Rt Hon Lord Lilley

    It is a great privilege to address the Hoover Institution on the future of Thatcherism.

    No institution played a more central role in laying the intellectual foundations on which Margaret Thatcher and Ronald Reagan subsequently built.

    You kept the flame of scholarship alight during the dark ages that preceded their era.

    And your work today will be crucial to a revival of their legacy.

    I have personally drawn heavily on your research over the years.

    When Gerry Dorfman visited my rooms in the Palace of Westminster, he saw on my shelves well thumbed works by several of your authors.

    Indeed, he pointed out that the single author with the most titles on my shelves is your Thomas Sowell.

    So my tribute to Hoover is a genuine one.

    BBC – And I naturally accepted your invitation with alacrity…….

    The Future of Thatcherism

    You have asked me to talk about the Future of Thatcherism.

    For me Thatcherism is a subject of immense personal significance … both for my past and my future.

    I had the great honour of joining Margaret Thatcher?s government in 1987 and subsequently serving in her Cabinet – as Secretary of State for Trade and Industry.

    And let me tell you…. if you ever hear an historian claim that individuals make no impact on history, – they have never served under Margaret Thatcher.

    Thatcher bus. At the height of her power she was asked what would happen to Thatcherism if she were run over by a bus. To which she replied ?no bus would dare?!

    As for the future – I am now responsible for the renewal of Conservative policies.

    So I have to decide what we can learn from Thatcherism and how we can revive her winning streak.

    When we talk about Thatcherism, I take it to include Reaganism, too.

    Because, together, they dominated the ?80s.

    And they were astonishingly successful.

    Before Thatcher, Britain seemed set to decline into a banana republic – without the bananas.

    Thatcherism reversed that and made us proud of our nation again.

    Before Reagan, the USA was widely believed to be falling behind Japan, Europe, even the USSR.

    Yet in the ?80s America regained its vitality.

    It created 20 million extra jobs.

    And the combined effect of America?s resurgent power and the British example of rolling back socialism led to the collapse of communism.

    Market economics became the dominant paradigm throughout the world.

    Yet today the Centre Left is in power throughout America and Western Europe.

    Does that mean that the Thatcher/Reagan era is now a closed book with no further chapters to come?

    Some people do argue that now both leaders are retired and the challenges they faced have been solved, that is the end of the story.

    They would claim that Thatcherism and Reaganism are no longer ?isms?, they are ?wasms?.

    In my view that is a profound mistake.

    It misses the main essence of what Thatcher and Reagan stood for.

    They weren?t just charismatic leaders.

    And their ?isms? were not just about economic policy.

    What made them so significant was that they broke with the pessimism and defeatism which had characterised Conservatism for so long.

    Conservatives in our two countries had come to accept that national decline and the growth of socialism and state power, were inevitable.

    Thatcher and Reagan rejected this belief.

    They were adamant that policies which are not desirable are not inevitable.

    The Left?s claim that its policies are inevitable has been one of their most potent weapons.

    Karl Marx purported to prove scientifically that the laws of history lead inexorably from capitalism to socialism to communism.

    Modern day social democrats and liberals have dropped his pseudo-scientific mumbo jumbo.

    But they still assert that history is on their side: that the expansion of state power is inevitable.

    Karl Popper systematically demolished this belief in historical inevitability in his famous book, ?The Poverty of Historicism?.

    Unfortunately, that didn?t stop generations of Conservatives from being mesmerised by their opponents? claims.

    I remember hearing Michael Wolff, the Director General of the Conservative Party under Edward Heath, asserting quite explicitly that socialism was inevitable.

    All Conservatives could do was slow its advance and manage it better.

    The political economist, Joseph Schumpeter, one of the most eloquent exponents of the case for capitalism, nonetheless concluded that socialism was inevitable.

    And others talked about the ?ratchet effect? whereby during each period of Labour control the State would expand its power a bit further.

    But Conservatives would never even attempt to roll back the frontiers of the State.

    The great and lasting legacy of Thatcher and Reagan was to demonstrate that socialism wasn?t inevitable; that the frontiers of the State could be rolled back; and that our national decline would thereby be reversed.

    Future Challenges

    We need to revive that spirit again: that refusal to bow before the supposedly inevitable or to back off from tackling the apparently insurmountable.

    That doesn?t mean we should go back to the Thatcherite agenda.

    Thatcher and Reagan slew the economic dragons of the 1980s.

    We must gird up our loins to slay the new dragons of the next millennium.

    Like Thatcher and Reagan, we must have the self-confidence to dismiss the Left?s latest claims to have history on their side.

    And we must have the courage to tackle the challenges which seem so intractable that most politicians shrink from even thinking about them.

    A Conservative of a very different school from Lady Thatcher once said

    ?there are two kinds of problems – the soluble and the insoluble. The soluble normally solve themselves. And the insoluble are best left well alone.?

    Thatcherism would have none of that.

    Nor should we.

    So the task I seem to have set myself in the remainder of my remarks is to identify the key insoluble problems we face and tell you how to solve them!

    Quite a daunting task for a pre-dinner speaker!

    In Alice in Wonderland the White Queen was required ?to believe three impossible things before breakfast.?

    My task is to solve three insoluble problems before dinner!

    Public spending

    Our biggest challenge is to reduce the share of national income spent by the state.

    This has risen inexorably for most of this century in both our countries.

    It rose even under Thatcher and Reagan.

    They did nonetheless sharply check its growth.

    Which was no mean achievement.

    But we should not be content with that.

    A lower share of national income spent by the state could bring not only greater personal freedom but lower taxes, stronger incentives, and greater economic growth.

    Those arguments have always applied.

    But a new factor will add urgency to that task.

    It will become harder and harder for governments to extract taxes from their citizens as more trade and business moves onto the internet and escape into the ether.

    Social Security

    In both our countries, the main factor which has been driving up public expenditure is spending on social security and welfare.

    In Britain this has grown twice a rapidly as national income for the last 50 years.

    In the United States, spending on social security and welfare amounts to a third of public spending.

    Just to pay for spending on social security and welfare now on average costs every working American nearly $150 every working week.

    America has much to teach us about tackling welfare spending and dependency.

    But I understand that for you discussion of social security reform is almost taboo.

    Yet it is an issue that cannot be shirked.

    For my last five years in government, I was responsible for Social Security.

    I demonstrated that reform is possible – and even popular.

    I set spending on a downward path relative to national income.

    In most countries, America included, pensions are the largest single item of public expenditure.

    Here you finance them entirely on a pay-as-you-go basis.

    This year?s contributions are used to pay the pensions of people who have already retired.

    Nothing is saved or invested for the future.

    So, as more and more people live longer, the cost of paying their pensions will impose an increasingly crippling burden on those of working age.

    In Britain, by contrast, we have begun to solve that problem.

    We allow people to opt out of the earnings related part of their pension.

    When they do so, they receive a rebate from their social security contributions payable into a private scheme.

    So the money is saved.

    It is invested.

    It goes into industry, generates the profits to pay for their pensions – now or in 10, 20 or 30 years time when they retire – without imposing a burden of tax on the economy and, meanwhile, strengthening the economy through a huge accumulation of investments.

    We have built up over a trillion dollars of investments in pension funds in Britain.

    That is not just more than any other country in Europe.

    It is more than all the other countries in Europe, put together, have bothered to save for their future pension needs.

    Before our last general election in May 1997, I put forward a plan which would have gone even further.

    Over a generation, the entire social security pension provision would be transformed so that it is completely backed by private investments.

    This would be the most enormous spread of private ownership of wealth since the spread of home ownership.

    It would generate an immense increase in long-term committed investment.

    If that extra investment increased the rate of growth of the economy by just one twentieth of one per cent, the proposal would entirely pay for itself through extra tax revenues generated.

    In any case, it would ultimately relieve the British tax payer of a burden of some $60 billion a year.

    And it would give our pensioners the most secure, best-funded pensions in the world.


    We may be ahead of you on reforming social security.

    But…we in Britain clearly have a lot to learn from you in America on dealing with crime.

    We British have come to believe that crime of all types will go on increasing inexorably year in, year out.

    A continuous diet of American crime movies has given us the minor consolation of believing crime will always be worse in the United States.

    As a result few people in my country are willing to recognise that America is now seeing a sustained and substantial decline in crime.

    We shall be studying very carefully the lessons of your experience.

    Some of them are already clear.

    First, your success was not achieved by liberal policies.

    Nor by tolerating crime.

    Second, you can?t have law without order.

    Third, the best way to get order is effective policing.

    Fourth, the best way to make policing more effective is to delegate to local police districts responsibility for reducing crime.

    And fifth, the best way for them to reduce serious crime is to refuse to tolerate the vandalism and hooliganism which create the climate in which crime flourishes.

    That I take to be the message of Wilson and Kelling in Broken Windows and other studies.

    Conservatives used to assume that, where social issues were concerned, sociologists were part of the problem – not the solution.

    Now there is a growing body of high calibre work by sociologists and criminologists which confirms what Conservatives have always instinctively believed.

    Whereas Thatcher and Reagan looked to economists as their gurus; their successors can call on social scientists to provide their intellectual fire power.

    The Family

    Which brings me to one of the most important issues we face.

    The latest sociological research has identified an institution of immense importance.

    It lowers the crime rate.

    It increases people?s likelihood of finding work.

    It socialises young males.

    It reduces rates of mental illness.

    And it contributes to peoples sense of well being.

    It is quite a small institution.

    But if there are a lot of them together, a whole area begins to enjoy less disorder and a greater sense of neighbourliness.

    That institution is called the family.

    So conservatives are right to believe in it.

    But we have yet to discover a strategy to prevent the spread of family breakdown.

    The rising tide of births outside marriage, plus marital breakdown means that more and more children find themselves being brought up by only one of their parents.

    The implications for society are enormous.

    The family has always been the fountain of love, culture, religion, language and economic support.

    The cost to the taxpayer of helping lone parents support their children has reached alarming levels.

    In the UK the equivalent of over $2,000 a year in tax has to be taken from every married couple struggling to look after their own children in order to pay for benefits going to lone parents.

    I am certain that we should not respond to this problem by being either judgmental or punitive.

    Many lone parents find themselves in that position through no fault of their own.

    They are widowed, divorced or deserted and they struggle to bring up their children properly and often with success.

    But we must ask whether the state has done anything which undermines the institution of marriage and what it can do to sustain it.

    There is little point in politicians preaching.

    But the government can insure that the tax and benefit system sends out positive, rather than negative signals about the value of marriage.

    It is extraordinary that the State has no compunction about issuing heavy propaganda against smoking.

    Yet it is deemed politically incorrect to show the slightest hint of approval of marriage.

    We have put forward proposals to end the tax penalty faced by couples who look after their own children.

    By contrast, our labour government has just introduced, at great potential cost to the tax payer, a subsidy to parents to employ other people to care for their children.

    And they have leaked a bizarre proposal to establish secular priests who will go around telling people how to be better parents.

    I am certain that is the last thing we need.

    If the state takes responsibility away from people, they will behave irresponsibly.

    If we restore responsibility, people will behave more responsibly.

    A United States of Europe

    Finally let me raise an issue which preoccupies us in Britain but which ought also to worry Americans.

    It is the issue of the new single European currency – the Euro.

    British Conservatives believe we should keep our own currency the pound sterling and refuse to join the Euro.

    Our opponents try to sweep all rational argument aside with the claim that British membership is simply inevitable.

    Like all claims that their policies are inevitable, this is bunkum.

    There is no compelling force which requires a medium sized economy alongside a successful single currency to abandon its own money in favour of the neighbouring currency.

    The US dollar is a successful single currency circulating through 50 states of the Union.

    But Canada has no plans to give up its own currency and adopt the US dollar.

    The truth is that the Euro is not primarily an economic project, but a political one.

    A single currency is intended to lead to a single government and a single state – a United States of Europe.

    And it will lead in that direction.

    After all, in the history of the world there has never been an official currency before without a government to run it.

    Americans should be as wary as we are of plans to create an artificial superstate in Europe, for three reasons.

    First, because artificial federations invariably collapse.

    And they often do so bloodily as we saw with Yugoslavia and the Soviet Union.

    Second, because for most of those currently pressing for a European Superstate, it is an essentially an anti-capitalist, protectionist, socialist project.

    They have found it impossible to pursue socialist policies successfully within individual Nation States. So they hope that a larger Superstate will enable them to reimpose control over the economy, over business and over people?s lives.

    Third, for many of its proponents the idea of a United States of Europe has always been intrinsically anti-American.

    It is designed to challenge the US role in the world.

    If they have their way, European integration will transform, de-stabilise and undermine NATO with incalculable consequences for world peace.

    By contrast British Conservatives want the European Union to evolve as a community of Nation States.

    We want to remove barriers to trade, travel, investment and study across Europe.

    But we want to allow each nation to retain the ability to govern itself.


    Conservatives should reject our opponents claims that their policies are inevitable.

    But we should not try to resist every change.

    Change is inevitable, but where it is the result of human enterprise and technical advance, it is likely to be desirable.

    Where it is the result of millions of individuals making responsible choices, it is likely to be desirable.

    Inevitably change will bring problems, too.

    Problems may be inevitable, but solutions are not.

    We have a choice which policy solutions we adopt.

    And we should be choosing policies based on the principles in which we believe.

    Based on Freedom.

    Freedom for individuals and their families.

    Freedom for enterprises and voluntary organisations.

    Freedom for nations to govern themselves.