to prevent effective picketing, and attempts by miners to stop the supply of coal to industry were met with unprecedented violence at the infamous Battle of Orgreave. Oil was imported at huge cost to ensure that power stations could keep generating electricity.

Ultimately Thatcher prevailed, and the defeat of the miners would be quickly followed by that of the print unions at Wapping, a dispute in which Thatcher gave her full backing to Rupert Murdoch. By the time of Thatcher’s 1987 election victory she could credibly claim to have defeated militant trade unionism in Britain.

Yet ‘popular capitalism’ proved largely a mirage. The ‘Right to Buy’ extended home ownership amongst former council tenants, but massively depleted the social-housing stock. Many of the properties sold through it eventually found their way into the hands of private landlords, helping to lay the basis for the housing crisis we face today.

Share ownership was encouraged as a sweetener for the privatisation of public utilities and by the end of the 1980s a record nine million people in Britain owned shares. Yet most people were petty investors with a handful of shares at most, which they quickly sold. The big investors still dominated, and essential public utilities – gas, water, electricity – were now in the hands of rapacious profiteers.

Taxes were reduced, particularly for the rich with the top marginal rate falling from over 80% in 1979 to 40% by the time of the 1988 budget. The basic rate also fell, but this was offset by sharp rises in indirect taxation such as VAT. Overall the tax changes under Thatcher were highly regressive in shifting the burden away from the wealthy and on to ordinary people.

This was most obvious with the Poll Tax, a form of flat taxation to replace the local rates. The ‘Community Charge’ was to be levied at the same rate on everyone, irrespective of wealth or income. The Poll Tax provoked mass opposition as millions of people refused to pay. On the day it was introduced in England and Wales, a demonstration took place in central London that turned into a riot. Ultimately the Poll Tax would play a crucial role in Thatcher’s downfall in 1990.

The failure of Thatcherism

As Thatcher left office, Britain was once again heading into recession with both unemployment and inflation rising. In the early 1990s, house prices crashed leaving many people in negative equity. The result was a record number of repossessions of people’s homes by the banks after they had defaulted on their mortgages. Her successor, John Major, won the following election in 1992, but rapidly became highly unpopular both over his programme of pit closures and because interest rates shot up on ‘Black Wednesday’ – stains on his reputation he never shook off.

The economic legacy of Thatcher is rather different to what is claimed for it. Popular capitalism it wasn’t. Unemployment remained stubbornly high throughout the 1980s, and inequality both between different social classes and different regions widened considerably. The longstanding dominance of the City of London and the financial sector was further enhanced following ‘the Big Bang’ of 1986, paving the way for the economic crash of 2007-9.

In 1979, Thatcher could pose as a radical against the post-war establishment, whereas today Truss represents continuity with an economic model that has been in place for almost forty years and which is responsible for many of the problems we currently face: low wages, rip-off privatised utilities, extortionate housing costs, widening inequality. Moreover, in confronting the trade unions, Thatcher had both a clear plan and something of a mandate from the electorate. She might like to portray herself as the second Thatcher to her fans in the Tory Party, but she is very far from having the room for manoeuvre that Thatcher possessed.

When today’s Tories propose laws to allow employers to use agency staff during strikes, or to force unions to provide a minimum level of service during strikes, they might like to see themselves as Thatcher, but the reality is that strikes in Britain have been at historically low levels for the last thirty years. If this situation is changing amidst rampant inflation, then many ordinary people may welcome it.

Thatcher’s achievement was to weaken the unions, which involved a large degree of state intervention and repression. However, her opening up of British capitalism to privatisation and deregulation has not solved its fundamental problems of low productivity and lack of competitiveness. Unlike at the time of her fall, the Tory party is in an existential crisis, bitterly divided internally and unable to hegemonise large sections of society, despite all the promises of ‘levelling up’ (a term with which Truss seems to have dispensed).

Hence the real weaknesses of the imitation compared to the original. We should do everything to exploit those weaknesses to end Truss’s term in office sooner rather than later.