Can Prime Minister Andy Burnham Break With Thatcherism, and Can Britain Afford It?
TBS CROSS DIG with Bloomberg
This Bloomberg video starts from a single question. Prime Minister Andy Burnham argues that Britain must move away from four decades of free-market orthodoxy. What would that break actually look like, and can a heavily indebted country pay for it? The narrator and a series of commentators answer by going back to why Thatcherism began, what it changed, where it is now seen to have failed, and how tight the fiscal constraints on Burnham are.
A Polarizing Figure
The video opens by noting how divided opinion on Margaret Thatcher remains. Depending on who you ask, the narrator says, she was either Britain's most unfortunate development since the Norman conquest or its greatest 20th-century leader after Churchill. One commentator recalls François Mitterrand's remark that she had "the mouth of Marilyn Monroe and the eyes of Caligula." Having met her, the commentator says, both features were extremely striking. The narrator reads Mitterrand's line as a description of her signature mix of personal charm and ruthless political instinct, summed up in her famous declaration that "the lady's not for turning."
From 1979 to 1990, the narrator says, she remade a Britain battered by strikes, inflation, high interest rates and weak growth. She broke the unions, privatized institutions, and gave the City of London free rein to "exchange industrial soot for stock options." The narrator stresses that most of what she did is still in place.
Why Thatcherism Began: Britain as "Ungovernable"
To understand how Thatcherism might end, the video argues, you have to understand why it began. Commentators describe a pre-Thatcher Britain widely seen as "a bit of a basket case." The country was thought to be in decline and had become something of a laughing stock, especially after it had to seek an IMF bailout. Inflation was high and the trade unions were very powerful. One commentator gives a figure: almost 30 million working days were lost to industrial disputes in 1979, the most since the general strike of 1926. A succession of governments seemed unable to manage the situation, and there was a sense that Britain had become ungovernable in the 1970s.
The narrator draws a parallel with today. Before he became prime minister, Burnham spoke of Britain being too "in hock" to the bond markets. Thatcher believed Britain was in hock to the unions, among other things. A clip of Thatcher sets out her stance: she was not declaring war on the unions or their leaders, but she was challenging their "illusion that government can be a universal provider."
Eleven Years of Overhaul and Its Costs
The video describes her 11 years in Downing Street as an economic overhaul that polarized the nation. Commentators say she was hated to some degree after taking power, and that the establishment could not believe what she was doing. Unemployment rose to about 11%, with 3 million people out of work, and her actions made many people across the country very angry. A protest clip has one person shouting, "You'll never starve us into submission."
Commentators describe Thatcherism as an attack on traditional British economics on several fronts. The first was monetarism, the idea that inflation could be controlled by reducing the money supply. She also cut the top rate of tax, increased the power of central government, and in one commentator's words "emasculated" local government and local decision-making.
The geographic effects were uneven. As a rough generalization, one commentator says, the South East did better than many other parts of the UK, which went through rapid deindustrialization. Another is blunter. The northern manufacturing belt collapsed, ordinary high-street businesses collapsed, and the economy shifted heavily toward the City and finance. "Fat cats got fatter," and companies ran themselves as global operations.
Privatization: The Pitch and the Long-Term Result
The video places large-scale privatization at the center of Thatcher's vision. When she took office, nationalized industries accounted for up to 10% of the British economy and employed almost 2 million people. The public sector as a whole employed 7.9 million. One commentator points out that privatizing the utilities, including BT, British Gas and the electricity networks, was essentially privatizing monopolies.
The pitch, as the narrator describes it, was simple: turn ordinary citizens into micro-capitalists so that a new generation could one day inherit a tidy portfolio of shares. The British Gas sale came with a large advertising campaign urging people to buy stakes, built around the slogan "If you see Sid, tell him."
Commentators acknowledge that privatization worked for a while. It raised a lot of money for the Treasury and seemed to bring private-sector money into quite run-down public services. The companies she privatized are still mostly private, and the unions have never regained their former power.
Over time, though, commentators say the public has faced higher bills, and investment has not kept up with what is needed. People see private-sector managers in the utilities making a lot of money. Water has drawn the sharpest reaction: one commentator describes "enormous backlash" against the privatized water industry as sewage has spilled into rivers and the sea.
Today's Fiscal Squeeze
The video then turns to the constraints Burnham faces. News clips report that a surge in UK borrowing costs halved Labour's fiscal headroom. One commentator says the bond market has now become "the anchor, the great limitation." Others note that growth is much weaker while demands on the state are growing, and that most of the public probably wants better public services but is not necessarily willing to pay for them.
The narrator says the cost of long-term UK government borrowing had been falling but has now risen to its highest level since 1998. The video compares 10-year yields for the US, France, Italy and Germany. All are elevated, but adding the UK shows the growing premium investors demand to lend to Britain, partly because it has already borrowed so much.
One commentator says UK national debt was around 44% of GDP when Thatcher took over in 1979 and is now roughly 94–96%. The narrator adds that debt interest alone costs about one and a half times the entire defense budget. The narrator names support during COVID as a major reason, and the result is tens of billions of pounds a year spent servicing debt "rather than paying for trains or transplants." One commentator sums up the contrast: "If Thatcher had a fiscal runway, Burnham's got a helipad."
Burnham and the Manchester Record
One commentator calls Burnham "the most committed anti-Thatcherite that we have seen coming to power," and he is quoted describing water as "a symbol of what has gone wrong with Britain." Commentators say he became a household name through nine years as mayor of Manchester, during which, according to the video, the region's economy grew at twice the national rate. His brand rests on politics outside London and on being "a more normal human presence."
His political strategy, the narrator says, is built on local control of essential services. The example given is Manchester's bus network, which he overhauled and brought back under public control. One commentator summarizes Burnham's account of the country's "wrong turns": political power centralized, economic power privatized, the country deindustrialized, and austerity weakening local government. His argument is that Britain will never be at peace with itself until more power is devolved. The narrator adds, with some irony, that he means particularly to a "number 10 of the north" based in his favorite city, Manchester. Another commentator sees him as in tune with global trends toward more state power, reindustrialization of parts of the economy, and a more activist government.
What "Manchesterism" Means
His changes have been labelled "Manchesterism," which he wants to bring to the national stage. As commentators describe it, the diagnosis is that power should be devolved to local leaders who know their areas best, so they can make decisions directly without deferring to Westminster. One commentator says that if he pushes this localism agenda through, "and that's quite a big if," it would be a very substantial break from Thatcherism. The economic case offered is that if second-tier cities can be brought close to the productivity of top-tier cities like London, faster growth, better outcomes and better living standards should follow.
On utilities, commentators say Burnham wants to invest and talks about more public control of services such as water. He is quoted describing a model in which services are delivered at cost and profits and savings are returned to the public through lower prices and higher investment. The narrator says greater public control could mean tougher regulation, public stakes in private companies, or in some cases outright public ownership. One commentator mentions golden shares or control through share ownership. The possible nationalization of the struggling British Steel also comes up, along with Burnham's apparent interest in a domestic industrial strategy and reindustrialization.
The Affordability Problem
The video then returns to the debt. The narrator says there is no big pot of money available. One commentator finds it very hard to imagine any government funding costs on this scale through taxation, borrowing, or both. Another says Burnham's biggest challenge is delivering on "very optimistic, ambitious promises."
Water is the clearest example. Nationalizing the water industry and others, a commentator says, would be "extraordinarily expensive." Even if the government acquired Thames Water for free, it would then have to find billions of pounds for the investment private investors currently provide. That could mean borrowing, and another commentator warns that if the bond markets sense irresponsible borrowing, they will charge more for it.
Rail is presented as the contrasting case. One commentator says rail nationalization is "very simple" and effectively free, because there is no infrastructure to buy. Rail operators hold only service contracts, and when those expire the government simply takes over running the services.
Given these limits, commentators argue that Burnham must also show he can make tough decisions, specifically bringing debt and spending under control. One judges it "much more likely" that Burnham's Britain will mean greater control or regulation of some utilities and industries such as steel, rather than wholesale nationalization. The narrator lists the other elements of his agenda as increased devolution, social care reform, possibly higher taxes on the well-off, and perhaps even some rolling back of Brexit. Burnham is quoted saying that private companies serving the public interest will be supported, but that those which do not will face clear consequences, "including taking back control or public ownership."
Back to the '70s, or Forward?
The video closes with one commentator's view of what is at stake. If getting rid of Thatcherism means going back to the 1970s, it is "dead on arrival." If it means moving forward to a new idea of the state, one that lets it be more active in some areas than during the neoliberal period, that could be the basis of a good governing philosophy. Whether Burnham can do that within Britain's fiscal constraints is the question the video leaves open.
Depending on who you ask, Margaret Thatcher was either Britain's most unfortunate development since the Norman Conquest or its greatest 20th-century leader not named Churchill.
Mitterrand said that she had the mouth of Marilyn Monroe and the eyes of Caligula. And certainly if you met her, those two features were extremely striking.
What Mitterrand was really describing was Thatcher's signature combination of personal charm and ruthless political instinct.
The lady is not for turning.
Between 1979 and 1990, she remade a Britain battered by strikes, inflation, high interest rates, and weak growth by demolishing unions, privatizing institutions, and giving the City of London free rein to exchange industrial soot for stock options. And by and large, most of what she did is still with us.
Fast forward 35 years and the challenges are different.
Surge in UK borrowing costs has halved Labour's fiscal headroom.
It's the bond market that has now taken over as the anchor, the great limitation.
We're living today in a world where growth is much weaker and the demands on the state are growing.
Most of the public will probably agree they want better public services but they're not necessarily prepared to fund them.
Prime Minister Andy Burnham now argues that Britain must break with four decades of free market orthodoxy.
The repeal of Margaret Thatcher's ideological on public ownership of water companies.
But what would such a break with the past even look like? And can the country actually afford to try it?
To understand how four decades of Thatcherism could end, you need to understand why it began in the first place.
The general perception before Thatcher came to power was that Britain was a bit of a basket case. Britain really had gone into decline, had deteriorated, had become a bit of a laughing stock, particularly when we had to go to the IMF to get a bailout.
This was a British economy with high inflation, with very powerful trade unions. The number of working days lost to industrial disputes in 1979 was almost 30 million, the highest since the general strike of 1926.
We'd had a succession of governments. It seemed like no one could manage the situation in Britain at the time.
There was a sort of sense that Britain had become ungovernable in the 1970s.
Sounds familiar.
Before he became Prime Minister, Andy Burnham talked about Britain being too in hock to the bond markets.
Thatcher, meanwhile, believed Britain was in hock to the unions, amongst other things.
I'm not declaring war on the unions or their leaders, but I am challenging their illusion that government can be a universal provider.
So, once inside Downing Street, she spent 11 years executing an economic overhaul that polarized the nation.
Thatcher was hated to some degree after she came to power.
You'll never starve us into submission.
The establishment couldn't believe what she was doing.
Unemployment rocketed to about 11%. Three million people were out of work. The actions that she was taking were making a lot of people across the country very angry.
Her radical blueprint was branded Thatcherism, an assault on traditional British economics on several fronts.
The first was monetarism, which was the idea that you could control inflation by bringing down the money supply.
She reduced the top rate of taxes, she increased the power of central government, she emasculated local governments, local decision-making.
As a rough generalization, it's probably true to say that those in the Southeast did better than many other parts of the UK where there was rapid deindustrialization.
The northern manufacturing belt collapsed, regular Main Street businesses collapsed, and the economy shifted massively in favor of the City and finance. Fat cats got fatter, they made more money, companies ran themselves as global operations.
And central to Thatcher's vision was the large-scale privatization of Britain's public sector, which, when she took office, was extensive. Nationalized industries accounted for up to 10% of the British economy and employed almost 2 million people. The public sector employed 7.9 million people.
The privatization of the utilities was essentially a privatization of monopolies.
BT, British Gas famously, the electricity networks.
And the pitch was simple. Turn everyday citizens into micro-capitalists, so a new generation could inherit a neat portfolio of shares one day.
When British Gas was privatized, there was a big advertising campaign to get people to buy stakes.
British Gas shares, they come out in November. If you see Sid, tell him.
Privatization did work for a while. It raised a lot of money for the Treasury, and it did seem also to inject private sector money into what were really quite run-down public services.
The companies that she privatized are, by and large, still private companies. Trade unions have never regained the powers they had.
But over time, the public has ended up facing higher bills, so higher prices, and the investment certainly has not been keeping up with what's required.
They see that private sector managers in the utilities making lots of money.
We've seen enormous backlash against privatized water industries as the sewage has been spilling into rivers and into the seas.
Today, the UK also faces severe fiscal headwinds. The cost of long-term UK government borrowing had been falling. Now, it's risen to the highest level since 1998.
This shows up clearly when compared to other major economies. These are 10-year yields for the US, France, Italy, and Germany. They're all elevated, but it's only when you add the UK that you begin to see the increasingly costly premium investors are demanding to lend Britain what it needs. Partly because it's already borrowed so much.
UK national debt as a share of GDP when Margaret Thatcher took over in '79 was around 44%. Now, national debt is between about 94 and 96%.
And debt interest alone is costing roughly one and a half times the entire defense budget. Supporting the country through COVID is a big reason why this happened and Britain ended up spending so much on interest every year. And the bottom line is there are tens of billions of pounds a year being spent servicing debt rather than paying for trains or transplants.
If Thatcher had a fiscal runway, Burnham's got a helipad.
Andy Burnham is the most committed anti-Thatcherite that we have seen coming to power.
Water is a symbol of what has gone wrong with Britain.
He has made himself really a household name because of his stewardship of Manchester, where he was mayor for nine years.
During his tenure, the region's economy grew at twice the national rate.
He sees politics about being outside of London and about being a more normal human presence. That's how he's built his brand.
His political strategy is rooted in local control of essential services like Manchester's bus network, which he overhauled and took back into public control.
Andy Burnham talked about a series of wrong turns that the country had taken. Political power is centralized, economic power privatized, the country deindustrialized, and austerity weakened local government.
His argument is Britain will never be a country that's at peace with itself until we devolve more power.
Particularly to Number 10 of the North, headquartered in his favorite city, Manchester.
I think he's in tune with a lot of global trends towards the state having more power, towards a reindustrialization of certain parts of the economy, and towards a more activist role of government.
The changes he's made have been given a name, Manchesterism.
What is Manchesterism?
Manchesterism. Manchesterism.
Manchesterism.
Which is something that he wants to make relevant to the national stage.
His diagnosis is that we need to devolve power to the local leaders who know what's best for their areas, so they are able to take the decisions directly without having to defer to the judgment of Westminster at the center of government.
And if he pushes that localism agenda through, and that's quite a big if, that will be a very substantial change from Thatcherism.
If you can get your second-tier cities almost to the same productivity level as the top tier such as London, then automatically there should be faster growth, better outcomes, better living standards.
He wants to invest in utilities. He talks about more public control of certain utilities such as water.
Where these kind of services are delivered at cost, and the profits and the savings are recycled back for the public in lower prices and in higher investment.
Greater public control could involve tougher regulation, public stakes in private companies, or in some cases outright public ownership.
It might mean the government having golden shares or controlling the companies through share ownership.
There's been potential nationalization of British Steel, which is in trouble. Burnham does seem to want to pursue a domestic industrial strategy, and he has talked about reindustrialization.
But think back to Britain's debt level. There just isn't a big pot of money available to him.
The scale of the cost is certainly very hard now to imagine any government being able to fund either by taxation, borrowing, or a combination of both.
The biggest challenge for Burnham is how he meets his very optimistic, ambitious promises.
Nationalizing the water industry and others, if that is the plan, would be extraordinarily expensive. Even if it got hold of Thames Water, for example, for free, the government would then have to pony up billions of pounds for the necessary investment that is currently being provided by private sector investors.
And for that, he may have to borrow money. And if the bond markets get a sense that he's borrowing money irresponsibly, they will charge him more for that borrowing.
The nationalization of rail is very simple. It's free, effectively, because there is no infrastructure to buy. All that the rail operators have is a service contract. When those contracts expire, the government just simply takes over the running of the services.
So, Burnham has to show that he is also a person who can take tough decisions, and those tough decisions have to be bringing our debt levels under control, bringing our spending under control.
It's much more likely that Andy Burnham's Britain is about greater control or regulation of some of Britain's utilities and industry, such as steel.
Alongside his vision for a remade Britain, increased devolution, social care reform, possibly greater taxation for the well-off, and perhaps even a rolling back of Brexit.
Where private companies serve the public interest, we will support them. But the consequences will be clear for those who do not, including taking back control or public ownership.
If getting rid of Thatcherism is rolling back to the '70s, it's dead on arrival. If getting rid of Thatcherism is going forward towards a new vision of the state which allows the state to be more active in some areas than it has been during the neoliberal period, then that is potentially the basis of a good governing philosophy.
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