Margaret Thatcher's death: the political world responds

How Barack Obama, Mikhail Gorbachev, Ed Miliband and others have responded to the former prime minister's death.

Margaret Thatcher's spokesman Lord Bell announced this morning that the former prime minister had died following stroke.

David Cameron, who was in a meeting with Spanish prime minister Mariano Rajoy when the news broke, was due to head to Paris but is now flying back to the UK. Downing Street has announced that Thatcher will receive a ceremonial funeral with military honours at St Paul's Cathedral.

We'll update this blog throughout the day as reactions from the political world come in. 

David Cameron

Today is a truly sad day for our country. We’ve lost a great prime minister, a great leader, a great Briton. As our first woman prime minister, Margaret Thatcher succeeded against all the odds. And the real thing about Margaret Thatcher is she did not just lead our country, she saved our country. And I believe she will go down as the greatest British peacetime prime minister. Today is obviously a day we should most of all think of her family. We’ve lost someone great in public life, but they’ve lost a much-loved mother and grandmother and we should think of them today.

Ed Miliband

I send my deep condolences to Lady Thatcher's family, in particular Mark and Carol Thatcher.

She will be remembered as a unique figure. She reshaped the politics of a whole generation. She was Britain's first woman Prime Minister. She moved the centre ground of British politics and was a huge figure on the world stage.

The Labour Party disagreed with much of what she did and she will always remain a controversial figure. But we can disagree and also greatly respect her political achievements and her personal strength.

She also defined the politics of the 1980s. David Cameron, Nick Clegg and I all grew up in a politics shaped by Lady Thatcher. We took different paths but with her as the crucial figure of that era.

She coped with her final, difficult years with dignity and courage. Critics and supporters will remember her in her prime.

Nick Clegg

Margaret Thatcher was one of the defining figures in modern British politics.

Whatever side of the political debate you stand on, no one can deny that as Prime Minister she left a unique and lasting imprint on the country she served.

She may have divided opinion during her time in politics but everyone will be united today in acknowledging the strength of her personality and the radicalism of her politics.

My thoughts are with her family and friends.

Barack Obama

With the passing of Baroness Margaret Thatcher, the world has lost one of the great champions of freedom and liberty, and America has lost a true friend.  As a grocer’s daughter who rose to become Britain’s first female prime minister, she stands as an example to our daughters that there is no glass ceiling that can’t be shattered.  As prime minister, she helped restore the confidence and pride that has always been the hallmark of Britain at its best.  And as an unapologetic supporter of our transatlantic alliance, she knew that with strength and resolve we could win the Cold War and extend freedom’s promise.

Here in America, many of us will never forget her standing shoulder to shoulder with President Reagan, reminding the world that we are not simply carried along by the currents of history—we can shape them with moral conviction, unyielding courage and iron will.   Michelle and I send our thoughts to the Thatcher family and all the British people as we carry on the work to which she dedicated her life—free peoples standing together, determined to write our own destiny.

Mikhail Gorbachev

The news about the death of Margaret Thatcher is a sad tiding. I knew that she was seriously ill; the last time we saw each other was several years ago. My sincere condolences go to her family and friends.

Thatcher was a politician whose word carried great weight. Our first meeting in 1984 set in train relations that were sometimes complicated, not always smooth, but which were serious and responsible on both sides. Human relations also gradually took shape, becoming more and more friendly. In the end we managed to achieve a mutual understanding, and that contributed to a change in the atmosphere between our country [the Soviet Union] and the West and the end of the Cold War.

Margaret Thatcher was a heavyweight politician and a striking person. She will remain in our memories, and in history.

George W. Bush

Laura and I are saddened by the death of Baroness Margaret Thatcher. She was an inspirational leader who stood on principle and guided her nation with confidence and clarity. Prime Minister Thatcher is a great example of strength and character, and a great ally who strengthened the special relationship between the United Kingdom and the United States. Laura and I join the people of Great Britain in remembering the life and leadership of this strong woman and friend.

Tony Blair

Margaret Thatcher was a towering political figure. Very few leaders get to change not only the political landscape of their country but of the world. Margaret was such a leader. Her global impact was vast. And some of the changes she made in Britain were, in certain respects at least, retained by the 1997 Labour Government, and came to be implemented by governments around the world. 

As a person she was kind and generous spirited and was always immensely supportive to me as Prime Minister although we came from opposite sides of politics. 

Even if you disagreed with her as I did on certain issues and occasionally strongly, you could not disrespect her character or her contribution to Britain's national life. She will be sadly missed.

Gordon Brown

Sarah and I have sent messages to Lady Thatcher's son Mark and daughter Carol, offering our condolences to them and to the Thatcher family and commemorating Lady Thatcher's many decades of service to our country.

She will be remembered not only for being Britain's first female Prime Minister and holding the office for 11 years, but also for the determination and resilience with which she carried out all her duties throughout her public life. Even those who disagreed with her never doubted the strength of her convictions and her unwavering belief in Britain's destiny in the world.

During our time in Number 10, Sarah and I invited Lady Thatcher to revisit Downing Street and Chequers - something which we know she enjoyed very much. But it was sad for her and her family that she lost her devoted husband Denis almost 10 years ago and that she was unable to enjoy good health in the later years of her retirement.

John Major

In government, the UK was turned around under – and in large measure because of – her leadership. Her reforms of the economy, trades union law, and her recovery of the Falkland Islands elevated her above normal politics, and may not have been achieved under any other leader. Her outstanding characteristics will always be remembered by those who worked closely with her: courage and determination in politics, and humanity and generosity of spirit in private.

Boris Johnson

She ended the defeatism and pessimism of the post-war period and unleashed a spirit of enterprise. She fought against the clubby, cosy, male-dominated consensus of both main parties – and she won. Her beliefs – in thrift, hard work, and proper reward for merit – were not always popular. But her legacy is colossal. This country is deeply in her debt. Her memory will live long after the world has forgotten the grey suits of today’s politics.

Iain Duncan Smith

Even if you disagreed with her as I did on certain issues and occasionally strongly, you could not disrespect her character or her contribution to Britain's national life. She will be sadly missed.

Michael Heseltine

I am sorry to learn of Lady Thatcher’s death. The illness of her last years has been cruel and very difficult. I send my deepest condolences to Mark and Carol.

Neil Kinnock

I recognise and admire the great distinction of Baroness Thatcher as the first woman to become leader of a major UK political party and prime minister. I am sorry to hear of her death and offer my sympathy to her family.

Ed Balls

Harriet Harman 

Douglas Alexander

Tom Watson

Stewart Wood (chief strategist to Ed Miliband)

Charles Kennedy

In extending sincere sympathy to the Thatcher family we remember today a landmark political figure, both at home and abroad. She was one of those politicians who made the weather.

As a politically divisive figure - not least where Scotland was concerned - her legacy will always be controversial.

And she continues to cast a considerable shadow across today's Conservative party.

But her impact - positive and negative - remains near immeasurable.

Gerry Adams

Margaret Thatcher did great hurt to the Irish and British people during her time as British prime minister. Working class communities were devastated in Britain because of her policies. Her role in international affairs was equally belligerent whether in support of the Chilean dictator Pinochet, her opposition to sanctions against Apartheid South Africa; and her support for the Khmer Rouge.

Here in Ireland her espousal of old draconian militaristic policies prolonged the war and caused great suffering. Her failed efforts to criminalise the republican struggle and the political prisoners is part of her legacy. It should be noted that in complete contradiction of her public posturing, she authorised a back channel of communications with the Sinn Fein leadership but failed to act on the logic of this. Unfortunately she was faced with weak Irish governments who failed to oppose her securocrat agenda or to enlist international support in defence of citizens in the north.

Margaret Thatcher will be especially remembered for her shameful role during the epic hunger strikes of 1980 and 81. Her Irish policy failed miserably.

Margaret Thatcher listens during her meeting with David Cameron inside 10 Downing Street in London June 8, 2010. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?