2S - Fall of Thatcher and her legacy
Learn why Thatcher lost office, how Major continued and adjusted her policies, and why economic recovery failed to restore Conservative authority by 1997.
Thatcher's fall and legacy
Thatcher won a third general election in 1987, but the strength of that victory concealed problems which converged in 1990. The late-1980s credit and housing boom was followed by rising inflation and high interest rates. Mortgage payments increased while the economy moved towards recession. The Community Charge, or poll tax, charged adults rather than properties and was widely regarded as unfair. Despite rebates, a broadly flat local charge took a larger share of a poor person's income, while households containing several liable adults could face a heavier bill than under property rates. Resistance included non-payment campaigns and the London demonstration which ended in a riot in March 1990. These problems made Conservative MPs fear for their seats.
Europe turned electoral anxiety into a leadership crisis. Chancellor Nigel Lawson resigned in 1989 after disagreements about economic policy and the influence of Thatcher's adviser Alan Walters. Geoffrey Howe resigned in November 1990; his Commons speech criticised her handling of Europe and encouraged colleagues to consider an alternative leader. Michael Heseltine challenged her. Thatcher won more votes in the first ballot but failed to secure the margin needed for outright victory. When Cabinet colleagues would not guarantee support in the next round, she withdrew. John Major became prime minister on 28 November 1990.
The distinction between a cause and a trigger matters. Howe's speech helped trigger the contest; the poll tax, recession and strained Cabinet relations had made a challenge dangerous to Thatcher. She was removed by her own parliamentary party, rather than defeated in a general election.
Her legacy survived her departure. Privatisation, restrictions on unions, council-house sales and the priority given to markets shaped what subsequent governments could do. Supporters credited her with breaking inflationary and union pressures and widening ownership. Critics pointed to unemployment, regional industrial decline and greater inequality. Major replaced the poll tax but did not restore the economic settlement of the 1970s. A change of leader therefore produced substantial continuity in government.
Major and domestic policy
Major sought to reduce the confrontational style associated with Thatcher while retaining the market economy. His relatively modest background and calmer public manner supported an appeal to ordinary voters. He consulted ministers more readily, but compromise was difficult when the party disagreed over Europe and the government's majority was small.
His policies combined repair with continuation. Council Tax replaced the poll tax in 1993, linking liability again to property values while retaining a personal element. The Citizen's Charter, launched in 1991, promised standards, information and complaints procedures for users of public services. It treated citizens partly as customers who should be able to judge performance. School league tables and Ofsted inspections emphasised measurable outcomes. NHS reforms separating purchasers from providers sought to encourage efficiency through an internal market, while care remained publicly funded for NHS patients.
Privatisation continued, particularly through the Railways Act 1993 and the transfer of rail operations during the following years. Supporters expected competition and private investment; critics feared fragmentation and difficulty coordinating a single network. The National Lottery began in 1994 and supplied money for arts, heritage, sport and other good causes. These measures show that Major's government was more than a pause between Thatcher and Blair.
Major's direct campaigning helped secure the unexpected Conservative election victory of April 1992. However, the parliamentary majority was only 21. Subsequent by-election defeats and defections weakened it, giving a small group of rebels greater bargaining power. Winning the election renewed his authority temporarily; it did not remove divisions or economic difficulties.
Black Wednesday and recovery
Britain entered the Exchange Rate Mechanism (ERM) in October 1990. Its rules required sterling to remain within an agreed band against other participating currencies. Membership was intended to restrain inflation by making a stable exchange rate a commitment which governments could not easily abandon.
Exchange Rate Mechanism
A European arrangement requiring participating currencies to stay within agreed exchange-rate bands. Defending a currency could require purchases of that currency or higher interest rates.
The commitment became costly during recession. Germany needed high interest rates in the aftermath of reunification, whereas Britain needed lower rates to ease borrowing costs and encourage recovery. Investors doubted that Britain could maintain sterling's rate. On 16 September 1992, Black Wednesday, the authorities bought sterling and announced interest-rate rises in an attempt to deter selling. The government nevertheless suspended ERM membership that evening; the announced rise to 15 per cent was cancelled.
Leaving the ERM allowed sterling to fall and interest rates to be reduced. A cheaper pound helped exporters, and lower borrowing costs supported domestic demand. Recovery developed, inflation fell and unemployment eventually declined. It would therefore be misleading to treat Black Wednesday as the beginning of uninterrupted economic deterioration.
Politically, the damage lasted. Ministers had presented ERM membership as essential and then failed to defend it. The episode weakened the Conservatives' reputation for economic competence and made the European policy dispute harder to contain. Improvements in economic indicators could not automatically rebuild trust in the government's judgement. The Bank of England's contemporary December 1992 account explains the conflict between British domestic needs and the exchange-rate commitment; as an institutional account of monetary operations it is valuable for the mechanism, but it does not measure every voter's response. Contemporary monetary-policy account.
Continue this lesson.
You’re previewing NovaLearn without an account. Create a free account to read the rest.
Create free account