Margaret Thatcher did not cause the Credit Crunch but she did raise loads more tax from the rich

Tonight at the Cambridge Union I have a platform to examine the Thatcher legacy.

The amount of newsprint and media time given over to the 30th anniversary of her arrival in Downing Street is testimony both to her achievement, and to the idiotic way the left and the many in the commentariate 30 years on still want to blame her for anything that goes wrong on their watch.

So let’s get a few of their nonsenses out of the way.

The extreme extension of credit happened in the last decade under Labour and under Mr Brown’s very own design of regulations. When Margaret Thatcher left office the simpler and more efffective controls on cash and capital did not allow banks to overextend and create a big asset bubble.

Nor did the Economic Policy review’s critique of Labour’s over the top and totally ineffective mortgage regulation cause the crisis – it was part of a case to have effective regulation of what mattered as we did before Brown changed it all.I had to face this ridiculous canard again yesterday in the debate on the Finance Bill!

Maragaret Thatcher put in a very successful policy to tax the rich. By cutting the marginal tax rate from 83% to 40% she ensured that the rich paid more tax, and a bigger proportion of the total income tax paid, as well as increasing the overall tax take.

Labour’s spite taxes will achieve the opposite,. More rich people will leave, more will invest and work less, more will hire expensive advisers to find ways round the taxes.


  1. mikestallard
    May 7, 2009

    I was there: you are right.
    In the 1970s, life was awful: were were cold, poor, hungry and without means of transport. There were regular riots.
    In the 1990s, life was very good.
    I reckon myself that Mrs Thatcher did a lot for the poor – and she also got the taxation system running fairly too.
    When the experts of the Left took over again in 1997, things started to go wrong almost immediately, starting with “freeing up the Bank of England” and the Dome fiasco.

    1. DBC Reed
      May 8, 2009

      I was also there and the facts are that that the serious rioting broke out in 1981 in Toxteth and Brixton as soon as Thatcher’s eccentric economic policies began to bite.She was let off the hook by the Falklands War (1982)which busied giddy minds with foreign quarrels,although she had pulled out HMS Endurance which might have been taken as a sign that we were n’t interested in the Falklands.Riots continued throughout her era: Broadwater Farm,Poll tax riots in Trafalgar Square etc.
      Far from being a revolutionary it was Labour’s Callaghan who said as PM in 1976 “you can’t spend your way out of a recession” (yeah right) while Tony Crosland declared “The party’s over” for local government spending in 1975. The post-war consensus being apparently over, it is no wonder that the voters took the every man for himself line of investing in property (buying your own council house), which was the only concrete proposal in her very odd 1979 Conservative manifesto.
      What Thatcher does represent is the moment Britsh political parties realised you did not need to half kill yourself providing the voters with work as long as their house prices kept on rising.This, as the likes of Henry George pointed out long ago,cannot go on for ever.

  2. Nick Lincoln
    May 7, 2009

    This story has to be emphasised again and again and again by people like you John.

    It is so simple, so fundamental yet it gets treated in a dismissive manner. If you want to increase the overall tax take, lower taxes! Time and again, this academic theory (Friedman et al) has – for once – worked in reality.

    Please promote this relentlessly. You’re our only hope (as they say in the movies)!

    1. Josh
      May 7, 2009

      Milton Friedman’s theory of targeting the money supply through monetary aggregates was highly flawed. In an era of deregulation and the abolition of exchange controls, it is incredibly hard to control money supply. The M3 aggregate overshot immediatly.

      However, one could argue it helped bring down the double digit inflation. And inflation targetting has proved to be as useless as targetting monetary aggregates.

      1. Nick Lincoln
        May 8, 2009

        My point was referring solely to Friedman’s research on income taxes: lowering them brings in more income tax, because less people seek to evade higher rates or flee abroad.

        Agree that his money supply argument is not so proven – but Reagonomics / Thatcherism came to power with very very high inflation and ended with very low inflation, so perhaps there was something to it!

        1. Josh
          May 8, 2009

          Ah ok. I never knew Friedman did such reseach. I always thought it was Art Laffer and the Laffer Curve.

  3. jim
    May 7, 2009

    I find it staggering how the Guardian tries to blame Thatcher for todays problems. It’s like a serial killer blaming his mother for the killing he did.
    Interestingly Seamus Milne had an article in today’s Guardian claiming that growth in the 70’s was about 2.4%. Completely ignoring the fact that inflation was running at about 14%, so growth was a negative 11.6%. Which was caused by the government printing money, much like they are doing today with QE.
    I remember sitting in the kitchen with a hurricane lamp, waiting for the power to come on, so that mum could cook dinner. It seemed normal to me then, of course, being just a child.
    I think though that the problem we have is intellectual dishonesty from both Conservatives and Labour. Anybody who understands economics, like Norman Lamont, has moved into gold. As they realise that the only way government can pay down Brown’s debts is via massive money printing, thus diluting the buying power of all existing notes. Yet neither Labour, nor the Conservatives want people to understand this, as they both like to print more notes to spend on their pet projects, be ot wars or diversity officers.

  4. Robert
    May 7, 2009

    I was able to vote for the first time in 1979 and have never regretted supporting Margaret Thatcher. Growing up in the statist 60s and 70s was enough to turn me off socialism for ever. Thatcher’s only errors, in my view, were the decisions that centralised control, over education for example. The incoming Conservative government should have one overriding priority – cut back the state at every opportunity. Mr Cameron will have to have at least the guts of Mrs Thatcher if he is to push back the Brownite client state in the way she fought the unions and backed free enterprise.
    By the way John, thank you for your excellent blog. It has become essential reading.

  5. Waramess
    May 7, 2009

    This was without question the most successfull politician of my time-by a mile-and I go back as far as Churchill.

    There is bound to be envy on the left and on the right of the political divide. A lot of pumped up egos cannot deal easily with the comparison.

    Her greatness however is underscored by this fact: we have never heard the same carping about Heath, Major, Wilson or Blair. That is because the big egos feel comfortable alongside any of them.

    Not so with Margaret Thatcher

  6. Doug
    May 7, 2009

    I was too young to vote in 1979.

    In the 80s and 90s I couldn’t wait for the Conservatives to be voted out of office and I thought Mrs Thatcher and the “nasty party” were well matched.

    From 98 onwards my views began to change. This time around I’ll be wholeheartedly behind the Conservatives. Under Labour, the loss of liberty, the money thrown at the public sector for little benefit, the criminal mismanagement of the economy, the lack of a promised vote on further EU integration, the fact that my son will be legally discriminated against (in the name of equality!) and the wholesale misappropriation of taxpayers’ money are just a very few reasons.

    In the 70s Labour squandered the country’s diminishing wealth buying votes from their union friends in nationalised industries. Now they squander our wealth buying votes from their union friends in the public sector. Some things never seem to change.

    The pity is that in Scotland I fear my Conservative vote will be wasted. Nevertheless, I live in hope!

    The good news is, I believe, the shambles that Labour has made (yet again) of the economy is leading more Thatcher-haters to reassess their positions. The realisation is dawning that in the 80s the Conservatives had a huge economic mess to clear up, which, eventually, they did. In 1998 Labour inherited a wonderful economy which, yet again, they have destroyed. If only Maggie was 20 years younger!

    1. PJ
      May 9, 2009

      Keep the faith, I was in Scotland from 1978 as a student and went canvassing for the Conservatives, I remember being told by the SNP at the polling stations not to waste my vote by voting Tory in Dundee but it had no effect…we we will return.

      The Scots were a nation of true Conservatives, self made individuals who built their wealth through engineering and science and who shared it with others through public works.

      I cannot believe that the cronies of Gordon Brown will hold sway forever.

  7. figurewizard
    May 7, 2009

    Under Margaret Thatcher’s leadership we suffered a recession in the early 1990s. Once again dodgy loans were at the heart of it, this time in the form of sovereign debt. It began with the governments of the Asian tiger economies being unable to keep up the payments. When Russia joined in with its own wall of debt in 1989 a full blown international financial crisis could no longer be avoided. At the time control of the money supply was at the heart of UK economic policy and in her famously consistent manner Margaret Thatcher didn’t weaken; she stayed with it. Also Public sector borrowing and national indebtedness were very much lower than has recently been the case here, which is why that recession did not tear the economy apart.

    You can’t say that about this one.

    Reply: We suffered a recession under Mr Major in the early 1990s, brought on by his mistaken entry into the ERM, urged on him by Labour, the CBI and others.I opposed ERM entry from within the government.

    1. Josh
      May 7, 2009

      Exactly. Howe and Lawson forced her into it. Eventually, it led to White Wednesday. Look at how quickly the economy improved after, and the inflation and growth stability that followed, because we set interest rates to suit our economic needs, not to maintain parity within the ERM.

  8. adam
    May 7, 2009

    it doesnt suit Harriets agenda to blame wimmin.

    She wants more on the board of banks through positive discrimination (women of course are helpless creatures incapable of establishing their own banks).

    I was thinking she could start with Gordon and Alistair. They have mishandled the economy, they now run banks. Good candidates imo.
    Yvette Cooper and Harriet Harthing for promotion.

  9. Paul
    May 7, 2009

    Once again the Bank of England has left interest rates at 0.5% this is counter productive in my view the rate realistically should be between 3-5%.

    I joined the Tory party in 1978 ( left again in 82) and helped fight to get Martin Stevens elected in Fulham ( then a rock solid 30 year Labour safe seat) and Margaret Thatcher elected as PM. The brilliant thing about Mrs. Thatch was the simplicity of her ideas and when explaining it she always used analogies of housewives balancing domestic budgets. People understood.

    In general “experts” and financial wizards and most politicians try to blind people with science and complications that don’t exist.

    I wish Dave ( but don’t hold out much hope) would be brave enough to introduce a very simple and clear set of policies.

    An unequivical EU referendum. An unequivical scrapping of ID scheme. An unequivical handing back financial control to Bof E an unequivical scrapping of quango’s An unequivical desire to raise more tax revenue by scrapping complicated pay and claim back, loopholes, highering rate at which people start to pay and lowering top rate back to 40%

  10. alan jutson
    May 7, 2009

    I cannot think of a better person to give such a lecture and debate.
    I have a feeling that many present will be very much enlightened by both knowledge of the facts of history, and of your thoughts about the present and how you see the future.

  11. Adam Collyer
    May 7, 2009

    In my opinion Margaret Thatcher’s greatest legacy was the breakup of the council estates via the “right to buy”. When I was a kid, the poor lived in council estate ghettoes and the well-off lived in private housing. Those of us lucky enough to live in private houses never even thought of visiting a council estate, much less of living there. Now people like me think nothing of living in a privately-owned ex-council house, right alongside somebody still renting from the council or a housing association. This has done more than anything else to break down Britain’s class barriers and bring opportunity for all. And it was opposed by spite-and-hatred socialists like Gordon Brown.

    I have never forgotten one particular day canvassing, when a man told me that his father had always been Labour and so had he as a young man, but “I’ll never forget what Mrs Thatcher’s done for me in giving me the chance to own my own house. It’s something I never even dreamed I could do. I will vote Conservative for the rest of my life.”

    Reply: My parents managed the journey from Council estate to privately owned house when I was a child. It made a huge difference to our lives, and I wanted many others to make that journey. It was one of Margaret’s best achievements.

  12. Callum Wood
    May 8, 2009

    Dear John,

    You were absolutely fantastic! It wasn’t a landslide win in favour of Thatcher but given that the Union tends to be quite lefty it was a brilliant result: a well-deserved vindication of just how good you (and Lilley and Leigh) spoke tonight.

    I was the young man with the camera on the 2nd row of seats on the opposition side, I hope you didn’t mind me snapping! We didn’t get to see you in the bar though, sadly.

    Reply: Thanks for that. I needed to get home – I always get up early to keep this blog going, where I can talk to more people than at the Union!

  13. scouser
    May 8, 2009

    maggie did well by fixing this broken country, sadly my left wing socialist friends do not agree and are stupidly blaming her for todays problems, funny that they where saying what a brilliant job brown did as chancellor until the economy collapsed under him then it was all maggies fault and now only gordon can fix it, the same gordon who introduced over 85 stealth taxes, sold our gold when prices where at there lowest, robbed thousands of from pension pots, put over 850,000 people in public sector useless pen pushing jobs, brought in thousands of new laws, gave a police guard to muslim preachers of hate who spouted hatred of this country while praising those who killed our soldiers, their little minds can only go back to the thatcher years and forget all that happened before under labour, the country was crippled under a labour government, strikes every week by either the miners, the dockers, steel workers, the car workers and council staff, people working a three day week, power cuts, bodies laying in cold storage because the grave diggers joined the strikers, i remember them well as our family waited for 4 weeks before my mother was buried

  14. Sue Doughty
    May 8, 2009

    Well said, good point. keeping merchant and retail banking separate was vital to our financial security and only a (foolish man -ed) would have taken away the glass wall between them. And Gordon is that (fool-ed)

    reply: Lehman went down causing great damage to the system. Lehman was just an Investment bank, perfectly legal under Glass Steagall. What went wrong was regulation of cahs and capital, not the abolition of the glass wall.

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