Fifty years ago today, Mrs Thatcher became Tory leader. Here's how her legacy has been ripped up

Yahoo

11-02-2025

Daily we lament the poor governance of our country and its economic mismanagement. However, we have been here before, and things have been even worse. Those born after the late 1960s require a leap of the imagination to envisage just how bad Britain was in the 1970s.
By the middle of that decade, inflation had reached almost 27 per cent. Industry and many businesses functioned only with the permission of the trade unions; you might wait three months to have a telephone installed (mobiles did not exist); a beleaguered government subsidised food; the stock market plunged, and had few investors. The top rate of tax was 83 per cent, and on investment income a preposterous 98 per cent; 30 per cent of people lived in council houses; and large sections of industry – including the energy sector, transport and telecommunications – were owned, and badly managed by, the state.
We may not yet be in that particular slough, but popular perceptions of politics in 2025 have familiar flavours of pre-Margaret Thatcher doom and gloom. Fifty years on from Thatcher's election as Tory leader on Feb 11 1975, the pressing question is how much of her legacy has been eroded or is in danger of being lost completely.
'It feels a bit like we are back in 1975,' says Mark Littlewood, director of Popular Conservatism, the group founded by Liz Truss, and a former director general of the Institute of Economic Affairs. 'People feel like nothing works and even if we change the government they will be as bad as if not worse than the previous one. There is a cycle of despair and decline in British public discourse, rather than someone saying 'This is how we get out of it'. That was Thatcher's message, even if it was a stern one. She was pointing out how much better things could be.'
It was in an almost entirely negative context in which Margaret Thatcher, the 49-year-old MP for Finchley and, until a year earlier, education secretary in Edward Heath's ministry, was elected leader of her party.
Heath had lost two general elections in 1974 – in February and October – and the Tories knew radical change was essential if they were to rise again. Nonetheless, choosing the first woman to lead a British political party caused widespread shock: especially in the parliamentary Conservative Party, still then controlled by a network of people quite unlike Thatcher – ex-public schoolboys from the upper-middle classes who had mostly known each other for decades, and had a definite idea of a woman's place. That place was not to lead the 'natural party of government'.
In the four years between her election as leader and her ascent to Downing Street in May 1979, things in Britain became distinctly worse. It neared bankruptcy in the autumn of 1976, and was rescued by the International Monetary Fund on the condition that the then-Labour government cut public spending: which was the beginning of its end. The last straw came in the harsh winter of 1979 (snow lay from January to March in much of Britain) as a rash of strikes in the public sector brought the country to a standstill repeatedly. Labour had lost control of the union movement with which it was supposedly so closely allied.
'One of the great curses she got rid of was the use of industrial muscle to extract more wages for less work,' says Charles Moore, now Lord Moore of Etchingham, Margaret Thatcher's biographer and Telegraph columnist. 'That is coming back now. Public services must improve productivity before they get [pay rises] and that principle has gone out the window.'
In those first four years, Thatcher, as leader of the Opposition, learned lessons that she put into practice after entering Downing Street. She cut direct taxes to encourage enterprise and employment. She allowed people to buy their council houses, giving them a stake in the country. She devoted much of the legislative programme of her first term to restraining the overmighty trade unions. She devoted much of the second and third to privatising key industries, including British Gas, British Airways, and British Telecom, water and electricity. Others would be privatised after she left office, such as British Coal and British Rail.
'The biggest problem we faced back then – that we barely think about now – was labour relations and industrial reform,' says Lord Lilley, who was secretary of state for trade and industry under Thatcher. 'There are fears Labour will bring some of this back but it hasn't happened yet, though they are empowering the unions in foolish ways. Whatever Labour does, we could never go back to the worst days before Thatcher's government. That part of her legacy is safe.'
After the horrors of the 1970s, this liberation from control by organised labour, and the realisation that public money was no longer being thrown at poorly-managed, technologically-backward nationalised industries, was greeted with relief by millions of people, whose taxes were cut. It was not least why Thatcher won three successive elections, as Labour moved even further Left in an attempt to combat her. Labour became even more irrelevant as a result: too many people were attracted by Thatcherism.
'She created an expectation of improvement, and now we have created an expectation of decline,' says Moore. 'In 1988 she could bring down the basic and top rates of income tax, and creating the sense that it was all moving in that direction made an enormous difference to people's readiness to work and innovate and stay in Britain if they were rich. Now there is a sense that the rich are leaving and the less well off are more reluctant to take on a new enterprise. Thatcher's approach was not to get in the way of growth – she wanted to remove obstacles for business.'
The cornerstone of the creed was cutting the size of the state, deregulating and creating conditions in which enterprise (a word seldom heard before 1975) could flourish. This did not just mean restructuring the industrial sector and removing state support from businesses that had become massively uncompetitive and reliant on taxpayers' subsidies. It also entailed the deregulation of the financial markets and the restructuring of the Stock Exchange ('The Big Bang') in 1986, not least to accommodate new trading technology and to advance Britain's role in global markets.
When, much against her will, she left office in 1990, Mrs Thatcher left a formidable legacy. Even when a Labour government won power in 1997 it recognised that she had changed the political climate. Income tax did not rise; nothing was re-nationalised; the trade unions did not regain their privileges.
But as we reflect on that legacy after half a century, and look at the state of politics and policy now, it is apparent that much has been lost already under successive governments of both stripes, aided by what Michael Gove memorably called 'the blob'. What remains seems destined to be dismantled by Sir Keir Starmer's Labour administration.
One of the most significant aspects of Thatcher's legacy – deregulation – has taken a particular pummelling since she left office.
'Regulation has got worse almost every passing year since Thatcher, including under the last Conservative governments,' says Littlewood. 'The risks of sole traders taking on their first, second or third employee are so perilous it isn't worth doing. There's also a risk you'll be spending half your time on compliance. We have become a nation of 'compliers' rather than producers, so nobody should be surprised that growth is on the floor. I still think the British people are up for a bit of swashbuckling, but the political elites refuse to allow them to do so.'
Another of the abandoned tenets of Thatcherism is lower taxation. Her arguments, learned from economists such as Friedrich von Hayek and Milton Friedman, but also from political thinkers such as Enoch Powell and Keith Joseph, were that both workers and entrepreneurs needed to be incentivised by being allowed to keep more of their earnings, whether in wages or salaries or in profits.
'What Thatcher's government did was create a climate for entrepreneurship,' says Lilley. 'When I first entered politics no children ever mentioned wanting to start a business as an ambition. By the end of the 1980s I would hear children in every school I visited say they wanted to start their own business. That was a huge change. My impression is that we have lost some of that drive, and a diminution of the numbers who want to be entrepreneurs. Those who do will find the climate less conducive than it was in the 1980s.'
'But something drastic happened after [the economic crash of] 2008, when, after 18 months of recession the United States continued on its growth path, but on this side of the Atlantic, things remained stagnant with living standards barely rising in the ensuing years. The big thing was we stopped banks lending through over regulation and gold-plating the 'Basel rules' [implemented in the EU in response to the banking crisis]. American banks lent to business, they were able to invest and they got ahead. Ours didn't and our businesses haven't invested.'
The specific repudiation of this aspect of her legacy really got underway during David Cameron's time in No 10, during which a determination to maintain the generosity of the welfare state caused taxes to be increased by stealth: notably through the freezing of thresholds. George Osborne, Cameron's Chancellor, used to claim that public spending was being cut, but in fact, all that was being cut was the rate at which it was increasing. Boris Johnson then raised National Insurance, and Jeremy Hunt, under Rishi Sunak, began to dismantle non-dom status for wealthy foreigners, many of whom made a huge financial contribution to the country in other ways.
The dismantling of Thatcher's taxation legacy has only seemed to accelerate under Labour, with Rachel Reeves, the Chancellor of the Exchequer, accused of throwing the British economy into reverse.
Her decision to raise employers' National Insurance contributions – the tax on the jobs of their staff – has coincided with a rash of redundancies, including 3,000 at Sainsbury's and 4,700 at BP. Reeves' move to levy VAT on private school fees, meanwhile, has led to the closure of several schools already, with the expectation of more to come. The promise of higher inheritance tax on farming estates has led to the prospect of farms passing out of families into an uncertain future, with possible serious consequences for our food supply. Reeves also used her first Budget, in October, to pledge to finish the job of abolishing the non-dom tax regime – although she has since indicated that those plans will be watered down.
'Reeves' first Budget could have been designed to depress opportunity,' says Moore. 'And the massive regulatory structure built around health and safety, DEI [Diversity, Equity, and Inclusion] and workers' rights amounts to a very tough life for small businesses, and squeezes costs so they are much less likely to take on and train a young person.'
The country now has the highest burden of taxation since Clement Attlee's administration in the late 1940s. Ironically, that record was achieved by the last Conservative government, and has been maintained by Labour. It is not only the Left that has undone Thatcherism, but also the so-called Right.
'Business rates have increased and inheritance changes will make a big impact,' says Lilley. 'Our business class has not 'reproduced itself' very much and it will do so even less if they can't pass their businesses on to their children.'
'Share ownership is less attractive now,' adds Moore. 'As is building up personal pensions because they're more highly taxed. For small business and farming, inheritance is a very big part of family and life and a business model, and all that is coming under attack.'
Home ownership, another foundation stone of Thatcherism, peaked at just over 73 per cent in 2007, 17 years after she left office, but directly as a result of her policies. It is now down to 65 per cent. Owning a property has become a near impossibility for most people under the age of 30, and a considerable number under the age of 35. This is not just caused by high interest rates, but also by the sheer shortage of stock, and the knock-on effect of still-uncontrolled illegal immigration. The present government seems not to know how many people are actually in the country, which makes any sort of strategic and infrastructural planning nigh on impossible. In the Thatcher era, immigration was controlled – she was once criticised for speaking of the fears of the public being 'swamped' – and property prices remained at a level that allowed wider aspiration for people to become homeowners. Those days have gone.
'One of the main reasons people can't get houses now is the massive increase in net immigration since Tony Blair,' says Lilley. 'During the 11 years Mrs Thatcher was in power the net level migration over the whole period was zero. There was no net change in the population through immigration. Since Tony Blair there have been millions, exacerbated by Boris Johnson. More people and not enough home-building means lots of people can't leave home or share rental properties when they would prefer to buy.
'Blair proclaimed the doctrine that immigration was essential for economic growth. In the ensuing two decades we've had the highest level of immigration in our history and the lowest rate of growth. Mrs Thatcher, of course, was a scientist and she would have looked at the factual evidence and drawn her own conclusions. It was outside the Overton Window [the idea in political science that there is a set of 'acceptable' beliefs] to query whether immigration was a good thing. She knew and talked about this in 1978 when she spoke about 'being swamped'. She was prepared to challenge those assumptions, but it became unacceptable after Blair to question that immigration was always positive for the economy, and people were afraid of being called racist.'
One of the most abject pieces of evidence of the failure to use Brexit to 'take back control' of the nation's destiny is found in the rocketing numbers of legal migrants from outside the EU since Britain left the bloc in 2020. That year, 112,000 such people arrived to study; in the year ending June 2024 it was 375,000, including dependants, according to official estimates from the Office for National Statistics. In 2020, there were 71,000 migrants for work purposes; in 2024 it was 417,000. This has put a massive strain on public services and infrastructure, but especially on housing. The Thatcherite dream of the property-owning democracy is now receding as a result.
The Conservative manifestos of 2017 and 2019 promised to rectify this, but through allowing mass immigration, and a failure to think radically about the planning system, they failed. Labour appear set to make it yet easier to get into the country, offering little hope things will improve in the near future.
Privatisation under Thatcher was not merely a means of getting experienced commercial managers in to revive businesses that had been driven into the ground by officials. It was also a means of replacing taxpayer funding with money from private investors, and in the process extending the principle of ownership to millions of small shareholders. People bought shares in BT, British Gas and the National Grid, another way of extending their stake in the country.
Now, parts of the railway network are being taken back into public ownership, and the Government appears to be eyeing up water companies. The notion that the state is an effective business operator is becoming current again; and it will cost an enormous amount of taxpayers' money, and not necessarily lead to better services.
Industry is not the only place where the state has intruded or is preparing to intrude. With great encouragement from Whitehall and local government, Starmer's administration has spent money very freely, notably on pay settlements for public sector workers, with a dire effect on borrowing and the cost of servicing debt. It has pledged to strengthen employment rights, the rights of tenants, and to increase the pay of those on low incomes, all interventions entirely inimical to the Thatcherite creed.
Starmer's changes come after decades of bloat with regards to the size of the state. From 1979-97, successive Conservative governments increased public spending on the NHS steadily by 3.2 per cent a year in real terms. Blair, and his successor Gordon Brown, raised this by an average of 5.5 per cent, rewarding hundreds of thousands of unionised workers in the health service in the process.
Thanks to the financial crisis, the Conservatives did not match that rate when in coalition with the Lib Dems from 2010 to 2015 – real terms spending rose by just 1.1 per cent – but by 2018, it had risen again to 2.8 per cent, thanks to a specific injection of cash under Theresa May. The pandemic took this area of spending out of control, with a real increase in 2020-21 of 9.7 per cent during the Johnson administration.
How Thatcher would have responded to that crisis can only be a matter of conjecture, but it is hard to think of her squandering vast amounts on useless protective equipment, for example, in the way Johnson did. Even before the pandemic there was little attempt to control NHS efficiency, despite occasional bursts of rhetoric from Conservative leaders, especially in terms of payroll; and there seemed to be no attempt at all once Covid struck. The current full-time equivalent NHS staff level is 1.365 million people, according to NHS Digital. When the Conservatives lost power just seven months ago it was 1.344 million, having risen 4.3 per cent in the previous year. In 2015, the figure stood at 1.074 million. Their nine years of post-coalition rule saw total welfare spending soar from £217 billion to more than £275 billion.
Thatcher, whose foreign policy outlook was defined by post-Cold War hawkishness, would presumably have taken a dim view of today's approach to international affairs too.
In recent months, the Government has handed £17 million in aid to Gaza. Much of this was sent to UNRWA, the United Nations relief agency in Palestine, some of whose workers have been accused of backing Hamas. Meanwhile, a staggering £310 million to the World Health Organization, which the United States has just quit at President Donald Trump's direction, citing the body's 'mishandling of the Covid-19 pandemic … failure to adopt urgently needed reforms, and its inability to demonstrate independence from the inappropriate political influence of WHO member states'.
And one can only imagine her response to the proposed deal to pay Mauritius to take the Chagos Islands off Britain's hands.
'We've become a cog in the wheel of international law,' says Littlewood. 'Can you imagine Margaret Thatcher calling up General Galtieri in Argentina in 1982 and asking him to take the Falklands and pay them £18 billion for the privilege?'
Having spent a decade rebuilding Britain's standing and influence around the world, it's safe to assume Thatcher would also be appalled at the ways our armed forces have been denuded. 'I'm sure she would be horrified at the state of our military,' says Littlewood.
'We've moved from a government that felt its primary obligation was to defend and sustain the interests of the British people to one that feels its primary obligation is to follow unamendable international rules and laws interpreted by unaccountable lawyers,' says Lilley. 'Hence the Chagos deal, which is indefensible.
'Mrs Thatcher believed defence is one of the first priorities of the government. She would have asked 'What do we need to spend, what can we afford to spend?' and fitted everything else around that. The priorities have been reversed. For a while that was understandable after the collapse of the Soviet Union but we are now in a more unstable world and we need to reflect that in our defence spending, which she undoubtedly would have done.'
Thatcher's foreign policy was also defined by her favouring of relations with the United States over those with Europe. The Starmer administration may be trying to ingratiate itself with Trump, but opposes him on key policies – notably net zero and in resisting his request to increase defence spending.
'The current attitude to net zero is suicidal,' says Lilley. 'The two things that mark this country out from America post-2008 is the lack of growth of bank lending and the other is the cost of energy. Real-term energy prices have risen here and gone down in the States, in large part due to oil and gas development, including fracking. One of our big exports was oil and now we are stopping people finding it and producing it. Mrs Thatcher would have instinctively recognised the importance of energy. She was also particularly keen on nuclear energy and sadly we've made little progress in nuclear power since then.'
Thatcher had been the first prime minister to recognise the importance of an environmental policy to tackle climate change, but never in a way that would impoverish the public or reduce wealth creation.
Despite Labour's net-zero drive, the seeds of the undoing of this aspect of Thatcher's legacy stretch back several years, to May's time in No 10.
In June 2019, weeks before she left office, May committed the UK to achieving net zero by 2050, even though she was warned by her Chancellor of the Exchequer, Philip Hammond, that the cost would be at least £1 trillion.
The policy was embraced even more enthusiastically by her successor, Johnson, who in 2021 said the UK's path to net zero would be 'paved with well-paid jobs, billions in investment and thriving green industries'.
All that comes at a huge cost to the public.
We are just seven months into this Government: at this rate, by the end of the parliament there may be little or nothing of the great Thatcher legacy left at all.
'What has been lost is the idea of self-reliance,' says Littlewood. 'Social mobility was a big part of Thatcher's appeal and that has certainly flatlined. Her message of resilience, risk taking and keeping the rewards of your success really resonated back then.
'Now we see millionaires and billionaires as cash cows who should not be applauded for their success, in fact they should be criticised for not paying their 'fair share' of tax. We have developed a victim culture and that would have her spinning in her grave.'
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