The Lady Is for Turning, 1979–82

Abstract

The Conservatives won the May 1979 election with a majority of 43 after enjoying the biggest electoral swing since 1945. The election manifesto had set out ‘a broad framework for the recovery of our country, based not on dogma, but on reason, on common sense, above all on the liberty of the people under the law’.² There were general commitments to published monetary targets and a lower Public Sector Borrowing Requirement (PSBR). There was a pledge to cut income tax ‘at all levels’, and a promise to ‘simplify’ VAT. There was a passage on ‘responsible pay bargaining’, long on the dangers of irresponsible pay bargaining, but short on specific commitments. There was no mention of the exchange rate. In short, the manifesto was an uneasy compromise between the ideologically attractive and the politically feasible, which, despite the claims made for a radical break in 1979, contained little, in economic terms, that the outgoing Labour Chancellor could have fundamentally disagreed with. The overarching aim was much the same as before — sustainable growth, to be achieved by lowering inflation and restoring incentives. As Tim Congdon points out, ‘The structure and form of policy, with the focus on quantified limits to monetary growth and the PSBR, were identical to those in the last two-and-a-half years of Denis Healey’s Chancellorship’.³

Control of the money [supply] operates through the simple but brutal means of butchering company profits. Ultimately insolvency and unemployment teach employers and workers alike that they need to behave reasonably and sensibly.

Lord Cockfield, Minister of State, HM Treasury, 1981.¹