Burns
Prime Minister, what are you hoping to do to help President Carter over the Iran crisis?
Thatcher
Well, really everything we can and the fact is that diplomatic efforts just have not worked. They have been there for nearly six months and Jimmy Carterhe has tried everything. He has been to every international forum and he has tried commissions there but it has not secured the release of the hostages from the students to the government. So, he is quite entitled and fully expects us to respond to him when he says, “Please, we must do something more” .
We did all go to the United Nations and the Security Council and we voted for a sanctions resolution but we were vetoed by the Russians. The essential thing about sanctions resolutions is this: you have all got to do it because it is no earthly good one person saying, “I will withhold trade” if another one takes it up. So, what we have got to do is to get together with the European Community and our other friends to see if jointly we can agree on a course of political and economic action to bring pressure to bear on Iran and that we propose to do. We are in urgent consultation with our allies and there will be a meeting of Foreign Ministers next Monday and we hope that that will take the necessary decisions.
Burns
And at that meeting of Foreign Ministers will Lord Carrington be recommending that we do do as President Carter wants? [end p1]
Thatcher
We have to do two things: everything we can to help secure the release of the hostages and, secondly, everything we can to support our American friends and allies—both are necessary.
Burns
But I think you said in your statement in the House this afternoon that President Carter now feels the need to take a step forward. Is what he is asking of Britain and the other European countries the only way forward he can take without actually resorting to military action?
Thatcher
There are both political things which you can do. He has asked, really, two things. First, that we would implement the United Nations resolution on sanctions, which could not be implemented because it was vetoed. Secondly, that if that does not work we withdraw diplomatic representation from Tehran altogether.
We must act together. This is the essential thing. That is why we are getting together with Europe. It would not help if just one or two nations said, “Well, we will not supply Iran” , or “We will not buy from Iran” , but other people did. That is why the necessity to act in concert with our allies, and we will be considering together these things to see the maximum amount that we can do together.
I think I ought to make one thing quite clear. If you get a United Nations resolution on sanctions passed and it is mandatory, that automatically becomes law here and, therefore, sanctions could be imposed. Without [end p2] that, and we shall not get that because of the Russian veto, then you have to bring a law before the House of Commons if we agree to impose sanctions. So, the matter would have to come before the House again.
Burns
Do you feel it would be difficult to get unanimity between the Nine next week at the Foreign Ministers' meeting because the Germans are already on record, I believe, as saying that President Carter cannot hope to get all that he has asked for?
Thatcher
I think there will be a very deep understanding of President Carter's problem because each and every person there will be thinking, “Supposing they were our people, would we not be expecting America, as the most powerful nation in the world, to support us? And if we would be expecting her to support us, is she not entitled to look to us to support her?” I think once you look at it like that and realise they have been there nearly six months, then I think there will be a deep understanding of the problem and a great wish to show solidarity with the United States: a great realisation that diplomacy has not worked, international fora have not worked, therefore together we have to do something further.
Burns
Like taking economic sanctions, which they want?
Thatcher
Like taking economic sanctions.
Burns
The threat President Carter, of course, uses is [end p3] that if we do not go along with him, then he will be forced to take other tough means, like military action—those words have been used. Would you see that as a grave situation?
Thatcher
That would be very grave indeed and I think that is just exactly why he is saying to the rest of us, “Look, that would be the worst possible thing. Let us try everything: further political and diplomatic action, economic action, any pressure we can bring to bear on Iran to see if we can get the hostages released that way.” After all, it must be almost unprecedented in modern times for diplomats to be held, contrary to all international law, for nearly six months, and it is in the interests of every country in the world, Russia included, to see that that does not happen to diplomats anywhere.
Burns
If the pressure is stepped up on Iran with an economic blockade or even worse, if it came to that, would that not have the effect of pushing Iran into the arms of the Russians?
Thatcher
That is sometimes said and, indeed, I saw the interview with President Carter last night, and certainly it is a risk, but it is one of the factors you have to take into account. But there are other factors you have to consider as well. The patience of the American people and of the President is not inexhaustible. It is not as if he is asking for this as a first move: he is almost asking for it as a last resort, and you have to take all factors into account. Skill has not got them [end p4] released: joint resolutions condemning the action of Iran has not succeeded in releasing them, so we have got to try to go together to the next step. The ‘together’ is important to show maximum solidarity with the Americans. It is important to see that it works on Iran and it is important to make it perfectly clear to the whole world that really they must expect this kind of action to be taken if they just make diplomats hostages. You cannot conduct civilised relations on that basis with any country in the world.
Burns
We have got this special relationship with America and if at the end of the day agreement was not reached amongst the Nine, would you make Britain's position absolutely clear to President Carter?
Thatcher
I hope we shall be able to agree among the Nine and I think there is a deeper understanding now. For sanctions to operate we do all have to take the same step at the same time and I hope that President Carter will feel that with the amount that they do for Europe—after all, we rely for our final security on the United States—that the United States is entitled to look to Europe for support in her great moment of need.
Burns
The Americans are also demanding our co-operation in boycotting the Moscow Olympics, as their team has now done; they have now boycotted it at the weekend. Would you accept that despite your messages to our own athletes, swimmers, and so on, that it is unlikely that we will be able to support them in that way, that our team will be [end p5] going?
Thatcher
President Carter has certainly asked for our co-operation in that, but, you know, a number of us felt very strongly that in any event we should not go to the Moscow Olympics because, to go to Moscow for the Olympics is really to confer a great mark of honour on Moscow and on Soviet Russia at a time when she has crushed another nation and is still keeping her under by force. So, we really, in a way, were ahead of the field in suggesting, first, that the Olympics should be moved and, secondly, when the International Olympic Committee said, “No” , saying, “Well, then, we must boycott the Games” .
Now, as you know, our own International Olympic Committee did not follow the lead which Parliament gave, but they did say that if matters changed they would reconsider it. I think matters have changed. I was very pleased with the decision of the American Olympic Committee. I know the difficult moments they went through because, naturally, they feel that the athletes have trained for this for a long time and what a pity it has to be in Moscow and they must have pondered a long time about it, but they felt that the defence of freedom was the over-riding need at the moment. They have decided. That is a lead which other nations cannot ignore and I hope that our own will reconsider their decision and, perhaps, change it.
Burns
Sir Denis Followes said last night, after President Carter's interview, that he did not think the situation had changed at all, so, presumably, that means [end p6] most of our athletes will be going?
Thatcher
They may, in fact, change their minds. It is, of course, a new factor that the American Olympic Committee have said, “No, we will not go” . I believe that in the coming weeks a number of others will say, “No, we will not go” , but it would really hardly be the same Olympics, would it?
Burns
President Carter did put a lot of pressure on his Olympic Committee—in short, if they defied him, that Committee believed that he would have put them out of business. Is there any pressure that you might consider putting on our athletes?
Thatcher
The pressure of persuasion and asking them to think just exactly what they would be doing in going to Moscow. It is all very well to say that there should be no politics in sport; it would be very nice if that could prevail, but that is not the way that Soviet Russia plays it, and I just hope that they will reconsider. After all, some have decided not to go. The Equestrian Federation and the hockey people have said, “No, under these circumstances we cannot go” . The more nations who decide that they will not go, the less like an Olympics it becomes.
Burns
But there would be no question, for instance, of withholding Government money to sports that defied your wishes and went to Moscow? [end p7]
Thatcher
Not to the Sports Council, no, nor indeed will we withold passports and visas. A free country does not do that. But I just hope that those athletes will think that they belong to a free country and they would be going to do a signal honour to a country which does not permit freedom, similar freedom, to its own people; which makes a point of even removing all dissidents from Moscow in case they should meet any athletes who go there and I hope that they will remember that in making their final decision. And also the fact that at this moment the Soviet Union is holding another country down by force and that we cannot tolerate.
Burns
And if, at the end of the day, our Olympic team does go to Moscow and that we are not, for some reason, able to fully support President Carter in his demands about Iran, what would that mean as far as the Western Alliance was concerned?
Thatcher
The Government has made its position very clear about the Olympics; Parliament has made its position very clear. With regard to reaction about Afghanistan, again, if I might say so, we were right in the lead. We held the first meeting here after the invasion of Afghanistan when Warren Christopher came over from President Carter. We held a meeting here. We have been urging. First, we stopped credits on preferential terms, then we urged Europe to consider not to sell as much high technology to Soviet Russia and we also urged Europe not to sell surplus butter to Russia. So, the Government here has really been in full support of [end p8] President Carter, but, also, in full support of even more than that, if I might put it that way—in full support of the ideal that freedom does not defend itself, someone has to defend it: in full support of the realisation that if Russia gets away with this, who and what next? [end p9]
Burns
Can we turn now to our own economy? Since you came to power a year ago to put things right, things seem to have got worse. Inflation, from 13 per cent., I think, when you came to power, is now heading for 20 per cent., unemployment heading for 1.5 million, perhaps 2 million, next year according to forecasts, wage settlements around 20 per cent., trade falling—why should people have confidence that your policies will get it right?
Thatcher
Because I think they know that when things have been badly wrong for a time, it takes quite a time to put them right. It was time for a change, but change does take time. In that last year, for example, we've had almost 100 per cent. increase in the price of oil. That's working through into prices. We still have the high wage awards previously working through. We had to take all what I might call the Clegg awards—you know, last year Mr. Callaghan said, “All right. Take, say, 9 per cent. now and we'll refer your claim to Clegg and we'll honour it when it comes out.” It's been coming out and we've been left to pick up the tab.
Last year just before the election gas and electricity prices were referred to the Price Commission, who actually recommended a very, very big increase in the price of gas—far bigger than we've had. But it was a way of putting it off. And so those came through after the election. Now all of these are in fact coming through together, still with this very worrying increase in the price of oil which, as you know, internationally we resist. And those things still have to work through. [end p10]
Burns
How long do people have to wait—?
Thatcher
I think the thing that we have been responsible for was we certainly did switch from income tax to value added tax, and that came on to the Retail Price Index. Now that will go out of the Retail Price Index in about August, and I am afraid that some of the increases that I have referred to will still be working through and indeed, also the rates increases, and those are going to be high—again partly because of the public sector awards through Clegg and the teachers' one is coming along. Those have still to work through and, much as I have to bear bad news and much as I regret it, I believe the Retail Price Index will continue to go up for a few months then, and I believe that we shall get better news in, say, August, when year on year we shall see a reduction.
Burns
(interrupts)
Thatcher
But these things are in—well, the Retail Price Index. These things are in the pipeline, and I just hope that we shall not get many more increases, if any, in the price of oil, because that goes through to everything.
Burns
One wonders how much time we've got, because the Cambridge group of economists in their economic forecasts have said that our economy will completely collapse in 18 months if you continue with monetarist policies.
Thatcher
Just let's try to analyse what monetarism is. It's as if it's something new. It's not. It's as old as the hills. It consists in saying this: that a nation has to earn its keep and Government is not going to print any more money than the nation earns. That is called monetarism. Other people call it making money sound. Other people call it common sense. But for years we've been printing more than the nation's earned. In so far as you print extra money, you devalue the money in existence, particularly the savings of anyone [gap in transcript] [end p11] who has saved in money terms. Now what we are saying is that inflation is quite high, we're printing less money than the rate of inflation and given time—and it is usually 18 months to 2 years—we'll gradually pull that down. You call it monetarism—no-one can escape monetarism any more than they can escape the laws of arithmetic. It's sound money, it's refusing to print money, and that's what we're doing. That is the only way. It does take time to work.
Interviewer
Which as I said the Cambridge group say we haven't got time. Their scenario is that inflation increases the basic cost of industry, that the high pound makes it [end p12] difficult to sell it then becomes easy for imports to get a hold in the country that unemployment rises and the British industry has never been less competitive.
Prime Minister
What's the alternative to printing less money? Printing more? What do you think printing more money will do? It will make inflation go further and faster. What happens when you get inflation going even further and faster? Goods price themselves out of the market, it's not long before your unemployment goes up even faster. So those who say that monetarism is wrong are advocating printing money are advocating faster inflation. And let there be no doubt about it. That's what they are advocating and that's what I will not do. Yes it will take time to work through but if you go for more inflation now by printing more money—that is by saying to people it doesn't matter whether you earn it or not brother you can have it—that's not a sound policy for anyone. The real problem we have at the moment is people saying I want the extra money but I don't want to earn it. And we are saying to them look there is more money to be earned, more money if you do away with restrictive practices, if you'll do away with overmanning. It isn't even as if you have to work that much harder it is that you have to work more efficiently, you have to use the latest equipment to its maximum extent. This is all commonsense. This is the way we are going and we are going to win through. [end p13]
Burns
As you say it takes a long time to work through, what happens in the meantime to people on low incomes and on social security who find it almost impossible to cope as prices keep rising and, indeed, they suffered most in the Budget when child allowances only went up 75p instead of £1.20 to keep pace with inflation, prescription charges at a £1, how do they manage to keep going?
Thatcher
Goodness me, you've put quite a lot there. Can I just deal with prescription charges first? Certain of the prescriptions are going up to £1, um, do you know the average cost of a prescription, when prescriptions go up to £1, the average cost of an item will be £2.90 so people are still paying only a third of what it costs, moreover, some two thirds of people don't pay for prescriptions because they are exempt, so it's only ⅓ of people who pay, ⅔ are exempt, either because they are retirement pensioners or because they're children under 16, or expectant mothers or people who are chronic invalids. And I just think we had better get straight how much the nation spends on drugs the last year of which figures are available we spent about £700 million on drugs, and only got in about £24–25 million on prescription charges so that's one factor. That again if you don't find some of it from charges you have to find it out of the taxpayer's pocket. Now you tackle Social Security benefits, there is as you know an increase in pensions coming along, the usual annual increase which will take inflation fully into account. Secondly, the mobility allowance for the disabled has gone up. Thirdly, we have tried on child benefit to give special help to the single parent family, because that's where it is most needed and fourthly, we have given a much more generous allowance next year for [end p14] people who have difficulty with fuel, bigger than ever before, a very generous amount. And the next thing, which I think people really have forgotten is this; I feel very strongly that it is far better for people to go out to work and support their families, even if their wages are not high. For that reason, we have put up the family incomes supplement, which is a supplement to low wages by a third. That's to say to people, well some of you think you can have less on Social Security if you are working, if you work and your wages are not high, we'll give you a supplement and it's going up by a third. Now that's pretty good, in fact, we've protected the worst off fully.
Burns
What about the child allowances then?
Thatcher
The child allowances are going up from £4 to £4.75 and a little more for single parents who get a premium,
Burns
But it would have needed to have gone to £5.20 to keep pace with inflation.
Thatcher
To keep pace with inflation, it might have needed to have gone to £5.20. But you forget that we have got to take it out of one pocket to put it into another, so as it is, it's going up by about 18%; or 19%;, but you know the income tax allowances have not all fully kept pace with inflation, because we have abolished the lower rate band you will find if you compare that with the child allowance, the two are pretty well in step. Please remember, the thing that I am constantly having to get over to people, the only money governments have, are money which they take out of you pocket. So demands you make on government are demands you make on yourself. [end p15]
Burns
So in leaving this section at the end of the day, you don't think poor families are any worse off than they were.
Thatcher
Look, we have tried to protect poor families. The Social Security payments are inflation protected, so are the old folk's pensions inflation protected. We have given slightly more to those who are on low wages to keep them working. I don't want people to go onto Social Security, they have the pride and respect and dignity of keeping their own family if they keep their own job. [end p16]
Burns
Can we move to the Common Market? After the Dublin Summit of Common Market Heads of State and subsequent postponement of the next meeting until the end of the month, have you given up hope of getting back the thousand million pounds you want from the EEC budget?
Thatcher
I wouldn't be in politics if I gave up hope. We want a very substantial proportion of our net contribution back because that in fact is what we contribute to Europe after we have met all the expense of Europe here. I think things are a little bit more optimistic than they were at Dublin but I don't under-estimate that it is going to be quite difficult. There is so much trouble in the world that it really is important that this running sore does not continue. What happens now is quite unfair to Britain—we didn't expect to have to pay contributions of this amount when we went in and we were told then that if unacceptable situations arose, the community would have to find a solution. It's taken such a long time to get it home to them, I started at Strasbourg last June. I would just say it's a little bit more optimistic now but there's still a lot of hard activity and it's going on this week and next.
Burns
Well, Mr. Healey accused you over the weekend of—I quote— “stealthily preparing the sellout of the century” over our enormous subsidy to the Market. Are you preparing yourself to settle for less—a considerable amount less than you originally demanded?
Thatcher
I'm preparing myself to settle for what I said at Dublin. I'm prepared to have a genuine compromise but I've very little room [end p17] for manoeuvre. You see, the amount actually changes from year to year, and what we're trying to do now is to specify, to say that we will be prepared to make a small net contribution. I don't really take very much notice of what Mr. Healey said. After all, I am operating under the rules and at the contribution that he left me—he left me. Mr. Callaghan renegotiated it. Mr. Healey was Chancellor of the Exchequer. They landed us with this contribution, so they're not in a position to criticise. It was their fault.
Burns
Well, President Giscard of France posed the question to you—also quoted at the weekend: “Would Mrs. Thatcher be satisfied with a temporary alleviation of the problems, or does she seek a permanent solution that would involve changing the Treaty of Rome?”
Thatcher
No, I think the solution's got to last as long as the problem lasts. You see, in a way we're unique. We're below average income per head of Europe, but we're going to make the largest contribution. Now that just doesn't make sense, and so long as we have that situation persisting, so long has a solution got to last. But we're not asking to change the Treaty of Rome. We can do it under the Treaty of Rome. We can, in fact, under the Treaty of Rome, cut down the contributions. There are certain ways of doing it within the Treaty of Rome. We can also put up the receipts from Europe to this country, which is another way of letting us have more money back. Those are two things. And the third thing is, in the long run, you know, we really can't go on with the present way of operation of the Common Agricultural Policy. What happens is we're pouring money into surpluses. So we're paying highly for food that we eat and when we've [end p18] done that we're paying highly for food that we don't want and can't eat, and is then sold off cheap to other people. That doesn't make sense.
Burns
So if you don't, in the end, get what you want or a satisfactory compromise, will you accept that situation or will you withhold, as has been said before, some of our contribution?
Thatcher
But we just have to have a satisfactory compromise. What's happening now is they're saying to me, “Look, you're asking we—Europe—to solve Britain's problem within a certain timescale. We too have problems. Will you be as co-operative in sorting out our problems as well?” Now that's reasonable. It doesn't mean to say that we barter one thing against another. It means that we consider the problems each separately on their merit, but we consider them within roughly the same time period, and I believe that things are very active now to try to do that.
Burns
Would you ever see a point arising where you'd consider withdrawing from the Market?
Thatcher
I don't believe it would be in Britain's interests, in Europe's interests or in the world interest for us to withdraw from the Market. One of the main reasons for being in there is political. We can act together. As a matter of fact, the Common Market was very helpful to us when we needed their help over Rhodesia. They did support Britain. We can act together. When it comes to trade negotiations, Europe is the biggest trading area in the world as far as imports go and it's far better to negotiate as part of Europe than it is to try to negotiate alone. When it comes to asking other people [end p19] to invest in Britain, they're far more likely to invest here if we're in Europe, and investing in Britain is the way into Europe, than they are to invest here if we're not. We get all of these things as benefits, and in fact we must cash in on these benefits.
Burns
Mrs. Thatcher, thank you very much indeed.
Thatcher
Thank you. Very grateful.