Boomers and the Ultimate Failure of Thatcherism

Just over 32 years since she left office and almost a decade after her death Margaret Thatcher continues to dominate British politics. Liz Truss’s successful campaign in last year’s Conservative leadership election consisted largely of cosplaying a cartoon version of the former Prime Minister – to the extent of copying various famous photo opportunities and outfits. The rapid collapse of her administration, following a series of decisions the real Thatcher would never have taken, was as perfect an example of “second time as farce” as you could wish for.

Thatcher continues to hold a hypnotic sway over the Conservative mind, and the psychodrama that began in earnest when she was ousted triggered an internal crisis that has yet to be resolved. Beyond Tory politics the changes Thatcher introduced have become part of a consensus that is only now starting to come under sustained challenge, as economic stagnation and social decay create a sense of perma-crisis.

Some of those changes were necessary. Only a very small fringe would suggest returning to the days of the closed shop or an 83% income tax rate. Even fewer would argue re-nationalising British Airways was a good idea. Other changes are so embedded that, while disputes about their merits continue in politics seminars, they either cannot be reversed (Right to Buy) or would require such immense upheaval that currently no party would consider it (nationalising utilities, or reversing quasi-market reforms in education and health).

The underlying belief system of Thatcherism, though, has been proven wrong in quite a dramatic fashion, and British politics, particularly, but not only, on the Conservative side, has still yet to reckon with the consequences of that. This failure underpins the generational shift in views on fairness and aspiration discussed in a post last month, and is the fundamental cause of the new civil war developing in the Tory party.

What was Thatcherism?

Thatcher was not notably philosophical and tended to discuss her beliefs and policies in practical terms. Yet she is the only British Prime Minister to be regularly described as an “’-ism”. Even at the time there was much dispute as to whether her worldview was coherent or rather a mess of contradictions. As John Campbell – the author of Thatcher’s first multi-volume biography – put it:

“The central paradox of Thatcherism is that Mrs Thatcher presided over and celebrated a culture of rampant materialism – ‘fun, greed and money’ – fundamentally at odds with her own values which were essentially conservative, old-fashioned and puritanical.”

Yet for her this was not a paradox at all – or at least she didn’t intend it to be. Shortly after Thatcher left office, academic Shirley Robin Letwin wrote a generally friendly book called “Anatomy of Thatcherism” which explains better than anything else how the former PM’s ideas cohered. This was helped, no doubt, by her son Oliver having been part of Thatcher’s policy team in No. 10.

Letwin argued that Thatcher was primarily interested in promoting was she called “vigorous virtues”:

“The individual preferred by Thatcherism is, to begin with a simple list: upright, self-sufficient, energetic, adventurous, independent-minded, loyal to friends and robust against enemies”.

In Thatcher’s mind these virtues had become downgraded in favour of softer ones: humility, gentleness, a desire for consensus and agreement. And this was at the heart of the crisis Britain seemed to be facing in the 70s. As she said in 1977 – “the real case against Socialism is not its economic inefficiency…Much more fundamental is its basic immorality”. She unpacked this view in a famous speech the following year on Christianity and Politics:

“Once you give people the idea that all this can be done by the State, and that it is somehow second-best or even degrading to leave it to private people….then you will begin to deprive human beings of one of the essential ingredients of humanity—personal moral responsibility. You will in effect dry up in them the milk of human kindness. If you allow people to hand over to the State all their personal responsibility, the time will come—indeed it is close at hand—when what the taxpayer is willing to provide for the good of humanity will be seen to be far less than what the individual used to be willing to give from love of his neighbour.”

From her perspective, therefore, economic policies which handed ownership from the state to individuals and families gave people freedom to use their wealth entrepreneurially and reduced the role of the state in distributing labour and resources. This had an essentially moral intent. The objective was not just a richer Britain but also one in which far more people would exercise those vigorous virtues that would overcome the ethical degradation of the country. As Letwin put it:

“The Thatcherite argues that an ‘owner’ who feels that he is ‘in charge’ and ‘secure’, is more likely to be active, to take risks, to display initiative…. A council tenant living in dilapidated accommodation all too easily ceases to regard improvement of the situation as feasible. But a person owning his own property may quickly set about putting it to rights, and in the course of doing so, discover a spirit of energy and adventure which, so the Thatcherite hopes, may permeate the rest of his life”.

Or as Thatcher rather more pithily put it to the Sunday Times in 1981 “economics are the method; the object is to change the heart and soul”. Thus the core policy decisions of her rule: selling off council houses, selling shares in privatised companies at a discount to the general public, switching taxation from income to consumption, and so on. Property was particularly important to her as the hub for family life, over many generations. As well as Right to Buy she introduced mortgage interest relief at source, and even considered a separate interest rate for mortgages. It was also part of the thinking behind the ill-fated poll tax, to protect the “little old lady with a large house” from rates.

The Afterlife of Thatcherism

It was this moral aspect of Thatcherism that allowed her to connect with the Tory base on a much deeper level than other politicians. Other party leaders and grandees often seemed apologetic about protecting their own. Macmillan was the archetype of the aristocrat paternalist constantly given to rhetorical concern for the poor and dispossessed. Thatcher not only defended the interests of “our people” but said it was morally right to do so, that they had nothing to feel ashamed about: indeed that they were the types of people who would go on to make the country great again.

Subsequent leaders have struggled to maintain this argument for several reasons. Firstly, they lost the Soviet Union and then the Labour party as enemies defined by their commitment to socialism. Secondly, it became increasingly clear that the tide of liberalism was not going to be reversed. Gay rights went from “looney left” to mainstream, fewer people married, more got divorced, and attacks on single mothers started to seem nasty and outdated. John Major’s attempt to recapture some of Thatcher’s moral purpose in his “back to basics” campaign were widely mocked as his own MPs fell one after the other into a series of ever more outlandish personal scandals. Thirdly – and most importantly – it became harder and harder to ignore the effects of the big increase in inequality unleashed in the 1980s.

David Cameron had a Macmillan portrait in his office but was well aware of the importance of Thatcher to his membership, who he always struggled to keep onside. The “big society” which eventually disappeared into the same graveyard of failed strategies as “back to basics” was an attempt to meld a greater apparent concern about inequality with a Thatcherite focus on self-reliance and personal responsibility. Ironically given his early reputation as an eccentric environmentalist Steve Hilton turned out to be by far the most Thatcherite of Cameron’s close team, but in such a hyperbolic way as to undermine any hope of it sticking over George Osborne’s more tactical approach.        

Post-Brexit the party has descended into complete philosophical confusion. May’s post-liberalism could perhaps have turned into an attempt to move on from Thatcherism had she not been banjaxed by Brexit negotiations. Johnson had no philosophy at all beyond personal advancement. Truss attempted a Thatcherite revival and was the first leader for a while to try some of the old lines, telling Laura Kuenssberg that “the economic debate for the past 20 years has been dominated by discussions about redistribution. And what has happened is, we have had relatively low growth … and that has been holding our country back.” But they fell completely flat to an electorate well aware that inequality has not reduced at all in the last 20 years, and that poverty, particularly in-work poverty, is now getting worse.

Rishi Sunak is left in charge of a party with no coherence at all. And he doesn’t even seem to know what he thinks himself. He appears simultaneously embarrassed by his personal wealth and wider inequality – it’s hard to see him agreeing with MPs like Lee Anderson attacking food bank usage – but also still compelled by a philosophy of personal responsibility, aspiration and family, expressed most forcefully in his angry defence of private schools, and his own parents’ decision to use one.

The Thatcherite Trap

No doubt this is partly because of Sunak’s lack of political experience but it is also due to the constraints discussed in earlier pieces. The smarter analysts in the party can see an existential threat heading towards them in the form of millennials who are not becoming more Tory-aligned as they get older. Yet any hope of avoiding wipeout in next year’s election depends on retaining the support of retired voters. They are polling in the mid-teens amongst people under 50; are behind Labour amongst those aged 50-65; yet retain a strong lead with those over 65.

And this is where the moral failure of Thatcherism becomes apparent. The very group of people she enriched, by giving them property, increasing the value of it, helping them become shareholders, allowing them to keep more of their income, have not become vigorously self-reliant, leading to a resurgence in entrepreneurial spirit, dynamism, and charity. They have become spectacularly entitled. (I shall pause briefly here to note I am talking about averages here and there are no doubt many lovely and self-aware boomers reading this, not least my business partner/father).

This has snookered the Tories. To emulate Thatcher now would require boosting home ownership amongst younger people but that cannot be done without upsetting older voters who do not want greater density in their town, or by cutting house prices which can only happen, in a planned way, by taxing property more.

The additional funding required to run the state has to come from younger, working, people because pensions, and pensioner benefits are untouchable, and the vast capital gains on property cannot be taxed for fear of electoral rebellion. Yet this is turn pushes young people towards an extremely anti-Thatcherite way of thinking about fairness and aspiration, and further away from ever voting Tory. As Duncan Robinson recently noted in the Economist:

“On average someone born in 1956 will pay about £940,000 in tax throughout their life. But they are forecast to receive state benefits amounting to about £1.2m, or £291,000 net. Someone born in 1996 will enjoy less than half of that figure: a fresh-faced 27-year-old today will receive barely more than someone born in 1931, about a decade before the term ‘welfare state’ was first popularised.”

And yet despite this the boomer sense of entitlement remains undimmed, as we can see in the current debate about how to reduce the number of older people dropping out of the labour market. Despite its obvious absurdity the idea of giving people in their 50s and 60s income tax breaks in order to continue working is being heavily promoted in the Tory friendly press; the Telegraph, Mail and Express now being essentially Union newsletters for pensioners. This is the logic of a completely captured government – give people enriched by untaxed capital gains to the point they can retire early even more money in the hope they won’t. How disappointed Margaret would be that her vigorous voters have decided to live the quiet life in their fully owned bungalow rather than continue working for the good of the nation.

Over the next twenty years this unfairness, which currently expresses itself as a largely generational divide is going to metastasise into something much broader as the unearned wealth is inherited. As a recent Demos report notes the annual value of inheritance is currently projected to peak in 2046 at 2.4 times higher than 2021 levels, or around £230 billion a year. This will disproportionately accrue to the biggest beneficiaries. The top 10% of inheritors born in the 1980s will get almost twice as much as the top 10% born in the 1960s. The bottom 10% will get the same (basically nothing). And it will exacerbate already existing regional disparities. Between 2008 and 2020 median household wealth in the South East and London grew by 43% and 62% respectively while falling 17% in the North East. None of this is likely to increase the numbers who think wealth distributions are fair.

Escaping the Trap

Thus a Conservative government find themselves in an ironic position of standing against the Thatcherite pro-growth policies of their younger think tankers because to endorse them would mean depriving Thatcher’s initial beneficiaries of some of their gains. If they don’t, at some point switch position, the deep sense of resentment already in evidence will only grow further.

Ultimately if you care about the success of popular capitalism you cannot downplay inequality or the state’s role in redistribution because it has to be underpinned by a sense of fairness. Once people no longer believe their actions will dictate their success or otherwise the game is up. As I noted in my last post on the topic only 20% of people under 40 now think “A person’s income and position in society is mostly the result of individual effort”. This is Thatcher’s nightmare, the very opposite of the society she hoped to build.

The Tories can’t escape boomer capture pre-election – it’s just too risky given the precarity of their position but then will need to find a way to do so in opposition. Labour will, almost certainly, and initially tentatively, try to find ways to tax wealth, perhaps initially by increasing capital gains tax. They may also look at more radical ideas like a land value tax (while abolishing Stamp Duty) or a lifetime receipts tax that could replace inheritance tax and raise more money. The naturally inclination of a Tory opposition will be to oppose, it would be an easy and popular hit, accompanied by lots of flummery about attacks on hard working home owners. They need to resist – or better yet propose more radical action themselves.

To quote from an earlier post:

“In his book, the Death of Consensus, the journalist Phil Tinline argues that there have been two moments in British politics over the past 100 years – 1945 and 1979 – when the previous consensus has come under so much pressure that a party has been able to win offering solutions that were previously considered politically unpalatable. He sees our current era as setting up a potential third break with the past. As he says:

‘Ever since [the 2008 crash] we have been living through shocks and crises. From the 2011 riots, to the Brexit wars, to the grind of the pandemic, Britain has seemed trapped between watching the old order collapse, and waiting for another to be born.’”

This is the third break - accepting we need to deal with wealth inequality if we’re going to restore peoples’ commitment to society and its economic growth. To save Thatcherism the Tories need to agree to bury it.