Cameron Learns From Thatcher on Economy

British Prime Minister David Cameron has bowed to uproars over taking away free milk in schools and tinkering with the National Health Service.

When it comes to the budget-cutting core of his economic policy, the lesson from his predecessors including Margaret Thatcher is that reversing course isn’t an option.

With the economy growing more slowly than he projected, pushing back expectations of Bank of England interest-rate increases and spurring opposition calls that he abandon his deficit-reduction plan, Cameron has no alternative to pressing ahead, political scholars say. The premier and his ministers are today under pressure over their plan to raise the age at which women receive their state pension.

Thatcher’s experience shows sticking to painful economic policies is less dangerous politically than a perception of weakness, according to Tim Bale, author of “The Conservative Party From Thatcher to Cameron.”

“Even if people disagree, the idea that you’re sticking to it and prepared to stay the course is important,” said Bale, who’s professor of politics at the University of Sussex.

Heath’s Retreat

While voters can accept retreats on secondary policies, they’ll punish a change of tack on anything central to the government’s identity, Bale says, pointing to Edward Heath, Thatcher’s predecessor as Conservative leader. In 1972, he abandoned a pledge not to bail out failing industries for fear of widespread job losses, introducing the phrase “U-turn” to Britain’s political dictionary.

“It was in complete contradiction to what they’d promised at the 1970 election, and it resulted in election defeat in 1974,” Bale said in an interview.

Cameron tried to make a virtue last week of his rethink of an overhaul of the NHS, a step forced on him by a rebellion from his Liberal Democrat coalition partners and protests from doctors and nurses. He said it showed his government is listening.

As lawmakers debate the Pensions Bill later today, Work and Pensions Secretary Iain Duncan Smith is facing calls to abandon a proposal to speed up the increase in the retirement age for women from 60 to 65. The previous Labour government had planned to do this by 2020, and the coalition would like it to happen by 2018 to save money, meaning hundreds of thousands of women will have to work longer than they thought.

Away from the tinkering, Cameron is following the path on core policy laid out by Thatcher in 1980 in one of her most famous speeches.

‘Not for Turning’

Amid expectations she would back away from anti- inflationary policies as unemployment rose, the prime minister told her party: “To those waiting with bated breath for that favorite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady’s not for turning.”

That image of toughness on the big question of the day didn’t mean Thatcher wasn’t flexible elsewhere. The following year she gave in to coalminers over planned pit closures when they threatened to strike. It wasn’t until 1984 that she was ready to take the miners’ union on, eventually defeating it after a year-long fight.

‘Chose Her Battles’

“She thought very carefully and chose her battles,” said Mark Wickham-Jones, professor of politics at Bristol University. “She always understood the politics of what she was doing.”

Thatcher’s counterpart across the Atlantic, President George H.W. Bush, failed that test, punished by voters in 1992 for failing to follow through on his 1988 pre-election pledge: “Read my lips: No new taxes.”

Cameron acted to prevent the government’s NHS plans becoming a similarly toxic moment. Since 2006, he has repeated that the state-funded service, which offers free care to all citizens, is his top priority. In 2009, he pledged no more “top-down restructures and reorganizations.”

Shortly after taking office the following year, the government announced plans to transfer about 60 percent of the NHS budget from local boards to groups run by community doctors and for the extension of a competitive market in health-care provision.

When it became clear the policy was unpopular, Cameron announced first a “pause” on the policy in April and then, this week, the rethink. Deputy Prime Minister Nick Clegg, acknowledging policy had been mishandled, said the NHS was the closest thing Britain has to a national religion.

‘Stayed True’

“When I became prime minister, I made a few promises to myself: Not to go native and forget what people care about and not to stick stubbornly to a course if it wasn’t the right thing to do,” Cameron said in an article for the Daily Mail newspaper last week. “In holding an unprecedented listening exercise on the NHS, I believe I’ve stayed true to both.”

It wasn’t the fastest U-turn the government has performed. In August, Higher Education Minister David Willetts appeared live on television defending the removal of free milk supplies to pre-school children, a policy revealed in that morning’s newspapers, when he learned from the interviewer that Cameron’s office was telling reporters the idea had been dropped.

Where Cameron has maintained consistency is on his 2006 pledge not to cut NHS funding. That has forced him to cut other departments’ budgets more deeply, and some in his party have urged him to go back on it. Cameron has refused, saying it would be fatal to his party’s credibility.

Deficit Plan

The plan to eliminate Britain’s structural deficit by 2015 is, according to Bale and Wickham-Jones, of similarly totemic importance to Cameron and Chancellor of the Exchequer George Osborne.

The two men have been talking up the British economy in recent weeks, highlighting the International Monetary Fund’s endorsement of their austerity policies.

Labour’s Treasury spokesman, Ed Balls, urged an emergency cut in sales tax last week, pointing out that growth has stalled in the past two quarters and the U.K.’s recovery lags behind that of most other Group of Seven countries.

“Cautious optimism has been borne out by events,” Osborne told a finance-industry audience in London June 15. “The British economy is recovering,” he said, allowing the government the leeway to start planning the sale of stakes in banks nationalized during the financial crisis.

“For Osborne to say he has re-orientated his strategy would be a fatal compromise,” Wickham-Jones said. “He would have to resign.”

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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