Labour and the Alliance the result was decisive:
Labour had clearly seen off the Alliance’s attempt
to replace it (Labour gained 30.8 per cent of the
vote and the Alliance dropped to 22.6 per cent).
Thatcher’s programme to change Britain would
continue for a further term. Indeed, there seemed
not the remotest possibility that she was even con-
templating retirement. She declared that she was
ready to go on to a fourth election victory and
beyond.
Thatcher was determined to show that though
this was her third administration there would be
no loss of vigour, no retreat from the Thatcher
revolution. The great state-run services – social
security, the National Health Service and educa-
tion – would be shaken up by the introduction of
competition, to produce efficiency and respon-
siveness to the customer, and better value for the
taxpayer. This was radical conservatism. Just as a
radical Labour administration after 1945 had
been ready to take on the establishment, so Mrs
Thatcher relished doing the same: the British
Medical Association, the National Union of
Teachers, university vice-chancellors, lawyers and
judges. Reforms were indeed highly desirable.
Providing ever more funds was not the answer
to dirty hospitals and cross-infection, to poor
standards in many state schools, to a higher-
education sector unwilling to increase student
numbers without additional cash. But the public
mood was changing; there was a feeling that it
was time to consolidate. Thatcher’s philosophy
was hurting not only the idle, but also the poor.
Benefits from reform were not seen to be coming
through. Privatisation of a whole host of state
enterprises from British Airways to the water
authorities had lost its excitement and seemed
only to be making profits for investors.
The country was split between the rich south
and the deprived manufacturing towns of the
north. Entering the third industrial revolution,
Britain was experiencing much painful readjust-
ment; unemployment remained above the 2
million mark. Britain’s industrial base had shrunk
but was in a much more competitive position:
that was the positive side. The Thatcher govern-
ment’s great achievement was the conquest of
inflation – or was it?
The economy began to go wrong in 1988 after
six years of unprecedented growth. After the
stock-market fall (it was thought at the time
to be a crash), the chancellor of the exchequer
Nigel Lawson had eased money control too much;
then in trying to keep sterling from rising too
high and hurting exports, he over-compensated
and pushed interest rates too low. Difficulties
multiplied: the trade balance slipped, a tax-cutting
budget in April 1988 proved not to be the right
remedy. Income tax cuts had been the most
popular strategy of the Thatcher governments, in
large measure paid for by raising indirect taxes,
reducing central government contributions to
local authority spending and increasing National
Insurance payments. The total tax burden had not
in fact been reduced; and the wealthy benefited
far more than the poor. Inflation began to rise
again and interest rates also climbed to heights
which hurt all homeowners with mortgages. An
excessive house-price boom shuddered to a halt.
Pressured by Lawson and Howe, the prime
minister agreed that Britain should soon join the
European Exchange Rate Mechanism (ERM)
when a number of conditions had been met. But
in October 1989 Lawson resigned, complaining
that Mrs Thatcher was undermining his steward-
ship of the economy by turning to an outside
adviser. By then the Thatcher economic miracle
was looking tarnished. But what spelt political
doom for her was the ill-advised introduction of a
new method of financing local government spend-
ing, the community charge, or ‘poll tax’ as it
became universally known. If the total revenue
the local authorities had to raise because of the
declining central government contribution had
not been generally so high, the measure might
have attracted less odium. But it was seen as
patently unfair that the lord in his manor was now
paying less than a working-class family crowded
into a council house.
During 1990 unease grew among the Con-
servative faithful. The party was deeply divided
between Thatcher loyalists in an increasingly
smaller majority and the sceptics who thought
that, under Margaret Thatcher, the Conservatives
would lose the next election, which could not be
held later than 1992. When, in November 1990,
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