By Eamon Dyas

In 1992, a year before she died, the American academic and mother of Oliver Letwin, Shirley Robin Letwin, published a book entitled “The Anatomy of Thatcherism”. In this she explored the nature of what has come to be known as Thatcherism. It is an interesting book with several insights into the concept of Thatcherism. I was reminded of it recently in the aftermath of statements by Rachel Reeves’ in which she outlined the principles on which she approaches the role of Chancellor of the Exchequer.

In her 1992 book Oliver Letwin’s mother says about Thatcher:

“She is supposed to have been taught at her father’s knee to elevate the ‘economics of sound housekeeping above the merely political to the moral level’, and to regard spending no more than you can as a matter of moral rectitude.” (The Anatomy of Thatcherism, by Shirley Robin Letwin. Published by Fontana, London, 1992, p.22).

The Labour Chancellor Rachel Reeves’ perception of the main role of a government is one that she shares with Margaret Thatcher except in the case of Reeves she appears to have learned it from her mother rather than her father. She explained the nature of her understanding of economics in a speech she gave to business leaders before the general election when, on 28 May 2024, she revealed:

“To my mum, every penny mattered . . . and the basic test for whoever is chancellor is to bring that attitude to our public finances.”

And shortly after Labour won the election, in her address to Parliament on 29 July, she re-iterated this point by stressing that:

“When household budgets are stretched, families have to make difficult choices. And government needs to do the same.”

It seems that Reeves intends to follow the economic model that Thatcher’s father bequeathed to his daughter and Reeves’ mother bequeathed to her. It looks like we have re-entered the era of the family economic model with Rachel’s Reeves’ mum following Margaret Thatcher’s dad 34 years later. 

Why all of this is so disturbing is that a Labour Chancellor seeing her role as the equivalent of someone in charge of a family budget was the great fabrication given widespread credence during the Thatcher years and it has been used to justify austerity measures ever since.

It is a fabrication that has somehow achieved the status of a law of political economy mainly due to the way in which an uncritical media has been complicit in providing it with the credence to convince the electorate of its veracity. Never mind the simple fact that a family household is not the same thing as a national economy. It would be if a family was in the position of determining the taxes it pays or the incomes it receives. But family households are not in control of the income they receive nor their spending outlays nor the level of borrowing they can arrange. These things are not within the power of domestic household to determine. When it comes to domestic households it is forces outside their control that determine such things. None of those critical factors operating on domestic households can be equated with the capacity of central governments like the United Kingdom to control their budgets. 

Governments have control over the currency circulating in the national economy; they can determine the amount of money in circulation and they can borrow at their discretion. They can determine their level of income through taxation. They can also decide what projects are worthwhile spending money on irrespective of how much such projects might cost. None of these things can be equated with the mechanics of running a household budget. Yet the Labour Chancellor of the Exchequer has persisted with this Thatcher analogy even though it is an analogy that is always used to justify austerity and policies that harm the working class and poorer sections of society. 

Oliver Letwin’s mum also looks at another related aspect of Thatcherism:

“Thatcherism is seen as a project for enhancing the might of the central government by destroying the autonomy of local authorities and of all powerful interest groups. The Thatcherite assault on the financial independence of local authorities is said to have culminated in the poll tax, which ensured that more of local authority spending ‘would henceforth be determined from Whitehall’. The sale of council houses and flats to tenants, the reforms allowing schools to run themselves on money provided by the government, the ‘smashing’ of the trade unions were all dictated by the Thatcherite programme for ‘seizing control over more and more’.” (ibid.)

Aside from trade unions Thatcher also succeeded in crippling the capacity of local authorities to exercise any influence on the economy. But that crippling effort has continued under all the recent Tory administrations. In many ways it will be in the area of local authority spending that Reeves’ mum’s economic guidelines will prove the more devastating.

The first point to be made is that local governments have had their grants from central government more than halved between 2010/11 and 2015/16. This has continued and by 2020 local governments had been deprived of 60% of the grant they received twenty years earlier. A look at the services provided by local authorities shows just how critical they are in the daily lives of the people they serve and the impact on those services by cuts that have always been justified by the argument that they are necessary in order to “balance the budget”.

Local authorities are responsible for schools and youth services; social care for the elderly, children and the disabled; refugees and child protection; social housing and housing benefits; bin collections, roads, buses, parks, cemeteries, public toilets, swimming pools, local museums, galleries and libraries.

 Unlike central government local authorities have a limited ability to raise money for the provision of such services and are compelled by central government to operate to a balanced budget. In such circumstances a cut of 60/% will inevitably result in a devastating cut in such services. This is something that successive governments were well aware of when they imposed such cuts on local authorities. By compelling local authorities to cut what was seen as “excessive” staff numbers (which also happened to have been a largely unionised workforce and therefore protected from wage cuts etc.) or outsource the functions they traditionally served to the private sector. This was done on the basis that these new arrangements would result in a more efficient and streamlined supply of local government services. The truth however was much less straightforward.

More than half a million council staff lost their jobs as a result. In terms of services, spending on social care for the over-60s fell by 35% between 2010 and 2018. Some of this spending cut was compensated for by compelling home owners to pay for part of their social care costs. However, a paper published in the British Medical Journal suggested that these cuts resulted in 45,000 excess deaths between 2012 and 2014 alone – subsequent deaths from the Covid pandemic no doubt ensuring that that figure would now be much higher. With an increasingly ageing population the demands on such services are already believed to have reached the limits of what local government is capable of supplying. Without a complete overhaul of the way that social care is funded excess deaths are bound to continue to rise.

There is much talk in recent years of women as victims of domestic violence. Yet that talk has failed to prevent the inevitable erosion of funding for women’s refuges. In fact 59% of local authorities have had to reduce their funding for women’s refuges in 2019-20 resulting in a shortfall of 24.5% of places and 33 fewer refuges in 2020 than there was in 2010. The situation with youth services is even more dire. These have been cut by 75% according to 2022 data. There are 4,500 fewer youth workers and 760 fewer youth centres. 

The number of people sleeping rough in England has more than doubled since 2010 with all forms of homelessness such as families living in temporary accommodation at record highs. When it comes to public libraries around 800 have been closed with most of them in deprived areas and more than 200 local museums. More than a thousand publicly accessible swimming pools have been closed and nearly 60% of public toilets. In terms of local transport facilities many previous bus routes have been cancelled resulting in buses now covering 14% fewer miles than they did in 2010. Local authorities are facing an estimated £14 billion backlog in road maintenance, with up to 50% of roads judged to be at risk of completed disintegration within fifteen years. The RAC reported in 2023 that calls to breakdowns attributable to pot holes were at a five-year high having increased 40% over the previous year.

(All the above statistics are taken from a review of several books recently published on the performance of the Conservative Party. The review is entitled Carnival of Self-Harm, by Tom Crewe. Published in The London Review of Books, vol. 46, no.12, 20 June 2024, pp.20-22).

In a situation where successive governments have imposed austerity policies on every aspect of social services, health, housing and education over a period of decades it is important that a Labour government is willing to rectify the results of those austerity policies. But that requires a government that has the ambition to do just that and with a Chancellor whose ambition does not extend beyond the pledge to treat the economy as a household budget there is little to hope for in this regard.