Published on May 6, 2024
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In 1966, the Beatles released a song called “Taxman”, which begins with these lines:
Let me tell you how it will be
That’s one for you, 19 for me…
Should 5 percent appear too small,
Be grateful I don’t take it all.
Leave alone–me tell you how it’s going to go
That’s one for you, nineteen for me
If five percent seems too little
Thank me for not taking everything
The lyrics were written to protest against excessive taxation in the United Kingdom, which until the 1970s amounted to expropriation of high earners, with an income tax rate of 83% for those on in the highest bracket, while capital gains were taxed up to 98%.
In the United Kingdom, the victory of the left-wing Labor Party in the 1945 general election led to the implementation of a form of democratic socialism under the leadership of the then Prime Minister Clement Attlee, who relied on a massive nationalization program. After the nationalization of banks, civil aviation, mining and telecommunications industries, railways, shipping canals, road freight transport, electricity and gas quickly followed, as did manufacturing industries. , including iron and steel.
Even after the Conservative Party returned to power following the October 1951 general election, Winston Churchill’s new government retained most of the socialist policies implemented by its Labor predecessor. This postwar consensus persisted into the 1970s, with many conservative politicians sharing the belief that the economy should be controlled by the state.
During the 1970s, Britain’s weaknesses became painfully obvious. The unions were very powerful and the country was torn by frequent strikes. Throughout the 1970s, the country experienced more than 2,000 strikes per year, with an average loss of nearly 13 million work days. The situation worsened in the winter of 1978–79, when the country was paralyzed by a new series of strikes by utility and transport workers.
On May 3, 1979, the Conservatives, now led by Margaret Thatcher, won the parliamentary elections, with a majority of 339 seats out of 635.
One of the first steps she took to make the economy more business-friendly was to reduce marginal tax rates from 33 to 30 percent for the lowest brackets, and from 83 to 60 percent for the lowest. highest brackets (this measure was followed by further reductions to 25 and 40% respectively in 1988). It also took steps to cut bureaucracy by speeding up obtaining building permits for industrial projects and offices, and simplifying or removing a range of controls.
During her second term, she encouraged the privatization of state-owned enterprises. Thatcher saw privatization as “one of the main ways of reversing the corrosive and corrupting effects of socialism.” Far from giving control to the people, public property was simply “the property of an impersonal legal entity: this amounts to control by politicians and civil servants”, she asserted. “But through privatization – especially the type of privatization that leads to the broadest possible ownership by members of the public – the power of the state is reduced and the power of the people is strengthened. »
During Thatcher’s tenure, the percentage of Britons owning stocks rose from 7% to 25%.
Although Thatcher confided in her memoirs that there were “still many things I would have liked to have done”, she gave a positive assessment of her mandate:
“Under my presidency, Britain was the first country to reverse the march of socialism. When I left office, the state-owned industrial sector had been reduced by about 60%. About one in four residents owned stocks. More than six hundred thousand jobs had moved from the public to the private sector. »
Thanks to the tax revenues generated by these productivity gains, the United Kingdom was able to considerably reduce its public debt. By 1976, the country had been on the verge of default and was forced to borrow $3.9 billion from the International Monetary Fund. Ten years later, in 1989, the British economy posted a surplus of 1.6%. Public debt fell from 54.6% of GDP in 1980 to 40.1% in 1989.
The stifling socialist culture of envy was replaced by a market- and business-friendly environment, where ambition was richly rewarded, leading to a sharp increase in private enterprise and self-employment. From 1.89 million in 1979, the total number of registered businesses in the UK rose to more than three million in 1989, while the number of people registered as self-employed rose from 1.9 million to 3.5 million during the same period.
