Election will be overshadowed by Thatcher - and Labour are just as bad

Last year, Starmer stated: ‘Margaret Thatcher sought to drag Britain out of its stupor by setting loose our natural entrepreneurialism’. And this year, Shadow Chancellor of the Exchequer, Reeves, opined that Thatcher had removed ‘blockages’ in order to ‘equip Britain to compete in a fast-changing world’.

Hot on her heels, current leading Labour MPs, David Lammy and Darren Jones, pitched in by pronouncing, respectively, Thatcher was a ‘visionary leader’ who oversaw a ‘decade of national renewal for our country’. Jones is Shadow Chief Secretary to the Treasury while Lammy is Shadow Secretary of State for Foreign, Commonwealth and Development Affairs.

In preparation for winning the forthcoming general election, both Starmer and Reeves have repeatedly pledged there is no 'magic money tree' which an incoming Labour government can shake in order let it leaves fall off so as to boost public spending and supplement the funding for public services.

They have then doubled down on this so-called fiscal responsibility by repeatedly saying that the 'taps will not be turned on' because that would mean the level of 'national' debt would spiral out of control.

Reeves Reeves and Keir Starmer (Image: free)

In this, Starmer and Reeves are remembering one of Thatcher's key political principles, namely, that the national economy should be run like a 'housewife' runs the home. In other words, making sure that outgoings match income.

Indeed, in 1949, Thatcher told her first Tory selection meeting: ‘The Government should do what any good housewife would do if money was short, look at their accounts and see what was wrong’. This was followed up in 1988 by her saying when in Downing Street: ‘I can’t help reflecting that it’s taken a Government headed by a housewife with experience of running a family to balance the books for the first time in 20 years’.

But if Starmer and Reeves wished to more effusively emulate their heroine, they would have thought through the issues just a bit more, leading them to argue that they would also apply this principle to the much bigger world of private enterprise.

Though privatised Thames Water is only the most obvious recent major case, hundreds of private companies are now lawfully, if not morally, able to build up unsustainable levels of debt through borrowing. Sometimes, this is the result of leveraged buyouts or takeovers where huge loans are taken out just to buy the enterprise in the first place. Here venture capitalists become vulture capitalists. Sometimes, this is the result of uncontrolled organic or inorganic expansion. Either way, the level of debt repayments become unsustainable.

But whatever the reason, the consequences can be catastrophic with the enterprises then being put into administration when the creditors pull the plug, by either refusing further new loans or wanting repayment of existing ones.

Those that pay the price are workers with their jobs, short-changed consumers with goods and services, and citizens with their taxes. These are the people that are always last in line after the administrators have salvaged what they can, paid it out to the major creditors and taken their fee for doing so.

What many do not realise is that those that believe that ‘greed is good’ are effectively being bailed out by the taxpayer via the government's insolvency and redundancy payment services. In these instances, these services provide for statutory payments when companies go bust and do not have the money to pay out either redundancy pay or protective awards for failing to consult over redundancies.

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So, the lesson is that Starmer and Reeves should logically bring forward plans to stop companies building up unsustainable levels of debt, especially while still paying out dividends to shareholders and bonuses to executives.

Regulating companies in this way would mean placing limits upon company borrowing for both lenders and borrowers, a compulsion to build up company cash reserves and to be subject to financial 'stress tests' of the kind that the Financial Conduct Authority applies to the banks and financial institutions.

If these are not abided by, then it would be a case of not only no dividends to shareholders and bonuses to executives but also fines for the companies and their executives.

It is only through such regulation of the ‘free market’ that proper protection for workers, citizens and consumers can be created.

Imaginative thinking could allow Starmer and Reeves to square the circle here. On the one hand, they could claim in their current ‘prawn cocktail offensive’ in the City that this is the most useful legacy of their political heroine. On the other hand, they could claim that this is also an act of social democracy, whereby the state intervenes in the processes of the market to ameliorate the outcomes of the market.

Such a game of ‘smoke and mirrors’ is not beyond Starmer and Reeves as recent their policy pronouncements have shown. But as this will critically involve challenging the power of capital, it will take more than mere political sophistry. Here, the union affiliates to Labour should be making this part of their social contract with the Labour Party by inserting such demands into the now highly contested ‘New Deal for Working People’ policy proposals.

Professor Gregor Gall is a research associate at the University of Glasgow and author of ‘Mick Lynch: The making of a working-class hero’ (Manchester University Press, 2024).