God and Mrs Thatcher (50 page)

Nowhere was this more apparent than in the proliferation of credit and store cards. The number of credit cards nearly tripled over the decade from 11.6 million card-holders in 1980 to 29.8 million in 1990, while credit doubled as a percentage of consumer expenditure from
8 per cent in 1979 to 15 per cent in 1989 and rose exponentially during the 2000s.
18
The nation’s credit cards were not just being swiped for one-off purchases, but for everyday consumables, in effect, to bolster wages. The amount paid out on essentials such as fuel, health and food remained relatively stable in the 1980s, while spending on travel, recreation, entertainment, tobacco, alcohol and dining rocketed; a trend that also paralleled Britain’s shift from a manufacturing to a service economy. The cash tills on the high street became the key test for measuring the buoyancy of the British economy, surpassing the balance of payments, unemployment figures and even Thatcher’s beloved inflation levels.

Women had always been recognised for their consumer power as keepers of the household budget, but in the ’80s advertisers cottoned-on to the potential of the new generation of women, who were better educated, had more disposable income and greater access to credit than ever before. The stereotypical image of the female consumer transformed from the thrifty housewife putting money aside for a rainy day to those stiletto-heeled cash cows on spending binges because they were ‘worth it’. Whereas once women had faced discrimination from banks, particularly in the form of loans, they now had full equality in the economic sphere, but this did not necessarily bring greater security. By 2012, the number of women declaring bankruptcy was equal to that of men for the first time.

Between 1984 and 1993 the number of bankruptcies more than tripled but as it became more commonplace so there was no longer the same stigma associated with it, even more so when, in 2002, the Labour government relaxed restrictions and reduced bankruptcy status from six years to twelve months.
19
A declaration of bankruptcy rather than paying off the debt became the most effective and efficient way of absolving oneself from the problem, which only further encouraged a culture of fiscal irresponsibility. Between 1980 and 1989, the percentage of households with at least one non-mortgage credit arrangement
grew from 50 per cent to 75 per cent.
20
In 1981, personal debt was 45 per cent of the national income, but by 2007 it was 160 per cent, which represented a three-and-a-half-fold increase.
21
A more worrying development, though, was the blurring of the distinction between mortgage and non-mortgage forms of finance. As house prices rose, so people naturally borrowed against their key asset: their home.

Given the stagnation of wages in low-skilled jobs and the large numbers of those claiming benefits, it is hardly surprising that the credit trend trickled down the social scale. But while middle-earners could apply to respectable banks and stores, those with a bad credit-rating or without a bank account (still 15 per cent in 1993 and one of the highest in northern Europe) turned to companies or loan sharks who asked few questions. The biggest rise in credit was precisely in these low-income groups; in 1980 22 per cent of low-income households were using credit but by 1989 it had more than trebled to 69 per cent.
22
A report by the Policy Studies Institute in 1992 revealed that 50 per cent of these loans were not going on luxury items but everyday essentials.
23

In truth, the origins of this problem lay in the 1974 Consumer Credit Act, which removed all restrictions on loans and put regulatory power in the hands of the newly formed Office of Fair Trading. But it was the Thatcher government’s constraints on the benefits system that meant that loan companies increasingly became the go-to option for Britain’s poor. The introduction of the Social Fund in 1988, which replaced the existing grant with a loan (with repayment taken directly from the individual’s benefit packet), also encouraged this normalisation of debt amongst the poorest members of society. As the New Economics Foundation report of 2002 into debt recognised, what the taxpayer was providing in terms of benefits, the lender was often taking away – with interest. Low-income households were not only funding their household budgets on debt, but were paying more for the privilege. While the top income group paid 60p a week on every £100 of debt, the poorest paid £1. This disparity is put into sharp focus when seen
in terms of interest, which was often well in excess of 100 or 200 per cent. In 1989, it was estimated that 500,000 had obtained loans through moneylenders, although in the mid-1990s a more accurate calculation put the figure at three million.
24
In his speech as president of Rotary in 1936, Alfred Roberts had labelled debt as the ‘curse of mankind’ and it is doubtful that even Margaret Thatcher considered this expansion of debt as part of her plan to ‘set the people free’.
25

In the 1980s, traditional forms of credit, such as the mail-order catalogue, the pawnbrokers and even door-to-door loan sharks were inched out of the market by slightly more respectable licensed moneylenders and payday loan companies, such as the Australian-owned Cash Converters and hire purchase outlet Japanese-owned Bright-House. Not only was there a proliferation of high-interest lenders incentivising the poor to spend rather than save but these companies had a greater presence in deprived areas than most high-street banks. This phenomenon could hardly be characterised as a positive trickling-down of wealth and opportunity, especially as the profits of these loan companies were lining the pockets of shareholders. In 2014, the sub-prime lending market was estimated to be worth over £16 billion – approximately the same amount that the government spends on housing benefit.

If the 1960s was the age of the affluent worker, then the 1980s was the period of the credit consumer as class-consciousness in Britain became more and more identified with consumption rather than production. Despite egalitarian promises of the market place, neo-liberal economics did not destroy old class bonds; only redefined them. The derogatory label of ‘chavs’, which gained currency in the noughties, was symbolic of this shift towards a new consumer-driven class identity, reflecting, as it did, middle-class snobbishness about working-class spending habits: did you shop at John Lewis or Primark? Holiday in Marbella or Provence? Was your Burberry fake or real? Britain finally became unhinged from its Christian moorings as consumerism became
the central source of values and social respectability. Advertising slogans and jingles were drummed into consumers like psalms, while shopping complexes dominated the urban landscape like modern-day cathedrals. Often built on former industrial sites, these shopping malls also symbolised the triumph of Britain’s retail sector over its manufacturing past. Ironically, it was the Church of England who funded one of the first of these, contributing £130 million to the construction of the Metrocentre near Gateshead. Opening in 1986, it boasted over 300 shops and, under stipulations set by the Church, its own place of worship, the ‘Oasis of Peace Chapel’.
26
Soon more than half of the Church Commissioners’ investments were in supermarkets and retail. Church leaders defended this record, arguing that the Church was contributing to urban regeneration, but it was also indirectly financing and encouraging what would later become Britons’ favourite Sunday activity.

When the financial crash occurred in 2008, many blamed the bankers; others blamed the Labour government; there were very few, and certainly not the Church, who dared to call it a crisis in individual morality and the public’s own fiscal irresponsibility. While David Cameron and Chancellor George Osborne have spoken at length about paying off the ‘nation’s credit card’, they have consciously avoided entreating individuals to pay off their own. Personal debt is a subject that politicians dare not broach for two reasons: Britain’s economy (and therefore economic revival) is largely dependent on people spending and the British electorate will not tolerate being lectured on how they should spend their money. In 2011, David Cameron hastily omitted a reference to the subject in his party conference speech, realising that it would provoke an unfavourable reaction. In that year, personal debt stood at £15 trillion (a little more than the country’s GDP) with forecasters predicting that it will reach £21 trillion by 2015.
27
Meanwhile, Britain’s savings have fallen below zero.
28
It is now a political vote-winner, in Britain, to talk of governmental thrift but political suicide to talk of personal thrift; that is the true political legacy of Thatcherite
economics. If ‘popular capitalism’, as Margaret Thatcher once said, was a ‘crusade to enfranchise the many in the economic life of Britain’ then this was certainly achieved.
29
But what in boom times was sold as freedom, in bust felt remarkably like oppression.

TT WAS NOT
so long ago that the financial district of London was known for its ‘gentlemanly capitalism’, when the power lay in reliable hands of the ‘old-boy network’ with hand-shake deals agreed over long, liquid lunches and all was safely encased within the reassuringly sturdy walls of the City. In the 1980s, this was to give way to a more egalitarian, global and depersonalised culture imported from America and typified by high-risk, short-term investments. Out went the ‘long term relationships between banker and client, now it gave way to brief affairs’ according to former City broker and author of
The Death of
Gentlemanly Capitalism,
Philip Augar.
30

The City, though, had no option but to modernise. In 1980, the Supplementary Special Deposit Scheme, known as the ‘corset’, which limited the amount that banks could lend, was removed. UK banking fell into line with the US as the abolition of exchange controls allowed the free movement of assets overseas and increased the link between commercial and global banking. In 1986, the ‘Big Bang’ signalled full deregulation. Named after the scientific theory of cosmological expansion, it meant that whereas once banking had existed in a dense controlled state, it was now continually expanding – although much like an inflated balloon it was destined to pop. Between 1997 and 2007 the UK financial services sector grew twice as fast as the economy. Minimal regulatory constraints were imposed but with the City providing a quarter of annual corporate rate receipts, the Treasury had little cause for complaint or reason to rein it in. In 1986, financial services
accounted for 15.5 per cent of the UK’s GDP; by 2008 it had almost doubled to 29.2 per cent.
31
The system did indeed become too big to fail.

In 1986, the country exported £2 billion worth of financial services; by 2005 this had risen to £23 billion and quickly supplanted goods and manufacturing as Britain’s biggest export. The only problem was that it employed a fraction of the workforce and was largely foreign-owned. Unlike in France or Germany, where the financial services sectors were obliged to invest in long-term industrial projects, the City of London, precisely at a time when industry needed it most, did not demonstrate the same level of commitment. Instead of siphoning off the profits, the Treasury could have compelled the City to channel these funds into rebuilding Britain’s industrial base in the wake of deindustrialisation. This, after all, was how banks such as the Midland Bank had operated in the Victorian era: enhancing the growing wealth of Birmingham by helping to develop industries, railways and services. Understandably, though, the banks rejected long-term investment in favour of securing loans against assets from which they stood to gain whether they succeeded or failed. The City of London embodied what became known as the ‘Wimbledon effect’, i.e. like the tennis tournament, with Britain always the host and rarely the winner.

Successive governments failed to adequately regulate the market, which, it soon became clear, did not encourage individual moral responsibility but the complete opposite. Scandals of fiscal mismanagement and greed blackened the City’s reputation for fair-trading and sound practice. Companies that promised huge returns on pension investments were perhaps the biggest perpetrators. The Royal and Sun Alliance was fined the paltry sum of £1.35 million for failing to compensate the 13,500 victims of its botched pension scheme, while Equitable Life, which had promised a 10 per cent return on high-risk investments, managed to wipe out the capital of its 1.5 million investors. The government stepped in, offering £1.5 billion in compensation, although the actual loss was believed to have been in the
range of £4.48 billion.
32
A recent study by
Which
magazine estimated that 71 per cent of the five million people with private pensions in Britain were likely to be 20 per cent less well off than if had they stayed in the state system.
33

In the end, the market turned out not to be the benevolent ‘invisible hand’ that Thatcher promised, but an unruly child (as it always had been), capable of severe mood swings and liable to blow if overexcited. Thatcher’s admirers (even some within New Labour) were happy to claim it as Thatcher’s legacy when things were going well, but seemed to absolve her of any responsibility when it all went badly wrong. The fact was that Margaret Thatcher was responsible for loosening the reins even if she was not riding the horse when it swerved off into an uncontrollable direction. Of course, this culture was encouraged and this behaviour continued unabated under New Labour, which was content to pocket a significant share of the profits to fund its schools and hospitals; much like a gangster’s wife who enjoys the lifestyle but does not question how her husband gets his money.

When out of office, Thatcher was again invited to comment on the oft-repeated accusation that her policies had given rise to a culture of materialism and fiscal irresponsibility. This time, perhaps in a more reflective mood, she drew upon the words of John Wesley: ‘Do not impute to money the faults of human nature.’
34
She might as well have said: ‘Do not impute to Thatcherism the faults of human nature.’ It was not money, political ideology or the capitalist system that was to blame, but man. Thatcherism may have laid the foundations for a culture in which individualism and self-reliance could thrive, but, ultimately, it created a culture in which only selfishness and excess were rewarded.