What did Margaret Thatcher Actually Do?

Summary: (1979–1990)

Shifted Britain from “state runs it” to “state sets rules, markets deliver”: tax/monetary squeeze to beat inflation; abolished exchange controls; 1986 City “Big Bang”; mass privatisations with price-cap regulators; tougher union laws; Right to Buy; NHS internal market.

Result: lower inflation, higher inequality, a rewired economy.

At its simplest

• Thatcher (PM, 1979–90) swapped the post‑war ‘government does’ model for a ‘government sets rules, markets deliver’ model.

• The move was not just rhetorical. It changed tax and trade, energy and finance, housing and health administration.

• The question isn’t whether she changed Britain — plainly, she did — but what, exactly, she changed and what it bought or broke.

From brief to blueprint

The early turn. Facing double‑digit inflation and a creaking industrial base, her first budgets shifted the tax burden from income to consumption (basic and higher rates down; VAT up to 15%). The government targeted the money supply, ran tight fiscal lines even in recession, and — crucially — abolished exchange controls in October 1979 so money could move freely in and out of the UK.

The market playbook. The state sold stakes in national champions (telecoms, gas, steel, airlines, water and electricity companies), created arm’s‑length regulators, and introduced price‑cap regulation (RPI‑X) to mimic competition where monopolies persisted.

The City reset. The 1986 ‘Big Bang’ ripped up London Stock Exchange rules — fixed commissions went, the old broker/jobber split ended, electronic trading arrived, and foreign ownership flooded in. The Financial Services Act (1986) moved the City onto a modern statutory footing.

Work and power. A run of employment and trade union laws in the 1980s restricted secondary action, required secret ballots for strikes and union leadership, and curbed closed shops. This was the legal spine behind the miners’ strike showdown and a wider rebalancing of workplace power.

Public services, market methods. In health, the 1990 NHS and Community Care Act introduced an internal market — a purchaser–provider split and NHS trusts — while remaining tax‑funded and free at point of use.

Homes and ownership. The 1980 Housing Act’s ‘Right to Buy’ turned long‑term council tenants into owners at a discount, with sales running at over 100,000 a year in the early 1980s and surpassing a million by the decade’s end; cumulative sales in England now run well over 2 million.

What changed in the numbers

Inflation came down fast. After peaking around the turn of the decade, inflation fell sharply — down to roughly mid‑single digits by 1983 — albeit at considerable cost.

Unemployment spiked, then fell late‑decade. The unemployment rate roughly doubled between 1979 and 1982; the claimant count peaked at 3.09 million in July 1986 before dropping towards the end of the 1980s.

Taxes rebalanced. VAT jumped to 15% in 1979; the top rate of income tax was cut from 83% (investment income 98%) in the late 1970s to 60% in 1979 and then 40% in 1988; the basic rate fell to 25% by 1988.

Inequality rose and stayed higher. Disposable‑income inequality, flat for decades, rose sharply in the second half of the 1980s, with the Gini index moving from the mid‑0.2s to the mid‑0.3s by 1990 — a step‑change that endured.

How the mechanisms worked (concretely, not by vibes)

1) Taxes and money. Cutting marginal rates was meant to sharpen incentives; raising VAT broadened the base and shifted the burden to spending.

The 1988 Budget locked in a 40% top rate that proved durable across governments. Tight monetary and fiscal policy helped break inflation expectations, though the disinflation coincided with a painful early‑80s recession.

2) Capital mobility and the City. Abolishing exchange controls (Oct 1979) removed a post‑war tool that rationed foreign investment. London’s ‘Big Bang’ then rewired market plumbing:

fixed commissions abolished; ‘single capacity’ ended; screens replaced most open‑outcry trading; overseas banks bought up brokers.

The Financial Services Act 1986 created a statutory regulatory architecture. The result was a deeper, more international financial sector — with risks that would only become obvious later.

3) Privatisation + regulation. Selling state firms raised cash, widened share ownership, and aimed to make companies more efficient.

Because many were natural monopolies, ministers paired sales with price‑cap regulation (RPI‑X) and sector regulators (Oftel, Ofgas, Ofwat, OFFER/OFGEM).

The principle: cap prices relative to inflation, let firms keep efficiency gains between resets, and use competition where feasible. Outcomes varied by sector and time.

4) Union law and labour markets. Ballots before strikes and limits on secondary action increased legal hurdles to industrial action and shifted bargaining power at the workplace.

Manufacturing employment and coal mining shrank dramatically in the 1980s for a mix of reasons: global competition, a strong pound, technology — and the new legal environment.

5) Housing and the Right to Buy. Selling council homes at discounts did expand ownership — a key political promise — but replacement housebuilding lagged.

Over time, the social‑rent stock fell sharply and waiting lists grew; a material share of ex‑council homes later moved into the private rented sector.

6) The NHS internal market. The 1990 Act split purchasers (health authorities and GP fundholders) from providers (NHS trusts), using contracts and prices to chase efficiency while keeping care free.

Later governments repeatedly revised — but did not fully reverse — the split until the 2019–21 shift to integrated care.

The person/lived angle

The 1980s felt different. If you were a miner in South Yorkshire or a steelworker on Teesside, the decade read as loss: jobs gone, unions weaker, futures rerouted.

If you were a young broker in the City, it read as opportunity: foreign banks hiring, pay uncapped, rules simplified.

If you were a long‑term council tenant, Right to Buy was a once‑in‑a‑lifetime bet that many took.

The map of modern Britain — prosperous finance hubs, struggling former industrial towns, a thinner social‑rent sector — traces back to these years.

The case for (steelman)

• Stability first. Ending double‑digit inflation is a lasting achievement; stable prices are a precondition for investment and real wage growth.

• Competition and capital. Exchange‑control abolition and Big Bang let London specialise as a global financial centre, pulling in investment and high‑value services.

• Incentives and ownership. Lower marginal tax rates and large‑scale privatisations arguably raised efficiency and created a broader share‑owning culture; in utilities, RPI‑X required firms to pass on efficiency over time.

The case against (steelman)

• The social bill. Disinflation via recession meant mass unemployment in the early‑80s; many places never recovered their pre‑1980s industrial base. Inequality rose sharply and stayed high by historic UK standards.

• Natural monopolies bite back. Where consumers cannot switch (water; parts of rail later on), privatisation without tight guardrails enabled rent‑seeking and under‑investment. Regulators were often outgunned.

• Housing trade‑off. Right to Buy boosted ownership but hollowed out social housing when receipts were constrained and replacements lagged; decades later, councils are still trying to catch up.

So what / Now what

Thatcher’s settlement — open capital, competition by default, independent regulators, labour law tilted away from closed‑shop unionism, and a smaller state as provider — is still the ground British politics stands on.

Even governments promising to ‘break’ with Thatcher tend to adjust the dials rather than rip out the wiring.

The live question in 2025 isn’t whether to go back; it’s how to rebalance: tougher utility regulation where markets don’t bite; a housing programme that rebuilds social rent;

tax and welfare that curb high inequality without kneecapping growth; and industrial policy that helps places left behind move to new work rather than wait for the old to return.

That, not relitigation, is the useful lesson.

📚

Bibliography

1. [1] House of Lords Library (2024), The UK economy in the 1980s — overview of growth, inflation, and unemployment.
2. [2] Office for National Statistics (ONS), Inflation and price indices — long-run CPI/RPI (MM23 tables).
3. [3] ONS, UK Labour Market: April 2015 — claimant count peak July 1986; plus labour market time series (MGSX, UNEM).
4. [4] UK Parliament (Hansard), Budget Statement 1979 — VAT unified and raised to 15%.
5. [5] UK Parliament (Hansard), Budget Statement 1988 — top rate cut to 40%; basic rate to 25%.
6. [6] UK Parliament (Hansard), Abolition of Exchange Controls — Statement by the Chancellor, 23 October 1979.
7. [7] Bank of England — ‘Big Bang’ changes and the Financial Services Act 1986 (see Quarterly Bulletin 1987 / archive resources).
8. [8] Institute for Government — Privatisation of British Telecom (1984) case study.
9. [9] Ofgem — RPI-X@20 / history of price-cap regulation in UK utilities.
10. [10] Regulation Body of Knowledge — Price Cap (RPI-X) Regulation (concept and practice).
11. [11] Department for Levelling Up, Housing and Communities (DLUHC), Live tables on social housing sales — Right to Buy (Table 691).
12. [12] House of Lords Library — Right to Buy and the housing stock (briefing / overview).
13. [13] Legislation.gov.uk — Employment Act 1980; Employment Act 1982; Trade Union Act 1984 (ballots; secondary action).
14. [14] The King’s Fund — explainer on the NHS internal market and NHS and Community Care Act 1990.
15. [15] Institute for Fiscal Studies (IFS), Inequality in the UK: 1968–2021 (Deaton Review).
16. [16] National Audit Office (NAO) — reports on economic regulation of utilities (e.g., water sector) and regulatory effectiveness.

Thatcher did this, Thatcher did that! Thatcher – my god – did a lot to piss people off. But, what did the first female PM actually do?