Was Margaret Thatcher great for Britain?

The 'Iron Lady’ would be celebrating her 100th birthday this month. Margaret Thatcher rose to power in 1979 as the first ever female prime minister and was one of the most controversial leaders in history, but how did her policies shape today’s finances?

Margaret Thatcher, British Conservative Party politician and Leader of the Opposition
(Image credit: Hilaria McCarthy/Daily Express/Hulton Archive/Getty Images)

Margaret Thatcher was no ordinary leader. She lost popularity as fast as she had gained it, which eventually led her to resign in 1990, after holding the top spot for 11 years.

Her challenging tax policies, taming unions and in her coldest moment, removing free milk for school kids, left her infamously labelled as ‘Thatcher the milk snatcher’ and the ‘Iron Lady’.

Her Victorian family values also added to the controversy – she wasted no time introducing section 28, a law that passed in 1988, which prevented schools from promoting homosexuality or LGBTQ+ related education.

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While her social policies may have divided the country, it was her economic policies that made the biggest impact. Thatcher changed the City forever and her policies continue to shape finances today. But what did she achieve and does ‘Thatcherism’ still live on today?

Thatcher’s ‘Credit Crunch’

Purse strings were tight for households as high inflation and unemployment gripped the UK in the 1980s, but Thatcher wanted them to spend. To encourage this, she relaxed rules around borrowing, making it easier for households to get credit using credit cards, hire purchase arrangements and even mortgages.

There was an overall reduction in government regulation of financial services and ultimately, people borrowed more than they could afford.

Did Thatcher’s credit boom lead to the financial crisis that followed almost 30 years later? One of the main reasons behind the 2008 financial crisis was the high risks banks took, which included dishing out risky loans and taking high risk investment opportunities.

‘The Big Bang’

‘The Big Bang’ in financial markets refers to the sudden deregulation of financial markets in the UK, when the London Stock Exchange became a private limited company.

The deregulation in 1986 removed restrictions that would then enable the UK to compete globally. Face-to-face trading was replaced with electronic trading instead, fixed commissions on trades were removed, and foreign firms were allowed to own UK companies. Thatcher changed the City forever.

But in doing so, she raised concerns that the ‘Big Bang’ would lead to ‘boom and bust’. Leaked memos almost 30 years later revealed that Thatcher’s move contributed to the 2008 financial crisis. The memos, now moved to the National Archives, were reported in the Financial Times.

Pensions mis-selling

Personal pensions were launched in 1988 under Thatcher, giving people another way to save for retirement if they did not have access to workplace pensions, or just didn't want to be part of one. The idea was to reduce the burden on the state and tax liabilities.

Under the 1986 Financial Services Act, employers were unable to force employees into workplace pension schemes. Adverts were released encouraging people to ‘break the chain’ of compulsory membership.

But, her plan backfired and it led to a major pensions mis-selling scandal in the 1980s, as people opted to leave their ‘safe’ workplace pension move into arrangements with lower contributions and higher risks.

Savers had no experience of managing a personal pension, yet commission-driven advisers pushed them into these plans, where they would also not benefit from employer contributions and face higher risks.

Around two million people were advised to switch out of occupational schemes. Compensation from misselling claims are estimated to have cost the industry over £11 billion.

Right to Buy

If there was one policy that gained Thatcher popularity, it was the Right to Buy policy, allowing tenants to buy the properties they lived in.

It was part of the Housing Act 1980 which enabled people to buy the house at a discount from the market value, depending on the length of their tenancy.

The policy is still in place today in England, but discounts are smaller, slashed by Labour to between £16,000 and £38,000, down from between £102,400 and £136,400.

Over two million people have used the scheme to date, but experts believe the scheme is adding to the social housing emergency and driving shortages.

Labour has said it plans to add restrictions to the scheme by excluding newly-built social housing.

Tenants will also be required to live longer in their property to qualify to buy at a discount.

Taxes

Thatcher believed tax cuts were vital to build a healthy economy and as such, in the 1979 Budget, the then chancellor Geoffrey Howe slashed the basic rate of income tax from 33% to 30% and the top rate from 83% to 60%.

The basic rate eventually fell to 25% in 1988.

But indirect taxes went up, up from between 8% and 12% to a single rate of 15%, meaning consumers had to pay more for goods and services.

But this drove inflation to as high as 21%, which then saw the government set interest rates at 14%.

The poll tax was perhaps the most awful tax ever to be applied in British history, requiring everyone to pay a fixed domestic tax. Rates were set by local authorities.

It’s now been replaced with council tax.

Privatisation of state-owned companies

It was under Thatcher when many people became shareholders for the first time, when she decided to privatise a number of state-run companies in the UK.

In the 1980s, Thatcher privatised a number of state-owned companies which include British Telecom, British Airways, British Aerospace and Rolls-Royce.

The idea was to make them more efficient, reduce government debt, but also enable people to hold a stake in these companies by becoming shareholders.

Many may remember the ‘Tell Sid’ campaign when British Gas shares went public.

While supporters of privatisation saw this as a positive move that would lead to reduced costs and stronger profits, it also drove prices higher for consumers, and services were driven purely by markets.

Margaret Thatcher eventually resigned in 1990 after her leadership was challenged and her support ebbed away. She was succeeded by John Major.

Thatcher passed away at the Ritz in London in April 2013.

Kalpana Fitzpatrick

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books).

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.