Premiership of Margaret Thatcher

The Premiership of Margaret Thatcher began on 4 May 1979 following the victory of the Conservative Party in the 1979 general election.

First government 1979–1983

Deflationary strategy

Under the Thatcher government, the taming of inflation displaced high employment as the primary policy objective.

As a monetarist, Thatcher started out in her economic policy by increasing interest rates to slow the growth of the money supply and thus lower inflation. She had a preference for indirect taxation over taxes on income, and value added tax (VAT) was raised sharply to 15%, with a resultant actual short-term rise in inflation. The fiscal and monetary squeeze, combined with the North Sea oil effect, appreciated the real exchange rate. These moves hit businesses—especially the manufacturing sector — and unemployment exceeded 2 million by the autumn of 1980, up from 1.5 million at the time of Thatcher's election just over a year earlier.

Former prime minister Edward Heath, who was also Thatcher's predecessor as party leader, was one of the fiercist critics of Thatcher's economic policies, although his verbal attacks on her policies were often seen as a sign of his anger at her for ousting him from the party leadership in 1975.

First Thatcher ministry

Margaret Thatcher was the Prime Minister of the United Kingdom between 4 May 1979 and 28 November 1990, during which time she led a Conservative government. She was the first woman to hold that office. During her premiership, Thatcher moved to liberalise the British economy through deregulation, privatisation, and the promotion of entrepreneurialism. This article details the First Thatcher Ministry, which existed from 1979 until 1983.

Formation

Following the vote of no confidence against the Labour government and prime minister James Callaghan on 28 March 1979, a general election was called for 3 May 1979. The Winter of Discontent had seen the Labour government's popularity slump during the previous four months, and the opinion polls all pointed towards a Conservative victory.

The Tories won the election with a majority of 44 seats and their leader Margaret Thatcher became Britain's first female prime minister.

Thatcher inherited some of the worst economic statistics of postwar Britain. The nation was still feeling the effects of the numerous strikes during the recent Winter of Discontent. Inflation had recently topped 20%, and unemployment was in excess of 1.5 million for the first time since the 1930s.