Premiership of Margaret Thatcher

's tenure as Prime Minister of the United Kingdom began on 4 May 1979 when she accepted an invitation from Queen Elizabeth II to form a government, succeeding James Callaghan of the Labour Party, and ended on 28 November 1990 upon her resignation. Thatcher, who had been Leader of the Conservative Party since her election in 1975, had led the Conservative Party to victory at the 1979 general election, and won landslide re-elections for the party in 1983 and in 1987. She was the longest-serving British prime minister of the 20th century and the first woman to hold the office. As prime minister Thatcher also served simultaneously as First Lord of the Treasury and Minister for the Civil Service.
In domestic policy Thatcher implemented sweeping reforms concerning the affairs of the economy, eventually including the [|privatisation of most nationalised industries], and the weakening of trade unions. She emphasised reducing the government's role and letting the marketplace decide in terms of the neoliberal ideas pioneered by the economists Milton Friedman and Friedrich Hayek, promoted by her mentor Keith Joseph, and promulgated by the media as Thatcherism. In foreign policy Thatcher decisively defeated Argentina in the Falklands War in 1982, and worked with the United States president Ronald Reagan to actively oppose Soviet communism during the Cold War, but also promoted collaboration with the Soviet leader Mikhail Gorbachev in ending the Cold War.
In the first years of her premiership, she had a deeply divided cabinet. As the leader of the "dry" faction in the party, she purged most of the one-nation "wet" Conservatives and took full control. However, by the late 1980s she had alienated several senior members of her Cabinet with her opposition to greater economic integration into the European Economic Community, which she argued would lead to a federalist Europe and surrender Britain's ability to self-govern. She also alienated many Conservative voters and parliamentarians with the imposition of a local poll tax. As her support ebbed away, she was challenged for her leadership in 1990 and persuaded by her Cabinet to withdraw from the second round of voting, ending her eleven-year premiership. She was succeeded by John Major, her Chancellor of the Exchequer.

First term (May 1979 – June 1983)

Thatcher was Britain and Europe's first female prime minister. She appointed few women to high office and did not make women's issues a priority, but her pioneering election was widely hailed as an achievement for women in general.

Royalty tensions

Thatcher, having to share the media spotlight with Queen Elizabeth II and Diana, Princess of Wales, increasingly assumed regal poses, such as taking the salute at the victory parade after the Falklands War, and becoming the centre of attraction on foreign visits. Tensions between the two were kept hidden until 1986, when the Sunday Times reported on the Queen's alleged criticism of Thatcher's policies, especially regarding the people of the Commonwealth, as "uncaring, confrontational and socially divisive." Thatcher often ridiculed the Commonwealth, which the Queen held in very high esteem.

Economic affairs

Biographer John Campbell reports that in July 1978, before Thatcher became prime minister, when asked by a Labour MP in the Commons what she meant by socialism:

Deflationary strategy

Under Thatcher's government, the taming of inflation displaced high employment as the primary policy objective.
As a monetarist, Thatcher started out in her economic policy by increasing interest rates to slow the growth of the money supply and thus lower inflation. She had a preference for indirect taxation over taxes on income, and value-added tax was raised sharply to 15%, with a resultant actual short-term rise in inflation. The fiscal and monetary squeeze, combined with the North Sea oil effect, appreciated the real exchange rate. These moves hit businesses—especially the manufacturing sector—and unemployment exceeded 2 million by the autumn of 1980, up from 1.5 million at the time of Thatcher's election just over a year earlier.
Political commentators harked back to the "U-turn" of Edward Heath's government and speculated that Thatcher would follow suit, but she repudiated this approach at the 1980 Conservative Party conference, telling the party: "To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady's not for turning". That she meant what she said was confirmed in the 1981 budget, when, despite concerns expressed in an open letter from 364 leading economists, taxes were increased in the middle of a recession, leading to newspaper headlines the following morning of "Howe it Hurts", a reference to the Chancellor Geoffrey Howe.

Unemployment

In 1981, as unemployment soared and the Government's popularity plunged, the party chairman, Lord Thorneycroft, and two cabinet ministers, Lord Carrington and Humphrey Atkins, confronted the Prime Minister and suggested she should resign; according to her adviser, Tim Bell, "Margaret just told them to go away". Thatcher's key ally in the party was Home Secretary, and later Deputy Prime Minister, William Whitelaw. His moral authority and support allowed her to resist the internal threat from the "Heathite" wets.
Following the Brixton riot in South London in April 1981, employment secretary Norman Tebbit, responding to a suggestion that rioting was caused by unemployment, observed that the unemployment of the 1930s was far worse than that of the 1980s—and that his father's generation never reacted by rioting. "I grew up in the 1930s with an unemployed father", Tebbit said. "He did not riot. He got on his bike and looked for work, and he went on looking until he found it."
Over two million manufacturing jobs were ultimately lost in the recession of 1979–81. This labour-shedding helped firms deal with long-standing X-inefficiency from over-manning, enabling the British economy to catch up to the productivity levels of other advanced capitalist countries.
The link between the money supply and inflation was proven accurate, and by January 1982, the inflation rate had dropped back to 8.6% from earlier highs of 18%. Interest rates were then allowed to fall. Unemployment continued to rise, passing 3 million by January 1982 and remaining this high until early 1987. However, Tebbit later suggested that, due to the high number of people claiming unemployment benefit while working, unemployment never reached three million.
By 1983, manufacturing output had dropped by 30% from 1978, although economic growth had been re-established the previous year. The productivity turnaround from labour-shedding proved to be a one-off and was not matched by growth in output. The industrial base was so reduced that thereafter the balance of payments in manufactured goods was in deficit. Chancellor Nigel Lawson told the Lords' Select Committee on Overseas Trade: "There is no adamantine law that says we have to produce as much in the way of manufactures as we consume. If it does turn out that we are relatively more efficient in world terms at providing services than at producing goods, then our national interest lies in a surplus on services and a deficit on goods."

Defence spending

In her first six months as prime minister, Thatcher repeatedly prioritised defence spending over economic policy and financial control. However, in 1980, she reversed this priority and tried to cut the defence budget. The 1981 Defence Review by John Nott, the defence minister, dramatically cut the capabilities of the Royal Navy's surface fleet. She replaced Francis Pym as defence secretary because he wanted more funding. The cuts were cancelled when the ships destined for cuts proved essential in the Falklands War.

Housing and urban enterprise

One of Thatcher's largest and most successful policies assisted council tenants in public housing to purchase their homes at favourable rates. The "Right to Buy" had emerged in the late 1940s, but was too great a challenge to the post-war consensus to win Conservative endorsement. Thatcher from her earliest days in politics favoured the idea because it would lead to a "property-owning democracy". By the 1970s, many working-class people had ample incomes for home ownership, and eagerly accepted Thatcher's invitation to purchase their homes at a sizeable discount. The new owners were more likely to vote Conservative, as Thatcher had hoped. The downside to this was that it eventually led to council house shortages, as the share of the money from the sale of the houses to be used to construct more council properties gradually fell by the end of the 1980s, and saw fewer councils building affordable housing.
To deal with economic stagnation in the inner cities, the Government introduced "enterprise zones" starting in 1981; the idea began in Britain and was adopted by the United States and some EU countries. It targeted designated small, economically depressed neighbourhoods and exempted them from some regulations and taxes. The goal was to attract private capital and new business activity that would bring jobs and progress to declining areas. Important projects included those in London Docklands, Salford and Gateshead.

Social security

Various changes to the social security system were undertaken during the course of Thatcher's premiership. Reductions were made in the amount of payable benefit to occupational pension holders over the age of 60 and a tightening of eligibility rules regarding periods of employment interruption was carried out. The Social Security Act 1980 removed an existing obligation to increase benefits in line with either wages or prices, whichever was better. Instead, the new obligation was for benefits to up only with prices. Under the same Act, long-term disability benefit and short-term benefits could, as noted by one study, "be uprated up to 5 percentage points less than was otherwise required". In addition, the number of incapacitated days before entitlements to sickness benefit could be acquired was raised to four. The 1980 Education Act largely abolished, according to one study, "the requirement on local authorities to provide free school milk and meals".
The Social Security Act 1980 restricted benefit access for the families of strikers, and tightened unemployment benefit eligibility. The Act also brought short-term benefits into tax and phased out earnings-related supplements to sickness and unemployment benefits. In July 1982, sickness and unemployment benefits became taxable, and new Department of Health and Social Security regulations were introduced in 1983 limiting access to certain housing payments for the under-25s. The Social Security Act of 1986 extended the disqualification period for those regarded as "voluntarily unemployed" from 6 to 13 weeks, but at the same time introduced a new, more generous benefit known as Family Credit for students between the ages of 16 and 18 who had lost benefit entitlement altogether, and for those who previously received Family Income Supplement, which was replaced by this new benefit. However, a poverty trap made this benefit "less generous than it appears", according to one study.