british politics-new labour

Thatcherism and New Labour

A period of political depolarisation in the United Kingdom

Gergely Kristof Gulyas

Question 13

PLT 5205

Dr Eunice Goes

Word count: 2,586

Table of Content Introduction.................................................................................................................2

Economic Policies.......................................................................................................2

Welfare State...............................................................................................................5

Foreign Policy.............................................................................................................6

Constitutional Reforms...............................................................................................8

Conclusion................................................................................................................10

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Introduction

The reign of Margaret Thatcher fundamentally changed the nature of British politics

for decades. Her great achievements include the privatisation of key industries, promotion of

the free market and libertarian beliefs, and the creation of a welfare system based on work.

Despite her resignation and the fall of the Conservative Party, her impact influenced the

policies of her elected predecessor, Tony Blair. In fact, many would argue, that the rise of

New Labour is one, if not the most significant accomplishment of Thatcherism. Blair’s

decision to move the Labour Party closer towards the centre of the political spectrum meant to

adopt many Thatcherite policies. It reflected in his economic policies, his attitude towards the

welfare state as well as in his foreign policy. However, New Labour cannot be considered and

a successor of the Thatcherite Tory Party. Blair had substantially different views to Thatcher

in constitutional issues and on the level of ideologies. Subsequently, considering the

emergence of New Labour as the greatest achievement of Thatcherism is a fundamentally

controversial. This paper takes a middle ground in such debate by stating that Blair’s shift to

the centre is a result of the success of Thatcher, but in this shrunk policy spectrum, Labour

remained to represent a different approach towards significant issues. This statement will be

argued via presenting the differences in the details of Blair’s policies even in areas, which

were identified to be similar to Thatcher’s initiatives. Moreover, it will highlight the major

differences between New Labour and Thatcherism in constitutional issues and the underlying

morality of government.

Economic Policies

The governing principle of Thatcherite political economy was the fundamental belief

in the free market. The following quote can sum up Thatcher’s view on the economy: “I came

to office with one deliberate intent: to change Britain from a dependent to a self-reliant

society – from a give-it-to-me to a do-it-yourself nation. A get-up-and-go, instead of a sit-

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back-and-wait-for-it Britain.”1 As this quote suggests, Thatcherism turned its back to the

welfare state and promoted a work-based economy. Due to the poor economic performance of

the time, Thatcher’s policies aimed to reduce inflation. To achieve this aim, she turned against

the established policies of Keynesian economics that dominated the political economy of the

United Kingdom as well as the so-called ‘First World’ for decades. The new governing

ideology, neo-liberalism, explained the economic decline of the UK by the inefficiency of

government intervention in the affairs of the market.2 In the spirit of this new way of thinking,

Thatcher’s government privatised key industrial enterprises including British Airways, British

Gas, British Telecom and other electricity companies, while completely closed others such as

mines in the North of England.3 This mass privatisation was unimaginable before

Thatcherism, but it has been irreversible for latter governments. Moreover, her cabinet took a

monetarist approach to tackle structural issues of the British economy including inflation.

Thatcher’s Secretary of State for Industry, Sir Keith Joseph was the lead supporter of this new

approach.4 Monetarism led to strict budgetary changes; it materialised in the form of

significant decreases in government expenditure as well as several tax raises.5 Arguably, the

most unpopular policy of Thatcher, the introduction of the ‘poll tax’, a flat-rate per capita tax,

was a result of this new, monetarist view.6 However, the most significant legacy of

Thatcherism is the rise of the monetarist principle that “the fight against inflation comes first;

that the interest rates are the policy weapon in that battle; and that government spending must

balance over the economic cycle.”7 This new principle have had long-term implications,

which were institutionalised by Blair’s government.

1 Margaret Thatcher, 1984, Speech to Small Business Bureau Conference, <http://www.margaretthatcher.org/speeches/displaydocument.asp?docid=105617>

2 Stephen Driver and Luke Martell, 2006, New Labour, Cambridge: Polity Press, p. 593 Richard Heffernan, 2001, New Labour and Thatcherism, New York: Palgrave, p. 414 BBC Two, 2013, Thatcher: The Downing Street Years, Episode 1 5 Stephen Driver and Luke Martell, 2006, New Labour, p. 606 BBC Two, 2013, Thatcher: The Downing Street Years, Episode 17 Stephen Driver and Luke Martell, 2006, New Labour, p. 60

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In economic terms, New Labour can be seen as a great achievement of Thatcherism in

many regards. Firstly, Blair did not re-nationalise the industries that were privatised under the

previous Tory government. In fact, New Labour administration committed to the privatisation

of the Royal Mail, the National Health Service (NHS), the London Underground and many

schools in the framework of Blair’s ‘Private Finance Initiative’ (PFI) or ‘Public Private

Partnerships’ (PPPs).8 This initiative was a modest privatisation of these two sectors by

creating an inner market in these national industries. Despite the unpopularity of this policy,

New Labour continuously expanded this pro-market initiative throughout their entire time in

government.9 Moreover, Blair’s administrations committed to the monetarist principles of the

Thatcherite years. As one of his first act, Gordon Brown, the Lord Chancellor of Blair gave

political independence to the Bank of England in 1997.10 This can be seen as the

institutionalisation of the founding principle of monetarism and the complete abandonment of

Keynesianism. In the spirit of this new political economic ideology, New Labour kept and

increased the tax burden on the people. According to official statistics, despite the decrease of

the parentage in basic rate income tax, the widened range of this tax category was an indirect

form of raising taxes in the 1999-2000 fiscal year.11 Moreover, Brown’s Treasury abolished

payable tax credits for pension shames in 1997, which generated an annual £5.4bn revenue by

1999-2000.12 In terms of spending, however, New Labour shifted its approach over time.

During the first Blair administration until the 2000 spending review, the government’s share

of national income had decreased from 44 per cent to 37.4 per cent compared to Thatcher’s

time.13 However, following the review, the cabinet decided to increase spending towards 8 Dr Eric Shaw, 2003, ‘The British Labour Government and the Private Finance Initiative in the

National Health Service: A Case of Pragmatic Policy-Making?’, The Innovation Journal: The Public Sector Innovation Journal, vol. 8 (3), pp. 3-5

9 Richard Seymour, 2012, A short history of privatisation in the UK: 1979-2012, The Guardian, <http://www.theguardian.com/commentisfree/2012/mar/29/short-history-of-privatisation>

10 Gordon Brown, 1997, The New Monetary Policy Framework, Bank of England, <http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/chancellorletter970506.pdf >

11 Her Majesty’s Government, 2015, Rates Of Income Tax: 1990-91 To 2015-16, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/418669/Table-a2.pdf>

12 Anthony Seldon, 2001, The Blair Effect, London: Little, Brown and Company, p.19613 Stephen Driver and Luke Martell, 2006, New Labour, p. 75

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reducing national debt and funding for the NHS.14 This turn meant a return to more Keynesian

politics, which was more popular in the circles of Labour voters.15 In fact, the second and

third Blair-Brown governments increased public expenditure to a historic height.16 This shows

a serious backlash from Thatcherite economic policies. Subsequently, it can be seen that New

Labour governments in some regards continued on the road started by Thatcherism, which is

arguably a result of the shift towards the centre of the political spectrum by both parties; but

there were substantial areas where Thatcherism and the New Labour vary as it is shown by

their attitude towards public expenditure.

Welfare State

Thatcherism, concerning the welfare state, was driven by the idea that work must be

made more attractive than welfare. To achieve her aim, Thatcher privatised council housing,

but due to the public outrage after the Tory privatisation of key industries, the NHS remained

intact.17 She also introduced major cuts to benefit rates, tightened entitlements and piloted

welfare to work.18 Moreover, Thatcher aimed to optimise the size and financing of the British

welfare state to create a tax-financed system.19 This new view on welfare to reward work

created a stigma for being unemployed. As Jessop et al. argue, it led to the decline of

traditional ‘one nation conservativism’ to a ‘two nation’ one. It meant an emerging divine

between “productive/parasitic, rich/poor, North/South, employed/unemployed, etc.”20

New Labour took a very different approach towards the welfare state. Their motto in

the ‘New Deal’ as to create a ‘welfare to work’. This program cost an overall £4bn to the

14 Stephen Driver and Luke Martell, 2006, New Labour, p. 7615 Martin Smith, 2014, ‘Globalisation and the Resilience of Social Democracy: Reassessing New

Labour’s Political Economy’, The British Journal of Politics and International Relations, vol. 16, pp. 601-60216 Martin Smith, 2014, ‘Globalisation and the Resilience of Social Democracy: Reassessing New

Labour’s Political Economy’, p. 60417 Richard Heffernan, 2001, New Labour and Thatcherism, p. 4118 Stephen Driver and Luke Martell, 2006, New Labour, p. 9619 Dennis Kavanagh and Anthony Seldon, 1991, The Thatcher Effect: A Decade of Change, Oxford: The

Guersney Press Co., p. 26620 Bob Jessop, Kevin Bonnett, Simon Bromley and Tom Ling, 1988, Thatcherism, Cambridge: Polity

Press, p. 87

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government and it was paid by a one-off tax on the privatised utilities. One of the main aims

of this program was to achieve full employment by 2000.21 In the case of this policy, both the

ideology and the execution vary significantly from Thatcherite approaches. Instead of cutting

the size of the welfare state, New Labour raised government expenditure in the sector. It also

introduced nonmonetary benefits. The Job Seeker’s Allowance allocated an adviser to help

the long-term unemployed (6 month or longer) to prepare for job interviews.22

In contrast, Blair introduced a significant change to the NHS in the form of PFI and

PPPs. This move to start and inner privatisation process of arguable the most important public

institution was an unimaginable step by the previous Tory government. This policy, however,

achieved a degree of Thatcherism beyond any expectations of Thatcher herself. Furthermore,

New Labour adopted several Conservative policies in their education reformsincluding the

National Curriculum. The introduction of university tuition fees is also a policy implemented

by Blair’s New Labour. The 1998 Teaching and Higher Education Act set tuition fees for

England, for the first time in British history, at £1000 annually. This amount rose to £3000 per

academic year by 2004. These welfare reforms may easily be understood as a perfect

succession of Thatcherite policies in the framework of New Labour.

Foreign Policy

Foreign policy-wise, Thatcher was a neoconservative. She believed in military

interventionism in conflicts similarly to her main ally, US President Ronald Reagan.23 This

interventionism was supported by strong, nationalist identity.24 Thatcher’s government

engaged in many military conflicts in Libya and the Middle East. However, most famously

her name is attributed to the Falkland War. Thatcher engaged in warfare to increase the

21 Anthony Seldon, 2001, The Blair Effect, p. 26522 Stephen Driver and Luke Martell, 2006, New Labour, p. 9723 Dennis Kavanagh and Anthony Seldon, 1991, The Thatcher Effect: A Decade of Change, p. 14324 Anthony F. Heath, Roger M. Jowell and John K. Curtice, 2001, The Rise of New Labour: Party

Policies and Voter Choices, Oxford: Oxford University Press, pp. 58-60

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security of Britain and she aimed to take the lead in such affairs.25 Blair had a similar

reputation of ‘warmongering’ as Thatcher, but for different motivations behind his actions.

Military intervention was a moral issue for Blair, which motivated him to join missions in

Sierra Leon, Kosovo, Afghanistan and Iraq.26 His Falkland War was the military intervention

in Iraq in 2004 along with President Bush. However, while Thatcher gained popularity after

the war, New Labour and Blair suffered greatly after the invasion.27 This shows that New

Labour foreign policy should not be categorised as the successor of Thatcherism. Despite the

similarity in the activeness in international affairs militarily, the motivation behind such

action and popularity of them was fundamentally different in the two cases.

Another significant area concerning Thatcherite and Blairite foreign policy was

Britain’s relation with Europe. Although the general view is that the attitude towards this

issue was very different for the Tories than for New Labour, As the discourse analysis of the

foreign policy speeches of Thatcher and Blair suggests in Daddow’s research, the reputation

of the two party leaders as the Eurosceptic Tory and the Pro-European Labour are not

justifiable assumptions based on their actual views.28 Despite the open resistance against

joining the European Monetary System and against having a greater contribution in the

regional-aid budget, Thatcher recognised the fact that Britain cannot be competitive in the

international market alone; hence the Tory Party should not be considered Eurosceptic. 29,30

On the other hand, Blair’s administrations took a similar approach towards the EU. In the

1997 manifesto, New Labour advocated a new, leader role of the UK in the European

Community.31 Despite this rhetoric commitment, the Labour government tackled the most

25 Anthony F. Heath, Roger M. Jowell and John K. Curtice, 2001, The Rise of New Labour: Party Policies and Voter Choices, p. 62

26 Anthony Seldon, 2001, The Blair Effect, pp. 332-34027 BBC News, 2007, Tony Blair: Highs and lows, <http://news.bbc.co.uk/1/hi/uk_politics/4717504.stm>28 Oliver Daddow, 2013, ‘Margaret Thatcher, Tony Blair and the Eurosceptic Traditions in Britain’, The

British Journal of Politics and International Relations, vol. 15, p. 22429 Andrew Gamble, 1994, The Free Economy and The Strong State: The Politics of Thatcherism, Hong

Kong: Macmillan Press, pp. 121-12230 Bob Jessop, Kevin Bonnett, Simon Bromley and Tom Ling, 1988, Thatcherism, p. 18131 Richard Heffernan, 2001, New Labour and Thatcherism, p. 23

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important European question regarding Britain’s membership in the European Monetary

Union with the “classic British policy of conditionality”.32 However, their lack of action

during the first administration also reflected on the deficiency in New Labour policy options

regarding this issue.33 In fact, Lord Chancellor Brown was highly reluctant of giving up the

pound at all. Although Blair and Brown later campaigned for the adaptation of the Euro, it is

clear that this project had never been a priority for New Labour.34 Hence, the foreign policy of

New Labour regarding Europe can be seen as a succession of Thatcherite politics in contrast

to traditional Labour stand in the issue. Subsequently, Thatcherism had a visible effect on the

policies of New Labour that strengthen the argument to claim Blair as the greatest

achievement of Thatcher.

Constitutional Reforms

The deciding factor, which draws a major divide between the Thatcher’s Conservative

Party and Blair’s New Labour is their views on constitutional reform in the UK. The most

crucial constitutional issue for Thatcher was the restoration of government authority from

trade unions. Regardless of the underlying laissez-faire intentions, both the Tories and Labour

supported this constitutional reform.35 However, major changes in the constitution such as

implementing proportional representation, regional devolution of power or a bill of rights

was off the table for Thatcher’s Tory Party. They introduced minor changes via the new

select-committee system, but there were no significant powers devoted to them.36

On the other hand, Blair’s New Labour was committed to reform the constitution in

some major areas. The list of issues tackled by New Labour included the devolution of power

to a directly-elected Parliament or Assembly in Scotland, Wales and Northern-Ireland and to a

32 Anthony Seldon, 2001, The Blair Effect, p. 32533 Anthony Seldon, 2001, The Blair Effect, pp. 316-31734 Stephen Driver and Luke Martell, 2006, New Labour, pp. 174-17735 Dennis Kavanagh and Anthony Seldon, 1991, The Thatcher Effect: A Decade of Change, pp. 134-13636 Andrew Gamble, 1994, The Free Economy and The Strong State: The Politics of Thatcherism, pp.

236-237

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directly-elected mayor of London, the introduction of a new electoral system for European

elections, the separation of power in local authorities, the creation of a Human Rights Act, a

Freedom of Information Act and a Limits on campaign spending in the Elections, Political

Parties and Referendums Act, as well as the reform of the House of Lords. 37 The most

important element in this extensive list of reforms is arguably the regional devolution of

power. This move was fundamentally un-Thatcherite as it goes against the governing

principle of neo-liberalist about the importance of the authority of a small, but centralised

government. The 1998 Scotland Act established the new Scottish Parliament, which had 129

members and limited legislative and tax-varying powers. It was followed by the 1998

Government of Wales Act and the 1998 Belfast Agreement and the Northern Ireland

(Elections) Act. Both regions were given the right to form national assemblies with

secondary-legislative powers.38 These acts were a clear break with Thatcherism, hence they

show how New Labour cannot be seen purely as the greatest achievement of Thatcher.

However, these constitutional changes sign an important milestone in the history of

the Labour Party. By devolving powers to regional and local authorities, New Labour did not

just reply to the demand of the people, but it once and for all turned its back on the socialist

legacies of the party.39 These reforms were the result of a deliberate repositioning of the

Labour Party in the centre-left of the political spectrum, abandoning its purely leftist origins.

This shift is also signalled by the emergence of issues into the political agenda, which were

traditionally promoted by the Liberal Democrats. The 1998 Human Rights Act and the 2000

Freedom of Information Act are policies of the centre, adopted by Blair’s Labour Party.40 The

real legacy of Thatcherism lays in this transformation of the political landscape. New Labour

37 Anthony Seldon, 2001, The Blair Effect, p. 14338 Stephen Driver and Luke Martell, 2006, New Labour, pp. 159-16039 Anthony Seldon, 2001, The Blair Effect, p. 15240 Stephen Driver and Luke Martell, 2006, New Labour, pp. 147-153

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did not become the direct successor of Thatcherite politics, but its significant shift to the

centre meant the end of the era of polarised politics in the United Kingdom.

Conclusion

The era of Thatcherism has unarguably left its marks on the politics of the UK. As its

predecessor, New Labour certainly had some Thatcherite attributes, but are they significant

enough to argue that its arise was the ‘greatest achievement of Thatcher’? As it was presented

above, Blairite policies are partially similar to Thatcherite ones, but in major issues they are

fundamentally different. In every reviewed policy areas (economic policies, welfare state,

foreign policy, and constitutional reforms), New Labour represented a centre-leftist approach,

which must not be confused with the arguably centre-right policies of Thatcher.

Consequently, this study highlights that although her greatest achievement is related to Blair,

it is not the rise of New Labour, but rather the shift of both Labour and Conservative politics

to the centre of the political spectrum. This tendency was reflected in the hung parliament of

the 2005 elections, when three parties (Cameron’s Conservative Party, Brown’s Labour Party

and Clegg’s Liberal Democrats) occupied and shared the centre. The 2010 General Elections

was a further demonstration of the emerged significance of the political centre. The

unexpected failure of Labour Party is arguably the result of their shift to the left under

Miliband. Hence, both the examination of the relationship between Thatcherism and New

Labour and the brief overview of post-Blair election result seem to support the hypothesis of

the paper that Thatcher’s greatest achievement is, in fact, the depolarisation of British politics.

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<http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/chancellorletter970

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(Accessed 28 February, 2016)

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of-privatisation>


11

Shaw, Dr Eric, 2003, ‘The British Labour Government and the Private Finance Initiative in

the National Health Service: A Case of Pragmatic Policy-Making?’, The Innovation

Journal: The Public Sector Innovation Journal, vol. 8 (3)

Smith, Martin, 2014, ‘Globalisation and the Resilience of Social Democracy: Reassessing

New Labour’s Political Economy’, The British Journal of Politics and International

Relations, vol. 16,

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<http://www.margaretthatcher.org/speeches/displaydocument.asp?docid=105617>


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