NEO-LIBERALISM AND MORALITY IN THE MAKING OF … · to alleviate hardship was that poverty has...

NEO-L IBERALISM AND MORALITY INTHE MAKING OF THATCHERITE SOCIAL

POLICY*

FLORENCE SUTCL I F F E - B RA I THWA I TEUniversity of Cambridge

A B S T R AC T . After , neo-liberal thinkers and think-tanks in the US and UK outlined differentstate welfare systems for the poor, such as Milton Friedman’s negative income tax. These wereunderpinned by a rational, economistic conception of human nature. Between and ,Thatcher’s Conservative party abandoned attempts to develop comprehensive, state-led, paternalisticschemes to tackle poverty. Thatcherites focused instead on creating what they saw as a rational tax/benefit system which would provide a safety-net for the poor, but encourage effort and thrift. Theyattempted to marginalize the importance of state welfare for the middle classes, to re-invigorate the‘bourgeois virtues’ which had flourished in Victorian Britain. A family-centred, moralisticindividualism underpinned Thatcherite policies; this individualism was not precisely congruentwith that of neo-liberal theorists. Its roots lay in personal sources (particularly Methodism), as well ashome-grown discourses on poverty and a Hayekian fear of the state. Though Thatcherites took ideasfrom diverse sources, their political project had a single guiding purpose: the moral (and, secondarily,economic) rejuvenation of Britain. Thatcherism was, thus, an ‘ideology’ in the sense used by MichaelFreeden.

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To the casual voter, political products look very similar. Unfortunately, this isvirtually inevitable as they are being formulated to deal with the sameproblems . . . Imagine a motor car. It requires fuel, it has brakes, instruments and asteering wheel for control. All political parties are vying to drive the same car. Theirdiffering destinations will result from, and on, the tuning of the engine, the fuel theyuse, the route they choose, whether they can stick to it, the personality anddetermination of the driver and the way he drives . . . That destination is a differentkind of society. But . . . [t]he car always looks the same to all but those who work inthe pits. Differentiation cannot be observed at the level of policy by the casual voter.

* Many thanks are due to Dr Jon Lawrence, Professor Peter Mandler, James Stafford, the twoanonymous referees, and to the organizers and participants at the ‘Neo-liberalism and BritishPolitics’ workshop in Oxford, June , for their extremely helpful comments on earlierdrafts of this article.

St Catharine’s College, Cambridge CB RL [email protected]

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Differentiation has to be obtained at the level of ideology – the normative view ofsociety.

Defining ‘Thatcherism’ – its nature and its components; its relation to neo-liberalism and traditional Toryism – is problematic. At the heart of the difficultylies the tension between traditional, conservative values and neo-liberal freemarkets. Daniel Bell identified the conflict between ‘asceticism and acquisitive-ness’ as one of the key ‘cultural contradictions of capitalism’, and manycommentators, from some Tories themselves, to libertarian free-marketeers andacademic analysts, have agreed. The New Left painted Thatcherism as anunholy alliance of neo-liberal economics with resurgent Conservative rhetoricin a power-grabbing project with hegemonic pretensions. Political scientist JimBulpitt argued that monetarism was a mere secondary instrument in power-hungry Thatcherite ‘statecraft’. These studies have fostered a pervasive sensethat Thatcherism cannot add up to a coherent and consistent ideology. Somehistorians have, therefore, analysed it in the context of the abiding Conservativeimpetus for power. This perspective sees Thatcherism as moulded by theeconomic pressures, political manoeuvres, and electoral imperatives of its time,and hears its distinctive rhetoric as a stitch-up of incompatible policies andplatitudes designed to appeal to the rich, to ‘middle England’, and to ‘Essexman’. Hence Richard Vinen’s recent study of Thatcher’s Britain focuses on thecontingent and ‘événementiel’.

Close analysis of events is certainly important; but ideology needs to be takenseriously. I use the term not in the pejorative sense bestowed on it by ‘wet’Tory opponents like Ian Gilmour, but in the Freedenite sense of ideologiesas ‘flexible intellectual frameworks that aggregate and prioritise a numberof political concepts’, both rational and non-rational. As Freeden hasurged, ideologies need ‘interpreting and decoding’, to ‘reconstruct andamplify’ the unarticulated. Because economic policy was central to

N. Strauss, ‘Document for Steering Committee on Communications Strategy’, the papersof Baroness Thatcher LG, OM, FRS, Churchill Archives Centre, Cambridge, THCR, /// (hereafter THCR).

D. Bell, The cultural contradictions of capitalism (London, ), p. xx; J. Grey, Is Conservatismdead?, qu. E. H. H. Green, Thatcher (London, ), p. ; S. Brittan, Capitalism and thepermissive society (London, ); R. Levitas, ed., The ideology of the New Right (London, ).

S. Hall, ‘The great moving right show’, Marxism Today (), pp. –; R. Samuel,‘Mrs Thatcher’s return to Victorian values’, Proceedings of the British Academy, (),pp. –; J. Bulpitt, ‘The discipline of the new democracy: Mrs Thatcher’s domestic statecraft’,Political Studies, (), pp. –.

R. Vinen, Thatcher’s Britain: the politics and social upheaval of the Thatcher era (London, ),p. .

I. Gilmour, Dancing with dogma: Britain under Thatcherism (New York, NY, ); B. Jackson,Equality and the British left: a study in progressive political thought, – (Manchester, ),pp. –; M. Freeden, Ideologies and political theory: a conceptual approach (Oxford, ), pp. ,–, –.

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Thatcherite propaganda, much analysis has focused on monetarism and supply-side economics. I re-evaluate Thatcherism by looking instead at social policyand social doctrine, taking as a case-study the tax/benefit system. This articledoes not consider the other key thrust of Thatcherite social policy: the attemptto create a ‘property-owning democracy’. Matthew Francis has examined thepolicies adopted by Thatcherites to promote wider property-ownership – the‘right to buy’ council houses and privatization – arguing that they lay in anevolving Conservative tradition, but that Thatcherite choices were profoundlyinfluenced by neo-liberal discourses current in the s and s. Thepresent article examines a less-studied aspect of social policy. It falls intothree parts: in the first I examine the policy prescriptions of key neo-liberalthinkers and think-tanks. In the second, I look at the development ofThatcherite policy on poverty in opposition. Historians who have reliedprimarily on the vague manifesto as evidence have suggested thatThatcher had pseudo-radical rhetoric but few real plans on entering office. Infact, a distinctive set of policies was fleshed out in opposition. The key shift wasfrom paternalistic, state-centred policies to a radical scepticism about the virtuesthe state can inculcate. Thatcherites absorbed the analysis of some neo-liberalthinkers (particularly Friedrich von Hayek), paying less attention to otherswhose work did not fit their vision of social policy (like Milton Friedman, whowas so influential on monetary theory). In the third section I examine theindividualistic and moralistic ideology that underpinned the shift frompaternalism to small-statism. Thatcherite individualism differed subtly butimportantly from the economistic individualism of the neo-liberal thinkers.And it is the precise contours of this individualism which allowed Thatcher andher allies to reject paternalism, and reconcile a free economy and traditionalvalues.

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Ben Jackson has shown that at the genesis of neo-liberalism in the s ands, many thinkers wanted a strong state as well as a free economy, becausethey were concerned to show that they had learned the lessons of the failures ofcapitalism in the hungry thirties. But when Hayek wrote The road to serfdom,

M. Francis, ‘“A crusade to enfranchise the many”: Thatcherism and the “property-owningdemocracy”’, Twentieth Century British History, () (first published online on Aug.. doi: ./tcbh/hwr).

Both Hayek and Friedman, the two thinkers examined, resisted classification as ‘neo-liberal’, but projecting the term back on to them seems a useful shorthand.

D. Kavanagh, ‘The making of Thatcherism, –’, in S. Ball and A. Seldon, eds.,Recovering power: the Conservatives in opposition since (Basingstoke, ), p. ;N. Timmins, The five giants: a biography of the welfare state (London, ), p. .

B. Jackson, ‘At the origins of neo-liberalism: the free economy and the strong state,–’, Historical Journal, (), pp. –.

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uppermost in his mind was not the great depression, but Nazi Germany.

Hayek stressed that minimal government would ensure the highest level ofliberty, or ‘toleration’. Big, socialist government reduces each citizen to(quoting Tocqueville) ‘a mere agent, a mere number’. Socialist governmentssee themselves as directing an enterprise, but the goal – the ‘common good’ – isill-defined. It is as if a group of people have agreed to take a journey togetherwithout having decided where they want to go. To ensure there are no disputesover the destination, socialist governments have to impose on society, viafascistic methods of propaganda, a ‘Weltanschauung’, a set of values which canmediate between such pressures as ‘more milk for children’ or ‘better wages foragricultural workers’.

By , the enterprise of socialist governments seemed to have changedfrom ‘doctrinaire socialism’ to a woolly egalitarianism, so that ‘the greatestdanger to liberty’ now appeared to Hayek to come from ‘the efficient expertadministrators exclusively concerned with what they see as the public good’.

But political limits on individual freedom were still the principal target ofHayek’s analysis. It is interesting to note the similarities with MichaelOakeshott’s argument that a polity should be only a ‘civil association’,concerned with setting a framework of order, not an ‘enterprise association’,concerned with goals like ‘the award of recognition or advantage in the pursuitof individual or corporate purposes or . . . ushering in the new Jerusalem’.

Hannah Arendt, also writing in the shadow of Nazism, harboured similarfears of an intolerant ‘mass society’, which prioritizes abundance overfreedom. Anti-statism resonated across the political right in the decadesafter the Second World War, though the planners seemed to have the upperhand.

Despite his anti-statism, Hayek saw a role for an ‘extensive system of socialservices’. Welfare needed to be generous enough to equip people with thematerial resources and psychological security to strive to better themselves. Thepropensity for people to do so was something Hayek took for granted: hisconception of human nature was highly individualistic, and his view of humanincentives was rational and economistic. Hayek thought ‘government may,usefully and without doing any harm, assist or even lead’ in welfare provision.

But his profound fear of government coercion of individuals and seizure ofnational resources meant that Hayek argued that government should only

K. Tribe, ‘Liberalism and neoliberalism in Britain, –’, in P. Mirowski andD. Plehwe, eds., The road from Mont Pelerin: the making of the neoliberal thought collective (London,), pp. –.

F. A. von Hayek, The road to serfdom (London, ), pp. , , –, , . Idem, The constitution of liberty (London, ), pp. , . M. Oakeshott, On human conduct (Oxford, ), p. . H. Arendt, The human condition (Chicago, IL, ), p. and passim. Hayek, Road to serfdom, p. . Idem, Constitution of liberty, pp. –.




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provide basic welfare: provision above the minimum should be left to‘competitive and voluntary efforts’.

Like Hayek, Milton Friedman assigned an important role to social security,and endorsed government provision of welfare. For Friedman, the basic reasonto alleviate hardship was that poverty has negative externalities (what he called‘the neighbourhood effect’). Poverty may cause crime, vandalism, and othermaterial problems, and it pains most people to see their fellow citizens in need.Private, charitable provision of welfare was the ideal, but whereas in smallcommunities, public pressure could ensure the rich contribute to charity, ‘[i]nthe large impersonal communities that are increasingly coming to dominateour society, it is much more difficult for it to do so’. So governments neededto intervene to ensure that all contribute to the welfare from which all benefit.Because the market was the most efficient method of allocating goods, andbecause he thought that people were driven by the profit motive above all,Friedman prescribed a particular form of social security which would bestmaintain the free functioning of the market and personal effort. He called it‘negative income tax’. It worked as follows: an income line is set, somewhereunder the average income for the nation; those above the line pay tax; if aperson’s income falls below the line, it is topped up by a benefit payment ofsome proportion of the difference between their income and the set line,avoiding a disincentivizing high marginal tax rate.

In –, British economist Dennis Lees visited the University of Chicagoand met Friedman. He brought back the ‘negative income tax’model, settingout a scheme for Britain in a article. Lees set the ideal income line for ahousehold at the level of their collective tax allowances, and the rate of thenegative tax payment at per cent. For example, a family with three childrenand a net (earned) income of £ would have total tax allowances (personaland child tax allowances, plus the two-ninths earned income allowance) of£. Their actual income is thus £ below their ideal income line; theywould receive a payment of per cent of this (£), bringing their totalincome to £. Three years later, the Institute for Economic Affairs (IEA),the independent neo-liberal think-tank founded in on the advice ofHayek, convened a group of economists, political scientists, and a socialscientist, Barbara Shenfield, to compare the Friedman/Lees model with threeother forms of ‘reverse income tax’. Their starting assumption was that theincome of the poor should be raised to an adequate minimum – not a bareminimum, but a level appropriate to British society in the s – which they

Ibid., p. ; idem, Road to serfdom, p. . M. Friedman, Capitalism and freedom (London, ), p. . Ibid., pp. ff. B. Chiplin, ‘Professor Dennis Lees: industrial economist who was a staunch believer in the

free market’, Independent, Feb. . D. Lees, ‘Poor families and fiscal reform’, Lloyds Bank Review (Oct. ), pp. –, at

pp. –.




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took as supplementary benefit levels, with long-term additions and occasionalpayments. The authors, like Friedman, thought that the provision of a basicstandard of welfare was vital to ‘[secure] the “external” benefits to thecommunity at large’. Society and the economy would benefit if all wereequipped to contribute to the best of their ability.

The authors considered first a ‘social dividend’ system, as proposed by Liberal(latterly Conservative) politician Lady Rhys-Williams in , and taken up in arecent pamphlet from the left-leaning think-tank Political and EconomicPlanning (PEP). In this system, the state pays a prescribed minimum income(the social dividend) to all families regardless of income. Income tax is leviedon all private income, at a rate of · per cent, so that the net benefit of thesocial dividend decreases as income rises. The social dividend for a family withtwo children – based on supplementary benefits plus rent allowance – was £.Such a family with a private income of £ would pay £· tax, and thenhave the social dividend added, making an end income of £,· – raisingthem well above the minimum income line. The ‘break-even’ point, where afamily’s final income is the same as their private income, comes at £, – justover three times the minimum income level. Even in a modified version whichlevied extra taxes to reduce the benefit to families who were not in poverty tostart with, a large ‘spill-over’ still existed. This would mean a high tax burden,which, the authors felt, was ‘likely to weaken incentives among the general bodyof taxpayers’. For this reason, these schemes were ruled out.

Next, the authors examined a Friedmanite system. This worked just as DennisLees’s scheme, but the income line was set at supplementary benefit levels(instead of at the level of tax allowances). Negative tax was paid at per cent. Afamily with two children and an income of £ would have it topped up by per cent of £, to £·. This was the cheapest system, but it was cheapbecause it did not raise the incomes of the poor to the minimum level, and forthis reason, it was summarily dismissed.

Finally, the authors considered a minimum income guarantee, where thestate tops up the income of all those below the minimum prescribed line to thatlevel. This was less costly, as it was entirely selective, and it eradicated poverty. Allfamilies with two children who had an income of less than £ would have ittopped up to that level. The authors were relatively unconcerned about the per cent marginal tax rate on those receiving income support:

The depressing effects of poverty may themselves be more important than themarginal rate of tax, and relief from the struggle to make ends meet may have a

A. Christopher, G. Polanyi, A. Seldon and B. Shenfield, Policy for poverty: a study of theurgency of reform in social benefits and of the advantages and limitations of a reverse income tax inreplacement of the existing structure of state benefits (London, ), p. .

Ibid., pp. , ; see Lady Rhys-Williams, Something to look forward to (London, ); C. V.Brown and D. A. Dawson, Personal taxation incentives and tax reform (PEP broadsheet , ).

Christopher et al., Policy for poverty, p. .




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stronger effect in encouraging self-reliance and the will to independence than thatof the high marginal tax rate in the opposite direction. The people concerned aremainly old and either unoccupied or in part-time employment and the disincentiveeffect will apply only to those whose earnings potential does not substantially exceedthe poverty-line minimum income . . . the potential loss of work effort due to a highmarginal tax effect on people with the lowest incomes is likely to be small.

More importantly, lower taxes would be imposed on the majority as the schemewas cheap. The authors concluded that a minimum income guarantee ‘may bethe most advantageous form’ of reverse income tax (though they were alive topossible dangers). They insisted that a safety-net for the poor was vital: povertysapped the potential strength of poor citizens, and the government musttherefore stamp it out. But equally important to the IEA were incentivizing taxbreaks for the majority, and an increase in private, competitive provision ofhealth, education, and insurance-based social security for those at mid- andupper-income levels. Competition would bring with it efficiency and greaterchoice. The IEA thus echoed Hayek’s enthusiasm for private welfare in this andmany other publications from the late s onwards.

The slightly different justifications for state welfare offered by these neo-liberal writers, and the varying policies they endorsed, demonstrate a commonset of preoccupations which justifies the common label. The comparisonbetween the IEA’s and PEP’s treatment of the ‘social dividend’ scheme isinstructive. PEP emphasized the ‘social’ nature of wealth, and might even havebeen happy to see a large ‘spill-over’ of benefits: by tying in a large body ofaffluent and middle-class beneficiaries, welfare schemes are rendered lesspolitically vulnerable. The IEA authors, by contrast, emphasized the individual,and the disincentive effects of high taxation. They agreed with Friedman thatcrushing poverty could itself be more of a depressing factor than monetarydisincentives. And like Hayek, they wanted those on higher incomes to chooseprivate welfare, removing state monopolies. But the policy they endorsed – theminimum income guarantee – was not one which would gain traction withThatcherites. The variety of theories about state welfare and policies on offerdemonstrates that there was flexibility within the neo-liberal project toemphasize different ends and to choose different means.

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As suggested by the interest of both PEP and the IEA, wholesale change in thetax/benefit system was attractive to both ends of the political spectrum in the

Ibid., p. . Ibid., p. . E.g. A. Seldon, Pensions in a free society (London, ); idem, Choice in welfare (London,

); R. Harris and A. Seldon, Choice in welfare, (London, ); on the editorial line ofthe IEA, see R. Desai, ‘Second-hand dealers in ideas: think tanks and Thatcherite hegemony’,New Left Review, (), pp. –, at p. .




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late s and s, and reverse income taxes looked like the frontrunners.Left and right were driven by different motives. Their differences stemmedfrom each party’s historic position on selectivity and universality. Labour hadbuilt its identity around the Attlee government’s universal, ‘cradle to grave’welfare, which tended to stabilize incomes over an individual’s lifetime, andwhich, along with full employment, also had a small redistributive effect onsociety as a whole. The Tories had developed an alternative model whichfavoured a smaller state, selective benefits, and greater choice in self-provisioning for the better off. But both were under threat from the sonwards. Universality looked wasteful, particularly as economic growth faltered.The ‘poverty lobby’, centred on organizations like the Child Poverty ActionGroup (CPAG), rediscovered poverty in the midst of the welfare state in themid-s, focusing attention particularly on the plight of low-income workingfamilies. And it was found that the middle classes benefited disproportio-nately from the welfare state, particularly from free healthcare and education,as well as from loopholes in the tax/benefit system. But selectivity too seemedproblematic: means-testing was unpleasantly associated with the Poor Law andthe ‘hungry thirties’; and there was a new focus in the s on the ‘povertytrap’, the term coined by Frank Field and David Piachaud to describe thepowerful disincentives created by the reduction or withdrawal of whole groupsof linked means-tested benefits as income increased. Both main parties wereattracted to the idea of a unified tax/benefit system which could evade theproblems of means-testing and universality, and tackle the issues of the workingas well as the non-working poor in one fell swoop. British policy-makers wereaware of similar trends across the Atlantic: proposals for guaranteed incomeschemes along the lines of a social dividend or Friedmanite negative income taxcame from President Nixon (the Family Assistance Plan), Democraticpresidential candidate George McGovern (the Demogrant), and PresidentCarter (the Program for Better Jobs and Income), though ultimately all falteredfaced with the entrenched distinction in American minds between thedeserving and undeserving poor.

Edward Heath’s Conservative party developed a tax credit scheme during thedetailed policy-making process undertaken in opposition, set out in a

H. Jones, ‘The Conservative party and the welfare state, –’ (Ph.D. thesis,London, ), p. .

B. Abel-Smith and P. Townsend, The poor and the poorest: a new analysis of the Ministry ofLabour’s family expenditure surveys of – and (London, ).

H. Glennerster, British social policy since (Oxford, ), p. ; R. Titmuss, ‘The roleof redistribution in social policy’, in P. Alcock, H. Glennerster, A. Oakley, and A. Sinfield, eds.,Welfare and well-being: Richard Titmuss’s contribution to social policy (Bristol, ).

F. Field and D. Piachaud, New Statesman (Dec. ), qu. Timmins, Five giants, pp. –. Christopher et al., Policy for poverty, p. ; J. Cowie, Stayin’ alive: the s and the last days of

the working class (New York, NY, ), p. ; B. Steensland, The failed welfare revolution: America’sstruggle over guaranteed income policy (Princeton, NJ, ), pp. ff.




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Green Paper. This planned to replace tax allowances, as well as some benefits,most significantly family allowances, with tax credits. They would cover thosewith income over £ a week from a job, National Insurance or pensionentitlements. Those within the scheme would have a credit calculated: £ for asingle person, £ for a ‘married man’, £ for a child. They would inform theiremployer, or the body paying their pension or insurance payments, and thisbody or employer, in making the payment, would deduct tax at the rate of per cent, then offset against this the credit. If the amount of the creditexceeded the amount of tax, the excess would be paid to the individual. A manearning £· a week (about £ a year) would pay £· tax; if he was marriedwith two children, he would receive a £ credit, giving a final income of £·(or £· a year). The scheme would help pensioners and tackle povertyamong working families, without using the hated means-test. But it would stilltarget payments at those in need. By working through the tax system, the stigmaof state payments would be lessened. The system was simpler, easier tounderstand, and automatic. It would not have problems with take-up. It wouldbring short-term benefits from National Insurance within the tax system. And itwould remove the anomaly that those with low incomes were unable to take fulladvantage of their tax allowances. But the scheme was never intended to offer ‘acomplete solution’: supplementary benefit (means-tested) would remain.

Nevertheless, in Geoffrey Howe called Heath’s tax credit scheme thegreatest step forward in welfare provision since Beveridge. Howe still felt, on thecusp of Thatcherism, as he had in , that a tax credit system was the bestform of welfare as it made all payments selective, while tempering the harshnessof the means-test.

Practical constraints meant Heath was unable to implement his scheme(always presented as a long-term goal), but under Wilson and then Callaghan,Barbara Castle led the charge for child benefit, the first step in a gradual movetowards a Heath-style tax credit system. Due largely to the poverty lobby, childbenefits were introduced even after Callaghan sacked Castle (though thebenefit was set at a low level). They were to be followed up – in theory – by amove to pensioner credits, and then a full system of tax credits once powerfulenough computing systems were in place. Heath’s plans had faltered, but histechnocratic, managerialist solution seemed to be surviving even after he wasejected as prime minister in and then as leader of the Conservative partyin .

Given this political context, in the early years of Thatcher’s leadership theparty had little choice but to say that it remained ‘committed to the evolution of

‘Proposals for a tax-credit system’, Cmnd (London, ), pp. , ; Timmins, Fivegiants, pp. –.

G. Howe, ‘Tax credits: why and how? A Conservative policy paper’, Oct. ,Conservative party archive, Bodleian Library, Oxford, CRD // (hereafter CRD);Timmins, Five giants, pp. –.




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a satisfactory Tax Credit scheme’. Thatcher and her key supporters, men likeKeith Joseph and Alfred Sherman (Thatcher’s speechwriting guru at the Centrefor Policy Studies (CPS)), were initially enthusiastic about tax credits. Theythought they could even save money, ‘if no attempt were made to improve thegeneral standard of living’, though like Heath, they soon realized that it wouldbe electoral suicide to make large groups of people worse off.

However, even in , the ‘band of romantics about tax credits’ was‘dwindling’, and by , Thatcherites had turned against tax credits. Suchschemes were now seen as an engine to transfer more and more nationalincome into the hands of bureaucrats. This argument owed little to monetaristtheory and more to a Hayekian fear of the state. Such fears were fuelled in thes by the public choice theory developed at the Virginia school of politicaleconomy, another strand of American free-market thought imported intoBritain in the s by the IEA, among others. Noel Thompson has describedin detail the profound attack on the Keynesian settlement made by the publicchoice school’s analysis of the power-grabbing pretentions of managerialist civilservants. The critique was even more damaging as it chimed with home-growndenunciations of over-mighty bureaucratic lethargy which came from across thepolitical spectrum in the s and s (the image of a mindlesslyobstructive, establishment-run bureaucracy presented in Yes, Minister in thes drew inspiration from, among other things, the diaries of RichardCrossman and Barbara Castle). The fear was that, regardless of the level taxcredits were set at, a unified tax/benefit system arrogated control of the flow ofnational resources in the hands of the bureaucracy; and that from there it was aslippery slope, for self-interested civil servants and pressure groups wouldprogressively enlarge the scope of the welfare system. An ex-civil servant advisedof his fear ‘that Tax Credits might fall into the hands of the “Welfare Staters”’.

Ralph Howell, a backbencher particularly exercised by the topic of taxation andbenefits, sat on several of the relevant committees in opposition, arguing that

‘The right approach’, Oct. , Margaret Thatcher Foundation website, www.margaretthatcher.org/document/, MTF (hereafter MTF).

K. Joseph, Stranded on the middle ground: reflections on circumstances and policies (London,), p. .

Leader’s Consultative Committee (Shadow Cabinet), Aug. , THCR ///;see meeting on social security policy, Sept. , THCR ///.

C. Patten to K. Joseph, July , the papers of Keith Joseph, Conservative party archive,Bodleian Library, Oxford, KJ / (hereafter KJ).

E.g. T. Balogh, ‘The apotheosis of the dilettante’, in H. Thomas, ed., The establishment: asymposium (London, ); W. A. Niskanen, Bureaucracy and representative government (Chicago,IL, ); idem, Bureaucracy: servant or master? Lessons from America (London, ); the latterwas published in Britain by the IEA.

N. Thompson, ‘Hollowing out the state: public choice theory and the critique ofKeynesian social democracy’, Contemporary British History, (), pp. –; S. Granville,‘Downing Street’s favourite soap opera: evaluating the impact and influence of Yes, Minister andYes, Prime Minister’, Contemporary British History, (), pp. –, at pp. –.

‘Further development of Conservative tax reform policy’, Nov. , CRD //.



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tax credits ‘enshrined high income tax levels and low tax thresholds’. Thistransferred power to bureaucrats, and disincentivized citizens, creating a ‘tread-mill society’. Late in , Joseph summarized Thatcher’s objections to taxcredits: ‘reinforcement of the “transfer machine” . . . further socialization ofincome . . . further entrenchment of expectations and the removal of the motiveto personal thrift’. Tax credits were no longer a serious option in theforeseeable future. Thatcher declared she would ‘fight like a tiger’ againstany Labour plans to introduce pensioner credits.

Nevertheless, tax credits lived on in a strange half-life throughout Thatcher’sopposition period. Patrick Jenkin, who took over the Department for Healthand Social Security brief in late , still believed that with a Heathite taxcredit system, ‘we can look forward to ending the “Two Nations” of whichDisraeli spoke so powerfully a century ago’. Because of the devolved nature ofthe policy-making process (developed in conscious contrast to Heath’s detailed,centralist programme), Jenkin had considerable latitude to pursue tax credits,and was aided by particular officials at the Conservative Research Department(CRD), whose ‘crusading zeal’ in favour of child benefit and tax credits NigelLawson challenged angrily in . But Jenkin became aware that ‘[m]anyvoices in the Shadow Cabinet had been raised against Tax Credits’. Unable tohammer out any agreement (or, indeed, to force Thatcher’s hand as he didwhen he got Howe’s agreement to pledge publicly to meet Labour’s plannedincreases in NHS spending), plans to present the country with a document onThe right approach to social policy had to be dropped. ‘[W]ith the doubts nowhanging over tax credits’, rued Jenkin, ‘I do not believe that we could usefullypublish anything.’ Nevertheless, to drop tax credits from the manifesto wouldexpose the party, as one MP put it, ‘terribly to parody’. Gordon Reece,Thatcher’s influential publicity adviser, also urged her to maintain thecontinuity of appearance. So the manifesto equivocated, claiming thatthe party ‘will wish’ to move towards tax credits, but that ‘progress will be verydifficult in the next few years, both for reasons of cost and because of technicalproblems involved in the switch to computers’. (Chris Mockler, the chief CRDcrusader in favour of tax credits, had pointed out during the manifesto drafting

R. Howell, paper on taxation and benefits, May , CRD //. Idem, Why work? A radical solution (nd edn, London, ), p. . Taxation and social security meeting, Dec. , KJ /. C. Mockler to C. Patten and A. Ridley, July , CRD //. Conservative Central Office press release, extract from a speech by Patrick Jenkin, central

council meeting, St Andrew’s Hall, Norwich, Mar. , CRD //. N. Lawson to G. Howe, July , CRD //. Social Services General Policy Group, June , THCR ///. P. Jenkin to K. Joseph and A. Maude, June , CRD //; see J. Campbell,

Margaret Thatcher, I: The grocer’s daughter (London, ), p. . M. Portillo, note on manifesto, Jan. , KJ /; see taxation and social security

meeting, Dec. , KJ /. G. Reece to M. Thatcher, Sept. , THCR ///.




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process that it was not entirely true to claim that the implementation of a taxcredit system was impossible for technical reasons, and demanded the languagebe toned down.) Norman Fowler (new secretary of state for social services)equivocated in the same manner in the run-up to the election, claimingthe party was ‘still interested’ but was grappling with the cost. But in fact, taxcredits had been written off at least five years previously. Nicholas Timminsidentified continuity in tax credits as a ‘policy goal’ for Thatcherites; but this wasjust PR. Nigel Lawson foreclosed the possibility of any unified tax-benefitsystem after the election when, as chancellor, he refused to allow Fowler toconsider taxation in his review of the social services. In his memoir, Lawsonexplained that he saw a ‘philosophical difference between tax and socialsecurity’. Any ‘basic income’ or ‘social dividend’ scheme would saddle a ‘largepart of the population’ with disincentivizing high taxation, and blur the‘important distinction between what individuals earn by their own efforts andwhat they receive from the State’.

As we have seen, Thatcherites thought tax credits nationalized income andreduced incentives to work. Taxpayers were overburdened and infantilized bythe nanny state which took with one hand and gave back with the other.Disincentives hit the rich (the brain drain), but were perhaps worst for thepoor. The problem was that, as Peter Cropper, CRD officer and foundermember of the Conservative free-market philosophy group Longbow, put it:‘the nation has willed the level of unemployment and supplementary benefitsup to a level which is dangerously close to (or in some cases actually above) theremuneration available at work’. Ralph Howell coined the term ‘won’t work’to describe the problem. It had two elements: because of the loophole whichleft short-term sickness or unemployment benefits untaxed, some workersmight choose periods of idleness which left them actually in profit; others wouldnot take a job which offered them little or no material advantage overunemployment, and would live entirely on benefits. To tackle the first problem,short-term benefits must be taxed. To tackle the second, income differentialsbetween the employed and unemployed must be increased.

Cropper argued that the best way to increase differentials was ‘[s]traight cutsin direct taxation’. ‘Won’t work’ was given a higher priority than the ‘povertytrap’, meaning that the removal of the means-test, while still desirable, was no

Conservative party general election manifesto, Apr. , MTF ; C. Mockler toP. Jenkin, Mar. , CRD //.

N. Fowler, general election press conference, health and welfare, May , MTF. Timmins, Five giants, p. .

G. Howe, Ministers decide: a personal memoir of the Thatcher years (London, ), p. ;N. Lawson, The view from No. : memoirs of a Tory radical (London, ), pp. –.

P. Cropper, ‘Note on the tax credit debate’, Jan. , CRD //; see R. Cockett,Thinking the unthinkable: think-tanks and the economic counter-revolution, – (London,), p. .

R. Howell, paper on taxation and benefits, May , CRD //. P. Cropper, ‘Note on the tax credit debate’, Jan. , CRD //.




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longer so important, and finding tax cuts was the principal goal. This was theconclusion of the Fentiman Road meetings in the summer of ; and itwas endorsed by Keith Joseph and his economic advisers at the end of the year:‘all our spare revenue resources should go into tax reliefs as ameans of economicrejuvenation’. The belief that cutting tax rates would bolster ‘economicrejuvenation’ found ample support in the work of supply-sider Arthur Laffer. Hewas best-known for his ‘Laffer curve’, sketched on a napkin in a Washingtonrestaurant in , which claimed that there is a point above which, as tax ratesare increased, tax revenues begin to decrease. He argued that the US and manyother Western nations were in this ‘prohibitive’ region, and that tax cuts wouldhave wide-ranging effects, from drawing more capital into the economy, toreducing unemployment and tackling the ‘poverty trap’ inflicted by highmarginal tax rates. Growth would create more government revenue in thefuture, and more prosperity to be shared out. The implication was that all wouldbe winners, including the poor. Thatcher knew of Laffer’s economic arguments,but though she believed Laffer’s ‘basic theory is right within limits’, she said she‘daren’t use it’. In presenting tax cuts to the electorate, it was more prudentto refer to intuitive, homely explanations, and to concrete examples of lowtaxation, high economic growth, and low unemployment under Tory govern-ments from to , or on the continent, than to an American academictheory. Laffer’s theory also focused on macro-economic efficiency, leaving outthe moral argument for tax cuts that was so enticing to Thatcherites.

Though Thatcherites were aware of the electoral problems with reducingbenefits, Nigel Lawson, for one, was not theoretically opposed to reducingbenefits rather than cutting taxes on earnings. The new econometric history ofthe late s, which blamed government relief programmes for highunemployment during the s, gave Lawson evidence to support hisargument that ‘a reduction in unemployment pay would actually reduceunemployment’. But he knew it would be unacceptable to the country andmany in the party. In the long run, proper tax and benefit uprating policiesshould ‘ensure that the gap between unemployment benefit and average

‘Personal tax policy – the alternative approach’, Jan. , CRD //. ‘Record of meeting held on Sunday th July ’, Third Fentiman Road meeting, CRD

//; taxation and social security meeting, Dec. , KJ /. D. Fullerton, ‘Laffer curve’, in S. N. Durlauf and L. E. Blume, eds., The new Palgrave

dictionary of economics (nd edn, Basingstoke, ); A. Laffer, ‘Economic study: prohibitive taxrates and the inner-city: a rational explanation of the poverty trap’, June , THCR ///.

M. Thatcher to G. Pepper, Aug. , THCR ///. M. Thatcher, general election press conference, Apr. , MTF ; Thatcher,

House of Commons, debate on the address, Nov. , MTF . N. Lawson to G. Howe, K. Joseph, J. Prior, and A. Ridley, Feb. , CRD //;

Lawson cited D. Benjamin and L. Kochin, ‘Voluntary unemployment in interwar Britain’, TheBanker, (), pp. –, which summarized idem, ‘Searching for an explanation ofunemployment in interwar Britain’, Journal of Political Economy, (), pp. –.




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industrial earnings steadily widens’. Taxes must be lowered, and benefits andtaxes must both be uprated by the same measure of inflation, to ensure thatbenefits did not creep up on earnings (as was the case in the mid-s,because benefits were uprated in line with prices or incomes, whichever washigher). These twin policies were relentlessly pursued by the Thatcheritesonce in power. Nigel Lawson made a start in by supporting the Rooker-Wise amendment, which automatically uprated personal tax allowances in linewith the retail price index.

Thatcher’s opposition period also saw concerted efforts to develop a plan totax short-term benefits, despite formidable administrative problems, and thefact that ‘about half the unemployed drawing benefit’ – that is, all those whohad no income other than supplementary benefit – ‘would be completelyuntouched’. The CRD considered Beveridge’s original system, which meanteveryone required an individual tax return at the end of the year. Improvedadministrative systems now made this possible as it had not been in the lates. But the CRD rejected this option, as the long time lag meant, they felt,that there would be little impact on the ‘why work?’ problem. The moralconcern over ‘why work?’ was driving policy.

Plans to tax benefits and reduce income tax were not merely a play for thehearts (and votes) of the middle classes and affluent workers. They stemmedpartly from a suspicion of the nationalization of income, as well as from themonetarist imperative to reduce the Public Sector Borrowing Requirement(PSBR). But underlying the policies on poverty and social security was a moralimperative: Thatcherites thought their plans would make the tax/benefitsystem fair, re-incentivize British citizens and re-energize the British economy.While the policy development process had links to neo-liberal theories andthink-tanks, and echoed some of their catch-phrases, Thatcherites had slightlydifferent aims, and so favoured different policies. Whereas the IEA authors werewilling to admit that poverty could be a depressing force, Thatcherites thoughtthat the poor needed to pull themselves up out of poverty, and that giventhe right incentives (often punitive ones), they would do so. The roots ofThatcher’s moralistic view of poverty and human nature lay not in pure neo-liberal theorizing, but in conceptualizations of society and human naturerooted in Thatcher’s formative years. It is to these that I now turn.

I V

In , one IEA author noted that ‘few modern students of the so-called socialsciences go back to first beginnings. Partly it may be that our romantic,

N. Lawson to G. Howe, Feb. , CRD //. N. Lawson to G. Howe, ‘The indexation of child benefit’, Dec. , CRD //. Finance Act, , section , part . Short-term benefits policy group, interim report, July , THCR ///. ‘The taxation of short-term benefits’, Apr. , CRD //.




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irrational, emotional age does not want to seem like that of the great rationalistsin the Enlightenment, who insisted on going back to the “noble savage”.’ ButThatcherites did sometimes go back to the origins of society. Thatcher, itappears, agreed with a correspondent who wrote, ‘[t]he truth is, as all the sagesand philosophers of history have agreed, that man is basically selfish’.

Thatcherites, as Alfred Sherman wrote, ‘simply recognise the force of self-interest in human affairs, particularly economic affairs. We neither praise it nordenigrate it.’ Self-interest was, in fact, the original basis for collective living:‘All men are possessed of evil or anti-social instincts . . . It was to restrain suchinstincts, and to provide channels for goodwill, that public order in thecommunity came into being. Its origins lie in the impulses of the individual.’

Sherman argued that self-interest is not base selfishness because people areembedded in families and communities. Families were the key: he pointed outthat when Thatcherites talked of the individual, what they meant was ‘thefamily’. Hence Thatcher’s famous, ‘who is society? There is no such thing!There are individual men and women and there are families.’ Individualsworking in the interests of their family would produce a prosperous but also amoral society.

Thatcherites were confident in the s that the institution of the familyremained in good health. In this belief, Thatcher was bolstered by a list ofsociological works supplied by the House of Commons Library for use in thepreparation of a speech to the National Council for Women. As the researchofficer put it, current sociology suggested that the family was stronger than everin the modern world. But the origins of these views on human nature and thefamily can be traced back further, to Thatcher’s generation and her Methodistupbringing. Robert Moore’s investigation of Methodism in a Durham miningcommunity in the mid-s described the stubbornness of Methodistindividualism among those whose religious foundations were laid in the pre-war period: ‘[m]en and women steeped in a religion based on the notion ofindividual salvation, personal responsibility and self-help do not seem to accepteven mildly collectivist ideas very readily’. They expressed ‘deep misgivingsabout the Welfare State’, referring to people who ‘won’t work’ and to their ownefforts to overcome economic hardship. Thatcher called frequently on allthese tropes in her rhetoric. This instinctive reliance on beliefs moulded by

D. G. Hutton, ‘The individual and society’, in A. Seldon, ed., Agenda for a free society(London, ), p. .

J. T. Murray to M. Thatcher, Aug. , THCR ///; highlighted by Thatcher. A. Sherman, ‘Self-interest and public interest’, May , Centre for Policy Studies

papers, London School of Economics archive, London, CPS / (hereafter CPS). A. Sherman, ‘Freedom and morality’, THCR ///. A. Sherman, ‘Nation, government, society, people’, Houston, Sept. , CPS /. M. Thatcher, interview for Woman’s Own, Sept. , MTF . K. Andrews to M. Thatcher, Oct. , THCR, ///. R. S. Moore, Pit-men, preachers and politics; the effects of Methodism in a Durham mining

community (Cambridge, ), p. .




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Christianity is interesting in light of Callum Brown’s thesis that ‘discursiveChristianity’ faltered in Britain in the swinging sixties. Though to offer aconclusion about the vitality or otherwise of discursive Christianity in the sis far outside the scope of this article, it is interesting to note that Thatcher feltsuch currents were alive and well: ‘I still believe that the majority of Englishparents want their children to be brought up in what is essentially the samereligious heritage as was handed to me. To most ordinary people, heaven andhell, right and wrong, good and bad, matter.’

Thatcherites, then, conceived of human nature as self-interested, but notentirely individualistic, for people were embedded in families and communities.But we must delve a little deeper into Thatcherite understandings of the societalinfluences on behaviour, in particular, how they thought structure and culturewere related. It is generally assumed that Thatcherites emphasized culture inexplanations of poverty. It is also often implied that cultural and structuralexplanations of poverty are mutually exclusive. Left-wing critiques of culturalexplanations of poverty – going back at least to American sociologist/psychol-ogist William Ryan’s critique of the Moynihan report (to which I willreturn shortly) – have suggested that to focus on culture effaces the iniquitouseffects of structural inequality, discrimination, and disadvantage. But in thes, Thatcherites assigned a key role to structure: they assumed thateconomic and legal frameworks had a long-term, formative effect on culture.Socialist structures, particularly the punitive taxation and dependency-inducingbenefit systems, had undermined ‘Victorian virtues’ like thrift and hard work,according to Thatcher (hence ‘won’t work’). Union wage-claims replacedindividual effort. Asked by the Church of England to make child benefit apriority, Thatcher commented that ‘the larger the child benefit, the morepeople look to the State to support the children for whom they are responsibleand whom they brought into the world’. Socialism had thus caused economic,but also moral decline. Reversing this moral decline lay at the heart ofThatcherism. As Thatcher put it in , the main issue was not material but‘moral . . . where the State is too powerful, efficiency suffers and morality isthreatened’. Sherman echoed her in arguing for the ‘social market economy,not primarily on economic grounds, but on moral grounds, because it entail[s]the widest spread of responsibility. It has also proved economically mostbeneficial, but that is an added bonus’. Milton Friedman too had argued that

C. G. Brown, The death of Christian Britain: understanding secularisation, –(London, ).

M. Thatcher, speech at St Lawrence Jewry, Mar. , MTF . W. Ryan, Blaming the victim (London, ), pp. ff. M. Thatcher, note on petition from Mr Dixon, General Synod of the Church of England,

THCR ///. M. Thatcher, speech to social services conference dinner, ‘The healthy society’, Dec.

, MTF . A. Sherman, speech draft, ‘The politics of freedom’, CPS /.




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the production of wealth was a ‘desirable by-product’, not the ‘mainjustification’ of a free market. For him, the main issue was freedom. ForThatcherites the main issue was morality and responsibility. They echoed therhetoric, but subtly altered the emphasis.

Thatcherites also echoed Friedman’s analysis of poverty and charity. Theyoften cited the example of Victorian capitalists passing factory acts andfounding charitable institutions – used by Friedman in Capitalism and freedom,and in shorter articles which Thatcherites culled for ideas. Sherman citedDisraeli and the Earl of Shaftesbury; Thatcher referred to Victorian capitalist-philanthropists, as well as to her own Methodist, small-capitalist upbringing.

But neither Friedman’s analysis of negative externalities, nor of social change,figured in the Thatcherite story, which still insisted personal provision andprivate charity were superior to state provision. Thatcher favoured the GoodSamaritan, and the moral she drew from the biblical story was that you had to bewell-off to be able to give. The idea that poverty itself might sap the vigorousvirtues did not play a large role in the Thatcherite analysis; nor did the idea thatsociety might have changed radically since the days of Victorian charity,rendering private philanthropy inadequate.

Though structure had a role to play, culture lay at the heart of Thatcheriteexplanations of poverty. This is clearest in Keith Joseph’s ‘cycles of deprivation’theory, which held that inadequately parented children become inadequateparents, living irresponsible, chaotic, and unproductive lives. Sherman wrotesimilarly about ‘the moral inadequacies which often underlie poverty and whatis wrongly called “deprivation”’. Thatcherites saw a culture of deprivation orpoverty as the reason that the poor were poor. This culture led them to havepoor housing, poor health, disorganized lives, low incomes, and irresponsiblespending patterns. What defined them as poor was their culture, not their lowincomes – which were an outcome of that culture; this model of poverty turnedon its head the Labour/poverty lobby definition which said that the poor werepoor because they had low incomes, and the solution was to give them access tomore resources. There is clearly a tension between the Thatcherites’ culturalexplanation (and definition) of poverty, and the insistence that people arerational economic beings, who will work if working brings proper monetarygains. The economistic, rational conception of human nature and motivation

Friedman, Capitalism and freedom, p. . M. Friedman, ‘The line we dare not cross – the fragility of freedom at “%”’, Encounter,

, THCR ///, annotated. A. Sherman, ‘Freedom and morality’, THCR ///; Thatcher, speech to Zurich

Economic Society, ‘The new renaissance’, Mar. , MTF . M. Thatcher, speech to Conservative women’s conference, May , MTF . K. Joseph, ‘The cycle of family deprivation’, in Caring for people (London, ),

Conservative party archive, Bodleian Library, Oxford, PUB /; see Joseph’s article inWoman’s Guardian, Jan. , THCR ///.

A. Sherman, ‘The politics of freedom – in honour of Sir Robert Menzies’, probably ,CPS /.




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had clear roots in neo-liberal writing. The cultural explanation had parallelswith American debates in the s and s. But its deepest roots lay inBritish discourses.

Thatcherite descriptions of poor people’s culture often suggested that thepoor had ‘the shortest time-horizons and the least self-discipline’, comparedwith the middle classes’ ‘further time-horizon’ and ‘willingness to defergratification’. Such statements lay in a long, home-grown tradition, goingback to the Edwardian middle-class philanthropists and proto-social workersstudied by Ross McKibbin. They also breathed new life into the division ofpoverty into ‘primary’ and ‘secondary’ (the latter the result of improvidentspending), a division which entered public discourse via Rowntree’s famousstudies of York. J. H. Veit-Wilson has shown that Rowntree in fact adhered to arelative definition of poverty, not an absolute one; but that this had beenneglected by most people since, including Peter Townsend of the CPAG in hisarguments for a relative conception of poverty. The classification of the pooras ‘fit’ and ‘unfit’, respectable and hopeless, can be traced back to CharlesBooth’s surveys of the London poor in the s, and to debates in the NationalAssociation for the Promotion of Social Science in the late s, and Boothand other discussants were merely reinforcing the dominant prejudices of theirage, which were no doubt bound up with the Protestant ethic of capitalism.

If the poor were defined as those who had a ‘culture of poverty’, the middleclass should also properly be seen as a cultural group sharing a ‘value-system’.

Ferdynand Zweig, the Thatcherites’ most favoured sociologist in the s,followed Weber and Tawney in calling it the ‘Protestant ethic’. Thatchercalled it ‘Victorian virtues’ (though ‘Victorian values’ circulated most widely).

Economist and Sunday Telegraph journalist Patrick Hutber, in a staunch defenceof the middle class, debated its definition. He was

tempted to say that a member of the middle classes is like an elephant – one knows itwhen one sees it. That, of course, is not good enough, which is why I would suggest

M. Thatcher, The path to power (London, ), p. ; K. Joseph, ‘The politics of politicaleconomy’, address to the Economic Research Council, St Ermin’s, London, Jan. , inJoseph, Reversing the trend: a critical re-appraisal of Conservative economic and social policies(Chichester, ), pp. –.

R. McKibbin, ‘Class and poverty in Edwardian England’, in McKibbin, ed., The ideologies ofclass: social relations in Britain, – (Oxford, ), pp. –.

B. S. Rowntree, Poverty: a study of town life (London, ), idem, Poverty and progress: asecond social survey of York (London, ).

J. H. Veit-Wilson, ‘Paradigms of poverty: a rehabilitation of B. S. Rowntree’, Journal of SocialPolicy, (), pp. –.

E. P. Hennock, ‘Poverty and social theory’, Social History, (), pp. –, at pp. ,. Joseph, ‘Politics of political economy’, pp. –.

F. Zweig, The worker in an affluent society; family life and industry (London, ), p. . M. Thatcher, The Downing Street years (London, ), p. ; see K. Joseph, ‘The

economics of freedom’, in K. Joseph, A. Maude, and I. Percival, Freedom and order (London,), p. .




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an alternative definition, that of motivation. If a single word has to be found to sumup the characteristic middle class virtues, middle class aspirations and middle classattitudes, I would choose a relatively old-fashioned one: thrift.

Thatcherites thought this ‘value-system’ had flourished in the economic andlegal framework of competitive capitalism: ‘[h]istorically, bourgeois values haverested on personal economic independence’; but they were not a function justof ‘income but of class status and traditions’. The way to solve poverty was toextend the bourgeois value-system downwards. This prompted Thatcheriteinterest in ‘embourgeoisement’.

The debate over whether affluent workers were becoming middle class (andTory) had convulsed the left throughout the s; but it had been put to sleepfor them by the magnum opus, The affluent worker in the class structure,which dismissed ‘embourgeoisement’. Zweig, though a marginal figure inthe British sociological establishment (and originally a refugee from Poland),kept the theory alive, using data from the Affluent worker study to argue forembourgeoisement, ignoring the fact that the authors of that study had usedthe very same data to argue Zweig’s theory was wrong. To Thatcherites,embourgeoisement promised the rejuvenation of Britain: Joseph called it ‘theobjective for our lifetime’. It was clear that a minority would remainunreachable, but Thatcher hoped, along with Hutber, for the ‘embourgeoisementof the majority of the population’. To achieve widespread embourgeoisement,first, the economic and legal framework that ensured ‘incentives for success andpenalties for failure’ must be re-established, and second, ‘charismatic leadersand political parties’ should ‘promote a new ethos, an heir to Protestant ethics’;’ values and life-styles generated by the tone-giving classes in society’ must be‘internalised by all’. Structure was subordinated to culture, but still played asignificant part in the Thatcherite analysis.

But there was another battle to be fought. Thatcherites feared, asright-wing journalist Edward Pearce put it, that for the ‘Guardian-readinglobby . . . years of a strong state has undermined private values, andindividual qualities’. This was de-bourgeoisement. Inflation, the welfarestate (the ‘Father Christmas State’ as Zweig called it), middle-class tradeunionism and consumerism all created dependency, expectations, ‘militancy,

P. Hutber, The decline and fall of the middle class, and how it can fight back (London, ),p. . Joseph, ‘Politics of political economy’, pp. –.

J. H. Goldthorpe, D. Lockwood, and F. Bechhofer, The affluent worker in the class structure(London, ).

Zweig, Worker in an affluent society, pp. –, . Joseph, ‘Politics of political economy’, p. . ‘The middle-class struggle’, Aug. , THCR ///, summarizing Hutber’s

book; highlighted by Thatcher. Joseph, ‘Politics of political economy’, p. ; F. Zweig, The new acquisitive society

(Chichester, ), pp. , ; Sherman, ‘The will-o-the wisp of the classless society, notes onspeech ()’ Jan. , THCR ///.

E. Pearce, draft speech and cover note, May , THCR, ///.




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solidarity, put-your-claim-in-and-spend-what-you-have-while-you-have-it’, and‘“me-too”ism’ as Joseph warned. This explains why Thatcherites celebrated‘middle-class’ values, but simultaneously denigrated establishment elements ofthe middle class – those who would be eulogized by Noel Annan in Our age, thebig-staters and paternalists. The re-establishment of an economic and legalframework, and a cultural ethos which rewarded proper bourgeois behaviourwas vital to ensure that middle-class corruption was reversed, as well as toconvert workers. This dual impetus drove the approach to social securityestablished in opposition. It meant Thatcherites opposed both selective anduniversal benefits, and focused relentlessly on reducing the tax burden for themajority. It drove the obsession with increasing in-work and out-of-workdifferentials, and rationalizing the tax/benefit system, particularly the compara-tively small anomaly of untaxed short-term benefits. The crusade to save thesoul of the middle class drove the abolition in of the earnings-relatedsupplement for unemployment and sickness benefit introduced in . Itlay behind the whole ethos of Thatcherite social security: ‘death by a thousandcuts’. The aim was not to abolish the welfare state, but to make it irrelevant tothose on middle and high incomes; to push them towards market-basedprovision (as Hayek and the IEA advocated). As Nicholas Timmins astutelypointed out, Thatcher was so successful that many in these groups over-estimated the scale of the attack, so that when he set out in to write hishistory of the welfare state, many people ‘joked that I had better be quick aboutit before the thing disappeared’. The contention that Thatcher failed toachieve her mission to destroy the welfare state starts from a false premise. Theargument that Thatcher entered power in with little developed policy orideology is also incorrect. Most of the changes to income support enacted after had been discussed, and often fleshed out, in opposition, and theystemmed from a distinctive vision of society and poverty.

Thatcherite conceptions of the individual and society drew on personalsources – Thatcher’s generational experiences and her Methodist upbringing –and were bolstered by sociologists like Zweig. Thatcher’s suspicion of the statechimed with Virginia school thinking, but more profoundly with Hayek’sanalysis, as channelled through Churchill. Thatcher absorbed The road to serfdomearly in her political formation, when in Churchill made it a centrepieceof his election campaign. Thatcher idolized Churchill, and she and her team

Zweig, New acquisitive society, pp. ff, –, ff, Joseph, Reversing the trend, pp. , . N. Annan, Our age: portrait of a generation (London, ). Hansard, HC Debs, Mar. , vol. , col. . Abolition took effect from .

The earnings-related supplement paid out on pensions was not abolished. P. Pierson, Dismantling the welfare state?: Reagan, Thatcher, and the politics of retrenchment

(Cambridge, ), p. . Timmins, Five giants, p. xv. See E. H. H. Green, Ideologies of Conservatism: Conservative political ideas in the twentieth

century (Oxford, ), p. .




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frequently turned back to ‘Winston’ for inspiration. In the s, Thatcherdisplayed a Hayekian fear of socialist structures, and a Churchillian faith in thepeople: ‘what did Winston Churchill say?’ she asked. ‘He said, I do trust theBritish people, if they are given the incentive, they will respond, they will beresponsible.’ She was confident that the ‘vigorous virtues’ of family-centredindividualism would reassert themselves once socialism was smashed; that theculture of ‘dependency’ was a by-product of socialist interventionism.

This optimism declined during the s as the dismantling of socialiststructures did not bring about the expected moral rejuvenation. Thatcher cameto focus more heavily on the intractability of culture, and to blame the affluenceand permissiveness of the s, and particularly the Wilson government. MarkJarvis has suggested that these strands of Thatcherite rhetoric were present from, but in fact they only really surfaced in , becoming dominant in thelater s. Thatcher’s growing pessimism culminated in her emphasis, inher autobiography, on the importance of the church in supporting traditionalvalues, and her embrace of American analyses of the ‘culture of poverty’. Thephrase ‘culture of poverty’ had roots in interwar African-American and urbansociology, but was made famous by left-wing anthropologist Oscar Lewis in themid-s. His liberal ideas, however, were ‘easily appropriated by conservativesin search of a modern label for the undeserving poor’. From the s, twotypes of theory of the ‘culture of poverty’ came into conflict in America. Onetheory held that poor people had an entrenched, pathological culture ofpoverty, and were in need of individual interventions. William Ryan suggestedthis appealed to many self-identifying liberals and humanitarian conservatives.Both groups wanted to help the poor, but, at the same time, did not want toalter radically the structures of a society which served them well; hence the focuson individual interventions. Ryan saw D. P. Moynihan’s report, The Negrofamily: the case for national action, as emblematic of this sort of theory of the‘culture of poverty’ (though later commentators have stressed that Moynihandid identify external ‘social factors and economic conditions’ as the cause of

The index to Campbell, Grocer’s daughter, has a subsection under Churchill for ‘MTreveres’, with ten page references, and a further two for ‘MT quotes’; see ‘Daily notes general election, . Points from Mr Churchill’s broadcast’, THCR, ///, highlighted;M. Thatcher, speech to Conservative rally in Newcastle, Apr. , MTF ; G. Howe,memo to Stepping Stones group, Nov. , THCR, ///.

M. Thatcher, speech to Conservative rally in Newcastle, Apr. , MTF . M. Jarvis, Conservative governments, morality and social change in affluent Britain, –

(Manchester, ), pp. ff; see Thatcher, speech to Conservative Central Council, Mar., MTF . A. Holden, Makers and manners: politics and morality in postwar Britain(London, ), p. , notes that the critique of permissiveness took hold during the s,though he also seems to suggest that Thatcher’s critique of the permissive sixties wasformulated during the s, on p. .

Thatcher, Path to power, pp. –, –. J. Welshman, Underclass: a history of the excluded, – (London, ),

pp. ff, .




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family instability and of poverty). The other interpretation of the ‘culture ofpoverty’, pioneered by sociologists like Herbert Gans, saw it as an adaptation tothe structural situation the poor found themselves in, endowing it with greaterdignity and legitimacy. This interpretation suggested that the structuralfactors needed tackling.

John Welshman has argued that in the early s Keith Joseph wasstimulated by British debates about the ‘problem family . . . family planning anddeprivation’ to work on his theory of ‘cycles of deprivation’; American debateswere not influential. Joseph may well have been aware of the US debates; hehad, after all, a voracious academic mind (he won an All Souls PrizeFellowship), and when he first publicly outlined his theory of ‘cycles ofdeprivation’ in , he organized a three-day seminar at All Souls, and the textwent through eleven drafts. But the four key pieces of research he cited wereBritish, and though he referred to one American work, it was far from astatement of the conservative American theory of the ‘culture of poverty’; ratherit was a critique of American (and English) individualism, in favour of Sovietchild-rearing. Joseph and other Thatcherites started to engage withAmerican theories of the ‘culture of poverty’ in the latter half of the s, aspart of the re-evaluation of Conservatism begun when Joseph negotiated fromHeath a roving brief to re-examine policy in the summer of . Josephencouraged a self-conscious engagement with foreign sources of intellectualinspiration, particularly with iconoclastic American thinkers – Friedman andHayek were, of course, the best known. In , Joseph urged Chris Patten,director of the CRD, to read Edward Banfield’s update to The unheavenly city,which created a ‘storm of criticism’, but which was of ‘great value’. This work setout to turn American urban studies upside down. Banfield began by dividingthe population into four classes – upper, middle, working, and lower – based ontheir possession of time-horizons of decreasing length, ‘learned in childhoodand passed on as a kind of collective heritage’. While the first three classes wereall ‘normal’, the lower class’s present-centred attitude was pathological.

Thatcher met Patrick Moynihan in early and they apparently had an‘enlightening’ conversation about welfare, particularly the greater quantity ofcharity in the Victorian period. Engagements such as these reinforcedThatcherites’ theories about poverty, time-horizons, and charity. In the s,

Ryan, Blaming the victim; S. M. Lipset, ‘The prescient politician’, in R. A. Katzmann, ed.,Daniel Patrick Moynihan: the intellectual in public life (Washington, DC, ), pp. –, at p. .

H. J. Gans, The urban villagers: group and class in the life of Italian-Americans (New York, NY,). Welshman, Underclass, p. .

A. Denham and M. Garnett, Keith Joseph (Chesham, ), p. ; M. Halcrow, KeithJoseph: a single mind (London, ), p. ; Joseph, ‘The cycle of family deprivation’, pp. –;U. Bronfenbrenner, Two worlds of childhood: U. S. and U.S.S. R (London, ).

K. Joseph to C. Patten, Mar. , KJ / (I am indebted to Ben Jackson for drawingthis reference to my attention); E. Banfield, The unheavenly city: the nature and future of our urbancrisis (Boston, MA, ), p. .

D. P. Moynihan to M. Thatcher, Jan. and Feb. , THCR ///.




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Thatcher noted that conservative thinkers like Michael Novak and CharlesMurray had ‘reinforced’ her views. She was increasingly comfortable withconservative American theories about intractable cultures of poverty as theoptimism of the s faltered. Thatcher’s confidence in the s thatcultures of poverty would change if problematic structures (i.e. socialiststructures) were removed was closer in some ways to the liberal Americantheorists (like Herbert Gans) – but the latter wanted to eradicate structural(classed) inequality, a project which would have horrified Thatcher.

The Hayekian roots of Thatcherite analyses of socialism are important for aproper understanding of the relationship of Thatcherism to ‘One Nation’Conservatism. In the s and s, ‘wet’ Tories like Gilmour seized the‘One Nation’ label and made it their own, associating it with paternalism and anextensive welfare state. Stephen Evans has recently argued that we need to re-assess the relationship of Thatcherism and the ‘One Nation’ tradition. Hesuggests that Thatcher appropriated One Nation rhetoric as it ‘allowed [her] tospeak to her party in an idiom they could understand and therefore support’,but focused on the patriotic themes of Disraelian One Nation Conservatism,rather than the paternalistic strands emphasized by the ‘middle way’. In fact,drawing on Hayek, Thatcher re-worked the concept of the ‘Two Nations’ farmore powerfully than Evans suggests. She claimed that ‘[n]owadays there reallyis no primary poverty left in this country’: hence there were no ‘two nations’ inDisraeli’s sense. The egalitarian socialist machine was the new danger tosocial intercourse. The two nations were no longer poor and rich; rather,socialism had ironically created not a classless society, not one nation, but ‘themost stratified of all societies, divided into two classes: the powerful and thepowerless; the party-bureaucratic elite and the manipulated masses’.

Politicians and bureaucrats treated the second nation like ‘numbers in a Statecomputer’. The echo of Tocqueville via Hayek – and Churchill – is easilyaudible. The radical updating of the ‘two nations’ meant that when PatrickJenkin said in that with tax credits, ‘we can look forward to ending the“Two Nations” of which Disraeli spoke’, he was using a language fundamentallyat odds with Thatcherite understanding of the ‘two nations’. To them, tax

Thatcher, Downing Street years, p. ; Thatcher, Path to power, p. . D. Seawright, ‘One nation’, in K. Hickson, ed., The political thought of the Conservative party

since (Houndmills, ). S. Evans, ‘The not so odd couple: Margaret Thatcher and one nation Conservatism’,

Contemporary British History, (), pp. –, at p. . M. Thatcher, interview for the Catholic Herald, Dec. , MTF ; the claim was

made consistently by Joseph, see ‘Moral and material benefits of the market order’, speech toBow Group, July ; ‘Equality: an argument against’, Observer, Aug. , both re-printed in Joseph, Stranded, pp. , .

M. Thatcher, speech to Greater London Young Conservatives, ‘Dimensions ofConservatism’, July , MTF ; see A. Sherman, ‘The new Tory radicalism’,Skeleton, Jan. , CPS /.

M. Thatcher, speech to Conservative party conference, Oct. , MTF .




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credits meant socializing evenmore national income, placing it in the control ofthe ‘efficient expert administrators’, which, to Thatcherites, appeared toreinforce the new ‘two nations’ which socialism had created. Competition,choice, low taxes, and self-provisioning were designed to combat the socialismthought to be dividing Britain and dragging the country down.

Thatcherism was a coherent ideology: it was driven by a vision of moralrejuvenation which involved appropriating monetarist economics but dismiss-ing Milton Friedman’s negative income tax. In developing and presenting theirproject, Thatcherites drew on a range of home-grown traditions and discourses,plundering neo-liberalism when it suited them. Hayek’s early intervention in was particularly influential. But neo-liberalism was a complex and diversephenomenon, as suggested by the discussion of the different social policiesendorsed by Hayek, Friedman, and the IEA. This could be a source of strengthfor the flexible Thatcherites: in their ideology and rhetoric, they easily fusedand fudged elements of Hayek’s fear of ‘hot socialism’ with his later stresson the tyranny of the bureaucrat and the social administrator. Replacingsocialist government with the free market would do away with this creepingtyranny. Proper economic and legal structures would allow people to exercisethe virtues they naturally inclined towards, creating prosperity and morality. Inthis way, the supposed tension between competitive markets and traditionalmorals was resolved, at least to Thatcherites’ own satisfaction.




https://doi.org/10.1017/S0018246X12000118


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