Burnham’s assault on Thatcherism is dangerously flawed
Burnham’s assault on Thatcherism is dangerously flawed
Roger BootleSun, May 24, 2026 at 1:00 PM UTC
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Margaret Thatcher pictured after winning the 1979 general election. Overall, her programme of privatisation was a success - Tim Graham/Getty Images
One of the most telling recent statements by Andy Burnham, the Labour Party candidate in the Makerfield by-election, is that he wants to reverse Margaret Thatcher’s legacy. This he sees as the key to bringing prosperity, not only to Makerfield, but also to the country as a whole. But does this make any sense?
Burnham says that Thatcher’s policies were responsible for deindustrialisation and “the draining away of economic, social and political power”. There are grains of truth in what he has to say, but no more than that. If he thinks that Thatcher’s policies brought economic decline then he surely needs to take a crash course in recent British history before he gets his hands on the levers of power.
From 1979 (when Thatcher took power) to 1990 (when she lost it), the UK registered an annual average growth rate of GDP per capita of 2.4pc. This was not spectacular by comparison with earlier postwar decades.
But where you see the Thatcher effect is in comparison with other countries. In the period from the end of the war to 1979, our economy was continually outgrown by France and Germany. This was, after all, the leading reason why the British establishment lined up in favour of joining the European Union. But during the Thatcher years, the UK surpassed both. We even outgrew the United States.
Moreover, this outperformance continued under John Major and, more consequentially, under Tony Blair, the Labour prime minister. This was surely not unrelated to the fact that Blair accepted the Thatcher settlement on major economic policy issues. He did not seek to change the restrictions on trade union activity; he did not undo the privatisations of the Thatcher years; and he did not put up the key tax rates.
The period of British economic success lasted until 2007. Since then the UK has been a more moderate performer by international standards and, over the last decade, has been one of the weaker performers of the G7 when measured by the growth of GDP per capita.
GDP statistics are pretty arid and they may not convey very much about living standards. But during the period of British economic outperformance, real incomes rose very sharply. Between 1979 and 1990 the average rate of increase of average earnings was 3.2pc and real consumption per capita increased at an average annual rate of 2.3pc.
Yet despite this record of success, the Thatcher government still made some big mistakes. In particular, the early embrace of crude monetarism led to policy overkill. Interest rates were increased to 17pc and the pound shot up on the foreign exchanges. These two things delivered a hammer-blow to much of British industry and they contributed to a very large increase in unemployment.
This was a policy mishap. Admittedly, inflation was brought down, eventually the economy recovered and the labour market turned. But the price of achieving this in lost output and the loss of industrial capacity was greater than it needed to have been.
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One aspect of this period of failure was that, since manufacturing was proportionately represented more strongly in the Midlands and the North, these parts of the country were hit especially hard. In these areas, some places have still not fully recovered and you can still see the scars inflicted during this period.
So Burnham is partially right to associate Thatcher’s policies with deindustrialisation. But his analysis is superficial. Many parts of France have undergone the same process and, indeed, the share of manufacturing in French GDP has fallen to a number not that different from ours (10pc versus 8.5pc.).
In the United States the share is down to 11pc. This has nothing whatever to do with Thatcher and Thatcherism. Indeed, the main force at work here has been globalisation and, specifically, the rise of China.
In practice, the bits of the UK economy that don’t function at all well at the moment are the bits which Thatcher didn’t really touch, prime among them being the NHS.
How would Burnham reverse the Thatcher legacy? Apparently, he intends to bring parts of the water and energy industries back into public ownership. He needs to limit his ambitions here. Overall, privatisation was a stonking success but some parts of it were botched. In particular, under an inadequate regulatory regime, parts of the privatised water industry have become a national disgrace.
His supporters had indicated that he might increase the three key tax rates, income tax, National Insurance and VAT but last week he explicitly said that he would not do so. No one should think that the answer to the country’s economic problems lies with even higher taxes. The continuing exodus from this country does not only involve the mega-rich. Increasingly, young, talented and ambitious people are fleeing these shores because they are fed up to the back teeth with higher taxes.
Perhaps Burnham would seek to raise more money, not by increasing taxes, but rather by increasing borrowing. He has blown hot and cold over this. At one point he said that we shouldn’t be “in hock” to the bond markets.
More recently he has acknowledged the need for fiscal rules. Most striking of all is the story which surfaced last week suggesting that if he became prime minister he would consider keeping Rachel Reeves as Chancellor in order to maintain the confidence of the bond markets. I must say, I hadn’t noticed that the bond markets had much confidence in our present chancellor, but I guess everything is relative.
It is not entirely clear how Burnham would propose to restore prosperity to the places around the country he describes as having been “left behind”. But if he comes close to embracing the policy agenda of Labour’s Left wing, then the whole country would be left behind – including by many of its current citizens.
Roger Bootle is senior independent adviser to Capital Economics and a senior fellow at Policy Exchange. roger.bootle@capitaleconomics.com
Source: “AOL Breaking”
