JB
Prime Minister, when you were kind enough to give us an interview in 1980 we discussed some of the achievements of your Government in its first year of office, and I wonder if I might start today by asking you a similar question and that is, what do you think are the main achievements of the Government, after four years in office?
PM
I think three. First, I think there has been a very radical change in attitudes. When we came back into power, the Government was controlling far too much, incomes, prices, dividends, exchange control and a fantastic number of other controls, and an increasing amount of nationalisation. And if I were being asked for example by an economics commentator about economics, asking what is going to be the norm for next year or something like that, and I would say there ought not to be a norm. Everyone had got their mind into the … that Government set certain things, Government controls certain things and that I think has changed substantially and with it has come a realisation that to have a higher standard of living you have to look not so much to having protest groups or pressure groups on Government, but to a success of your own efforts and own company for which you work for. So I'd say an immense change of attitudes and we've managed to withstand one or two very significant strikes, the first one of which was that big steel strike. Because Government cannot be blackmailed and it mustn't be blackmailed by those kind of strikes merely because it happens to be running a nationalised industry. The second thing is that I think we really have throughout the very very difficult recess years taken very tough decisions, which have laid us a more stable and better financial foundation for the future, than most other countries have got. And this is what's happened to France now because she's gone the socialist way. Well, she hasn't had as much opportunity to learn about the socialist way as we've had, so she's making the fundamental mistake all over again. Look at the United States has a colossal deficit, we don't. So we've [end p1] really got the soundest financial basis this country has had for many a year. And we've done it on a published strategy. Each year we've published a long-term financial strategy, and I think that is a very considerable achievement. And the third thing is by the way we have run overseas foreign affairs and defence affairs. We have earned the respect of other nations in the world. Britain is really respected now. So those three things.
JB
Yes, thank you. Obviously inflation is one …
PM
… inflation is one, … what I call the sound financial basis, the low deficit public expenditure and we've got inflation right down.
JB
It has been a hard slog, I think …
PM
It has been a hard slog.
JB
Have you at any time felt that the price was too high?
PM
I'm not sure what you mean …
JB
Well, in terms of jobs, in terms of …
PM
No, because I have always known, and I can dish out heaven knows how many quotations from the other side, that in the longer-term, and we are concerned to build for the longer-term, inflation is the biggest enemy of our island. So we had to get … and yet to get inflation down, sometimes means in the short run you have to have fewer jobs. In the longer run it gives you a better opportunity for more jobs because with lower inflation you can then compete with other countries and I notice that Mitterrand, Monsieur Mitterrand, turned round this time and said we've got to fight the evil of inflation because it affects our prices as compared with other countries. So, the short-term and long-term are in conflict. I was concerned to build a future for Britain for the longer-term. [end p2]
JB
In terms of unemployment, have you in your mind an idea of when we can expect an improvement in …
PM
We've had another very difficult year this year because as you know the first stage of recovery is really increased output and also be aware big companies can increase their output without taking on any more people at all. Small companies may take one or two extra. So the unemployment is the last of the problems to respond to coming out of recession, to respond when we come out of recession. The lag with improving jobs is longer in unemployment than with anything else. Sorry, that doesn't make sense does it? The lag with improving the position is longer in the case of jobs than with anything else.
JB
Yes, one of your objectives was to bring down the level of public spending. On the whole, public spending still remains very high.
PM
Yes, to bring it down as a proportion of gross national product, you're quite right, that's the really important thing, and of course at a time of world recession that is very very difficult to do because there are certain standard things in expenditure which go on, and in particular, of course don't forget, we've had not only your old age pensioners, not only to keep them slight ahead of increased prices but we've also had 600,000 more old age pensioners. So you can't just stop that expenditure and some of it continues to rise. So it has gone up as a proportion of GNP. I think that is inevitable in the recession. I think this year we've just got it down slightly. But unless we've kept a very, very firm grip on controlling these things, it would be infinitely worse now.
JB
Yes, it still is.
PM
It is inevitable I am afraid, in a recession of the kind we've had. But even so we've tried … . for example, we've got the lowest numbers in the Civil Service now for fifteen years because we're going for efficiency. And if we run the full Parliament we shall have the lowest in the post-War period. [end p3]
I really give that as an example of how we've tried to keep control on costs.
JB
And it still is your ambition to bring the level down …
PM
To bring the proportion down, oh yes, indeed, I think its down by about 1%; this year … because also we've gone to cash control which is very much better. And it was always done in real terms. Everyone assumed that Government expenditure automatically needs to be compensated for inflation, which was ridiculous. Businesses don't automatically get an income that's compensated for inflation, they have to become more gradually more efficient. So instead of saying, “deal with your expenditure by what is known as real terms and is automatic compensation from inflation”, we say, “we are spending, we budget just like a company, X thousand pounds this year, X thousand next year, and if that X thousand doesn't quite make up for inflation so be it, that's the way we should try to get our expenditure down.” Is that clear?
JB
Yes, thank you. I think for the last two years anyway we've been looking forward and I think we've probably been encouraged to look forward to the fact that the economy is on the turn. Do you think that now at last there is real recovery in sight?
PM
I think the signs are better now. I think when we thought it was coming the bottom point was 1981 and the first half of 1982 we thought we were coming out. I think that really was that we'd run our stocks down and the first sign was a re-stocking and then it stopped, and I just believe that with the United States coming out of it more, and with a fall in price of oil and there's some signs in Germany, one or two signs all over at the moment which I think is much more encouraging, whereas at the beginning of last year we seemed to be the first one to be coming out of it, but you can't come out of it alone, not if you're an exporting country. So I do think the signs are better this year than they were this time last year. [end p4]
JB
So …
PM
… they are not only our signs, but signs simultaneous with the United States, and in Germany.
JB
So when we look at recovery, you think it is now likely to be real recovery rather than just a …
PM
… rather than just a stock. I hope it is real recovery because we are also getting it again in construction and we did a little bit last year. We're getting it in construction, I think they are more optimistic in industry now and actually more orders are coming in. And I think that is good, I think the signs are better now than they were this time last year. I'm naturally cautious.
JB
Much will depend presumably on interest rates as far as … investment is concerned.
PM
Yes, we struggled to keep it down. It is not easy to see for the reasons you know. There's still a big inbuilt deficit in the United States. That means there aren't enough people with a high saving ratio. And that means that it's thought in the international scene that large amounts of international money will go to the United States to this deficit. And they'll have to be attracted by quite high interest rates. And that keeps the Dollar strong. And it has some impact on our interest rates although we've tried to diminish that impact as far as we can, because I know the less we can have interest rates down, we'll not get construction and we'll not get expansion in industry.
JB
Yes, I remember in 1980 when I talked to you you said then the worst thing you had to do was allow interest rates to rise. It is really …
PM
But that actually was the foundation of what we did then was aimed in the long term of getting inflation down. We must get … . [end p5]
JB
But still, judging from what you have been saying, still you're [in?] a bit of a [dilemma?] as to whether or not you can keep it down.
PM
Well, we have this trouble. But it's a thing you learn in politics. The battle is never won. You have to fight it again on almost every time. It's never won. It comes up again and again. You have to fight it again every day of the week.
JB
One of the things that I think seems to have happened as a result of the need to lower inflation and to curb spending is a lack of investment and development in public works. I mean, things like railways, roads, water, electricity, sewage—that sort of thing—which I would have thoughtfuture generations are going to be looking at as to what they would have expected us to maintain. …
PM
The allocations, as you saw the … Wasn't it last October I did a statement about this? It was grossly distorted. The allocations [inaudible]. British Telecoms, for example, has undershot the basic [inaudible]. Local authorities have undershot their capital expenditure. We do certain allocations in nationalised industries or local authorities and for the public utilities. This is your capital and this is your current. What has happened is that they've spent so much on their current expenditure that they had not … Certainly local authorities … . they had to put on more for expenditure on capital. And you will remember that the construction industry came to see me and I went round to the local authorities, the nationalised industries and said ‘Look, you should spend your capital allocations’. The difficulty is if they're spending so much on current expenditure, then they just haven't room for capital and this, I am afraid, has been the story of this country. That we have often sacrificed capital expenditure to the current. And if your wages are going to go up the whole time, more than is warranted, the money goes into wages rather than into jobs on capital expenditure. And this is why it is the battle to keep wages [end p6] from going up, we can't spend money twice. … . going to say in the public sector we're going to take out more money for doing the same job, the money is not then available for nationalised industries or, in the case of local authorities, the amount they are having to charge on the rates is already so great that they do not spend their full capital allocation. I had to go round in October and I think we got about £600 million more spent but you see it's like home, you can't go spend on having a new kitchen or an extension put on and at the same time spend a great deal more on your weekly entertainment or your weekly costs you've got to cut your weekly outgoings in order to make for capital expenditure you can't do both.
JB
Do you think there is a change …
PM
Oh yes, certainly, if I may say so the capital expenditure on railways has gone down (can you get the figures), capital allocation has not gone down. And you don't replace places like Shildon or railway wagons; the reason Shildon is closing is because it has spent investment on wagons but on later wagons than those that are produced at Shildon. Investment is not necessarily all the answer, its got to be productive investment. In the early 1970s we spent billions on investing in steel and we got the forecast wrong and now we spend billions on running it down. Because the whole world is building steel plants and therefore there just wasn't—our markets were going.
JB
Do you feel that the change in attitude is coming through at trade union level? [end p7]
PM
Oh, in the private sector yes. There are one or two difficulties in the private sector, Halewood is one of them. Its very very … . but some of the big motor companies in some of the regional areas in Merseyside, where they are crying out for jobs, are some which have some of the worst strike records. And it's thoroughly disheartening, and you can't expect companies to invest there when they see the problems you get with the labour force. Apart from that we are not getting many strikes in the private sector, it's the public monopolies sector where they are using their power really to try to hold the nation to ransom. Some of them, mercifully the great majority of them who work in nationalised industries stay loyally at their jobs as they did in the case of water.
JB
Is that change of attitude coming into the public sector, do you think, or are you going to have to introduce further legislation?
PM
Oh I think it has done in large measure. We had the one big steel strike … . Because people realise the one big steel strike lost us markets in steel which we have never recovered. Coal, of course we are stockpiling coal to a great extent we can't sell it all. But again people realise that they lose far more by going on strike. But there again the water, it was the manuals that went out, about 100,000 homes were without water but when you think about how many million houses, 15/16 million, it was a small proportion. And many many people in the National Health Service … stayed and kept the thing working, the vast majority. [end p8]
JB
Is further legislation …
PM
Oh, we are going to go on doing what we can. We have a big paper out at the moment as you know about ballots for officials of the trade unions, which I think is very very important. Yes I think there is quite a bit more legislation to be done … But it's much larger, it's much broader than that. The whole attitude has changed and people realise that our success depends upon the enterprise, vigour, drive, new design, best products, best delivery date, best servicing. You see so many engineering products have to be serviced after they have been installed and when I think … of the small businessmen they are all there because they are good. There is much, much greater appreciation of that now. And you feel much better you know, one feels much better … much greater sense of achievement, more satisfaction. Management couldn't manage before so many decisions were taken by governments.
JB
Could we look at the world scene for a few minutes? Your Government has, like previous governments, I think, placed itself very firmly on the Atlantic Alliance but the Alliance has been in some disarray over sanctions, the amount of sanctions which should be imposed on the Soviet Union, and Afghanistan, and events in Poland; and also there have been certain differences on trade and on interest rates. Do you think that the differences have been basically resolved and how much effect have they had on the strength of the Alliance?
PM
Well not a great deal on the fundamental strength of the Alliance because we all made certain they didn't. That is to [end p9] That is to say that the disagreements are small proportionately compared with the basic broad agreement that we defend our way of life. Very small proportionately … .
There is still not full agreement and again it is inevitable with the recession when we are all fighting for jobs that there does tend to be a certain amount of protectionism in opinion. And also people say we must solve things where we can; and so therefore there has not been full agreement on how we should deal with the Soviet bloc. There is full agreement that we should not sell things of very high technology which could be of use to them in defence, there is no doubt about that, that's easy. … . but are not because they are diverting so much to armaments. And that's the difficult part. But that's difficult to sort out because the United States will say, yes all right, we will stop spending things to them, like things connected with the Siberian gas pipeline, nevertheless we must supply them with wheat and food and its a very very difficult argument to sustain. But I do think the United states was absolutely right in saying we should not give subsidised interest rates to the Soviet Union. I would agree with that, in fact we do agree with that. But again you know in general, the interest rates, I am not only talking about the Soviet bloc, I'm talking about the whole of the export world. Though you are struggling for big international orders and contracts you have to remember that your own companies are not just competing with companies from other countries but we're competing against companies who have their governments behind them and so naturally when our companies are competing we say, right, our companies have their government behind them. And there are times when you do have to give a certain amount of aid relieve to add to those projects to compete with others who are doing the same thing. And where you find some under [end p10] some under-cutting you on the interest rate very often you have to match their interest rate. It wouldn't be fair for our companies to lose out, not because they are not efficient but because someone else was … . subsidy. And therefore we have to go around constantly and say, look if you are not careful you are going to get into a competitive international subsidy and then you know who will win, it will be the richest country who will win, the one can afford the greatest subsidy and therefore we simply must have an agreement as to how we tackle these things.
JB
Yes. You mentioned nuclear disarmament and the West's attitude towards it. Are there any circumstances do you think where Britain might accept the idea of unilateral disarmament?
PM
No. Nuclear, no. Any government which did that would be totally irresponsible and would be gambling with our whole future. And it is a deterrent. One has to, one notes that the big countries have nuclear armaments … which have nuclear weapons have not gone to war against one another. Nuclear weapons are the biggest deterrent to war. Of all kinds, not only nuclear war but conventional war. Now let me give you one example … that was in chemical warfare we destroyed our stockpile sometimes ago. Russia didn't though, on the contrary she is still building up her stockpile. And then we came to nuclear, and if you ever let it go it would take you years to climb back. Years in which you would be totally vulnerable to blackmail by a country who treats its own people in a way which recognises no human rights whatsoever. Either way I think its best not to call it unilateral disarmament, it is to call it one-sided disarmament. People understand that. If you want to get rid of of nuclear weapons, you've got to get rid of them on all sides simultaneously. [end p11] And it's much better for the world that you do. … . and then we would be genuinely safe.
JB
Are there any circumstances do you think under which the deployment of cruise missiles would become unnecessary here?
PM
Well they would become unnecessary if Russia agreed to take down her SS20s. I can't see that she will agree to take them down between now and the end of the year, and therefore I think we shall have to start to deploy them. How many are deployed will depend on how many Russia continues to have. If she starts to dismantle hers then we'd not have to deploy so many and that would be a very good result. But we will still keep the objective of zero. Although I think it would take some time to bring them down to zero. But it's they who are dragging their feet, not us.
JB
So as of now they will be coming in this year?
PM
Yes, as of now.
JB
In Europe, we still have, as we did right at the beginning of your term of office, these regular Budgetary arguments about the contributions to the Budget. Do you see any way in which that is going to stop or are we going to have to go on, year after year?
PM
I find it most frustrating and very depressing to have to fight for it year after year. We got a three year formula and then they quarreled about the third year because it wasn't as precise, so we had to fight that. Now we've just got the refunds for that, but we have no arrangements for this year and so what one did at the March Summit in Brussels was to say, look, we've got to get two things. We've got to get a long-term arrangements of totally restructuring the Budget because at the moment it's completely unfair. But we're not going to get the long-term arrangements in place this year and so until we get the long-term arrangements we've got to have an interim arrangement, and we've got to decide on that and how much by June this year and make provision for it in the Budget for next year that is being prepared. Because, I say the Budget for next year— [end p12] our refunds for this year in January to March next year but in preparing the Budget for next year you've got to put the amounts in. It is most depressing but the fact is there are countries in Europe—Germany and we are the only two that finance the Community. Germany gets something very special in return for her finance. She gets goods from Eastern Germany … . without levy to Western Germany whereas the rest of us have to pay levies on goods which come in from outside the Community, so she gets something in return for her finance, we don't and the real reason why we find it difficult to get refunds is because most of the other countries which take benefits out are quite happy to have those benefits and don't want to have them reduced. We cannot go on like that and I find it very depressing that we have to fight for it and I sometimes think that equity and fairness seem to be a British concept. But we shall win this battle because we have a good case. Because each and every one of them knows that if they had the same case they'd be fighting it in the same way and so we shall win it. But we shall have to be very, very tough again and I had hoped that after the last time they'd be reasonable in future. They've resisted it and resisted it and resisted it and it's thoroughly unfair. But they know that certainly under our Government we shall fight our corner. … . an area of enforced co-operation in the whole of the Soviet bloc. We have to show how much stronger, more prosperous and firmer is an area of voluntary co-operation of democracies working together. We shall win that battle, don't doubt it. But we shall really have to battle for it and that's the depressing thing.
JB
The biggest crisis you've had to face is obviously, I imagine, the Argentine invasion of the Falklands … .
PM
… . within a few days this time last year. This day, Monday is the day when … .
JB
Presumably our commitment remains as strong, the problem hasn't been resolved in the long run and there is still the future of the Falklands to be faced.
PM
Yes. Why do you say that? The Falklands are British sovereign territory, British administered, we discovered them, we colonised them, many of our people there have been there far longer [end p13] than the Italians, and Spanish, and the Argentines. Why do you say it? We're not negotiating about sovereignty.
JB
No, I wasn't asking that. What I was asking was, do you see any way forward or is it going to remain as it is at the moment?
PM
We stand on our rights. British sovereign territory, British administration, peopled by British stock of territory that was previously uninhabited. Contrast Argentina. It was not uninhabited territory. Many of the Italians and Spaniards went to Argentina as a colony long after our people went to the Falklands. And they displaced many of the Indians and Incas who were there.
JB
If the people of the Falklands decided they'd like some new arrangement … .
PM
That would be a totally new factor. Having been invaded do you really think that they would want any arrangement with the Argentines? It's like the Channel Islands. They'll never want the Nazis back.
JB
Yes, I would like to look now at the future. You have mentioned that you need ten years to achieve what you want for Britain.
PM
Yes, You see the centre of British politics had swung much too far to the left. The centre is only mid-way between two points. It had swung much too far to the left. Indeed, this country still has a bigger public sector than most other free democracies. Still. So I had to swing the centre back to the centre, we're not quite yet back there. Still have far many more nationalised … . public sector than most of the democracies in Europe.
JB
Do you have a vision of what Britain, of what you'd like Britain to be like in 1989?
PM
Well, much bigger owner-occupation. Can you look at the Saturday speech, it really tells you the Conservative approach, [end p14] which is really four-fold. First, we are more than a one generation society, it is really based on … if a person is not interested in the future. A person who never looks back to his ancestors is not interested in the future. So yes we are interested in keeping the best of the past because we believe in continuity. We are not a one-generation society, selfish, living only in the present. Our ancestors built for us and we build for the future. So our attitude and approach is in taking our inheritance and adding to it and enhancing it and passing it on. So we are always building for the future. Secondly, we are conserving the best of the past and if you look you conserve in your historic buildings. We set up a National Heritage Fund. We did the Countryside and Wildlife Bill because we like to conserve the nature. Yes it is important to conserve it. We like to conserve our great institutions because they really are man's gift to civilisation and the way in which we embody human rights and institutions. So you have the continuity, the conservation—that is not enough, you want to change and adapt constantly in order to enhance your inheritance you have to change, adapt, to be prepared to adapt new ideas in accordance with your customs and traditions. You will find that we are—we were first into the industrial revolution when they invented people [sic]. Then of course you have choice, choice is the essence of freedom and this of course is the really great difference between us and the socialists, we enhance the area, enlarge the are of choice and of course you choose your own property. You will find that a country that has no human rights is a country that has no property rights. So yes, you give greater property rights. It starts in owner-occupation. You try to enlarge the area in which people are responsible for their own future and they do that by having a lower proportion of taxation—it has been difficult at the moment, so that they in fact do more and more for themselves. Government help is never meant to be a substitute for responsibility and self-discipline. It is meant to be a safety-net [end p15] and to enable people better to discharge their own responsibilities towards their children. So you will find that that is the Conservative approach. It is one which believes that people should be much more independent of Government in contrast of the Socialist approach which tries the whole time to make people more and more dependent on the Government by getting a bigger proportion of them in council houses, a bigger proportion of them working for the public sector, so they have a vested interest in voting Socialist—they have a vested interest in an increased enhanced public sector. And of course always depending your own way of life, and of course I must say that you cannot have freedom without a strong law. The two sides of the same coin, law, a just law and freedom are two sides of the same coin. That is why we have put so much emphasis on more police, more equipment. It takes a long time to come through because we've had to get all this into place. But if you look for example—Romola ChristophersonRomola will give you an example—just in Lambeth, figures for Lambeth, would you believe in the last three months, I think, the violence and the mugging has fallen by 40 per cent in the last three months? Would you ask William WhitelawWillie for it? But some of these methods are actually now coming through and it is a combination of more policemen, better equipment, the policemen back on the beat gaining the trust and the co-operation of the community, because with law you can never do without the co-operation of the community. And that again is the personal responsibility. Does that give you some idea?
JB
I would like to get some photographs sitting down. Could I carry on talking to you?