Markets and Liberty: Inside Thatcher's Treasury

Helen Goodman MP was a Treasury civil servant during the Thatcher years. Comparing her own experiences with the tributes of Conservative MPs, she wonders what lies behind the impulse to rewrite history.


I was a student when Mrs Thatcher was elected Prime Minister. I had voted Labour, but I do remember watching her arrive at No 10 on the telly and feeling a surge of hope – that at last we had a woman and some good must come of this.

Within two months my Dad who was working on a public sector construction was unemployed, an early victim of the cuts. He never worked again.

I was in my final year and had been offered a job at the Bank of England. Just after my finals I received a phone call – the job offer was being withdrawn! I will never forget the look on my father’s face when I told him. One family, two job losses in three months.

The reason my job was taken from me was that one of the government’s first moves was the lfting of Exchange Controls – the first of the big financial deregulations, which the Tories were praising in Parliament yesterday. The Bank had had 600 working on this. I quickly learned that with unemployment came stigma. I found myself living in a hostel for homeless women behind Victoria Station, being openly challenged – surely a job offer hadn’t been withdrawn – I had failed to get a job.

Later I learned that the Bank had withdrawn my job offer, but they’d kept on the other new graduate they’d recruited – a man. That hurt.

Well Mrs Thatcher certainly radicalised me – I joined the Labour Party and went to work for a Labour MP. This was the days before IPSA and allowances – all he could afford to pay me was £30 a week. So it was a short-term opportunity – but life changing. I retook the civil service exams and astonishingly was offered the Treasury.

When I arrived there in September 1980, officials were still reminiscing over Denis Healey and highly sceptical about Mrs Thatcher’s ideals. One afternoon, everyone working on public spending, about a quarter of the department, was called into the large marble columned meeting room overlooking Parliament Street – all wood panelling and busts of Charles James Fox. Mrs Thatcher had decided to introduce cash limits. This was the first time I was really aware of her as a force of nature. The senior official in charge had come straight from No 10. He told us he’d raised all the problems and difficulties but received this riposte “I know it’d difficult Mr L.... but don’t wallow in it.”

I was plunged in at the sharp end – my first job was on social security and I remember we had to take through emergency legislation raiding the National Insurance fund, set up by Lloyd George. My second posting was to the overseas aid desk.

Mrs Thatcher had skilfully managed to condense her philosophy into two key organising principles – markets and liberty. For officials – even the most junior like me – this was tremendously powerful, because you knew that if you pursued these two ideas you were doing the right thing. It was a clear framework and within it there was scope for initiative and flexibility. There was no need to constantly refer up for detailed instructions.

Of course, what it also did was to over-simplify every problem and ignore the costs and downsides of policy. For example in the 1970s a series of international commodity agreements covering crops and metals had been used to stabilise these markets. This had helped the producer countries to predict and stabilise their export earnings. It was difficult to know whether prices were always aligned with long-term value so Mrs Thatcher and Ronald Reagan swept them away. So now we have traders speculating in food stuffs and multi-national corporations suing the poorest countries on earth. I would submit that this is not an improvement.

I can clearly recall her on the TV arguing with the Archbishop of York, John Habgood. “You should be providing moral certainty”, she said. “But have you thought”, he politely inquired, “that moral certainty might be a sin?”.

In the 1980s the Treasury was reorganised. The nationalised industry division was closed down and we started to privatise everything.  This brought us into close proximity with the City. They were riding high on the Big Bang. I was shocked – for doing exactly the same work young men in the City were being paid five times my salary and they were allowed to speculate on the shares being sold. I recall there was some strategic leaking about this – I can’t imagine how that happened.

Listening to the tributes of Tory MPs yesterday two things struck me – first their emotions; a mixture of terror and admiration. This was authentic. I only met her once at a large meeting after midnight when we had to secure an agreement to an urgent tax change. The power had gone so we were lit by candles. She swept in – all whisky and jewels – like a latter-day Empress Catherine II all the clever young men seemed to crumple before her. Only Eddie George – Steady Eddie – whom she later made Governor of the Bank of England could tell her what was needed.

The second thing that struck me was their desire to present her now as a figure behind whom the nation could unite. When the first draft of her 1984 part conference speech was circulated the phrase “the enemy within” was meant to refer to the miners. She delivered it after the Brighton bombing – which gave it a very different interpretation. Quite apart from her political opponents the government she led was one of the most divided in history – far more divided than the famous Blair/Brown splits. In 1987 I was moved to the foreign exchange desk. Here I discovered that the Treasury was engaged in a full scale exercise in deceiving No 10 over the management of the pound, a central part of any government’s economic policy. Mrs Thatcher and her advisers wanted to let the pound float freely, but Nigel Lawson’s Treasury was pursuing a policy of shadowing the deutschmark. Ever week we were buying and selling hundreds of millions to stabilise the pound. It was my task to write a daily markets report for No 10 – this had to explain our intervention in the forex markets without revealing our policy objective. When I suggested that instead of this duplicitous approach, the Chancellor simply raise the matter at Cabinet – he would certainly have had Geoffrey Howe’s support – I was told that if I ever mentioned this again I would be sacked!

Perhaps some of the younger Tories simply don’t know what happened (by the time David Cameron turned up in the Treasury I didn’t even bother to get to know him I was so bored with this endless stream of self-assured young men) but it does seem that this attempt to re-write what happened has more to do with current desperation rather than historical accuracy.

Mrs Thatcher herself certainly had difficulty in adjusting to her loss of power. Sir Michael Richardson, her personal financial adviser told me that he had a big lunch for her when the Queen created her a Baroness. “Margaret, this must be your proudest day” he said. She replied “What is one day of pleasure in a life of gloom?”.

Margaret Thatcher and Geoffrey Howe in 1980. Photograph: Getty Images

Helen Goodman is Labour MP for Bishop Auckland and shadow media minister

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/