Thatcher Accused BOE Head of Blocking Her Policy, Archive Shows

Former Bank of England Governor Gordon Richardson
Bank of England Governor Gordon Richardson appears in a 1973 file photo. Source: Central Press/Getty Images

Margaret Thatcher had an “appalling” relationship with Bank of England Governor Gordon Richardson, accusing him of obstructing her economic policy and fueling inflation, records of meetings in 1980 show.

Previously secret government documents released by the National Archives in London today show that the prime minister, then in office just over a year, returned from a vacation in Switzerland having “talked to a number of bankers” who told her “British money supply was out of control, that her strategy was right, but that it was not being properly operated.”

At a Sept. 3 meeting, Charles Goodhart, an official at the central bank, told her capital markets weren’t functioning and banks had to be allowed to increase corporate lending “or many more businesses would go bust.” According to her private secretary, Michael Pattison, Thatcher responded that “this confirmed comments from her Swiss friends that the bank was simply unwilling to implement government strategy.”

The record of the “stormy meeting” illustrates the style of dealing with opposition that earned Thatcher, now 85, her “Iron Lady” nickname. Elsewhere in the archive are the thoughts of British diplomats on the prospect of Ronald Reagan becoming U.S. president and discussion of the possibility of lending special combat forces to foreign countries.

Thatcher took office in May 1979, and in the April 1980 budget, Chancellor of the Exchequer Geoffrey Howe set a multiyear target for money supply, part of an effort to reduce inflation. Retail-price inflation hit 21.9 percent, a four-year high, that month. As the year progressed, it became clear that the government would miss its money-supply target.

‘Sabotaging Her Program’

In August, during her vacation, Thatcher met Karl Brunner, a Swiss advocate of monetarist economics. “He effectively said that the Bank of England doesn’t know what it’s doing, and Mrs. T was left with the impression that the bank might even be sabotaging her program for some reason,” Goodhart, now 74 and a professor at the London School of Economics, recalled in an interview. “She came back breathing fire and fury.”

Richardson, Thatcher’s first central-bank governor, was summoned to the prime minister’s office at 10 Downing Street.

“We knew nothing about the Swiss jaunt,” Goodhart said. “I think the governor found her a tiresome woman. He didn’t like being interrupted. He suddenly found himself on the receiving end of a tirade.”

Richardson, who died at age 94 in January this year, didn’t get a third period as governor when his term expired in 1983. He was replaced by Robin Leigh-Pemberton.

Lessons for Cameron

Goodhart said he sees lessons from Thatcher for the current conservative prime minister, David Cameron, now in his first year in office and trying to implement an economic package that has prompted riots against increases in student tuition fees.

“Thatcher was prepared to put through a set of policies that were pretty tough,” Goodhart said. “Her own toughness meant people accepted them pretty easily, because they knew they couldn’t change them. And that changed expectations.”

That toughness was already being tested in 1980. The records show that in March she told her press chief, Bernard Ingham, that she was “attracted by the idea of a campaign built on the good news concept -- good sense, good use, good business, good times.”

The following week, Ingham sent Thatcher a memo explaining why this was a bad idea. “The truth is that 1980 is not going to be a good year in material terms,” he wrote. “Economically, it is going to be a hard and difficult year.”

Savings had to be found where they could. The Treasury explained that the sixpence coin, a relic of Britain’s pre-decimal currency also known as the “tanner,” should be withdrawn because the value of the metal in it was higher than the face value of the coin, and the step would raise as much as 3.5 million pounds (then $8.3 million).

Thatcher scrawled her view at the top of the memo: “There will be headlines about the end of the tanner -- but for 3.5 million pounds it will be worth it. MT.”

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