Several fallacies have been accepted too freely recently about the position of our manufacturing industry in the balance of our economy. The biggest fallacy is the view that salvation lies in services, and only in services. The corollary to that is that it is inevitable and desirable that over the past two decades there has been a reduction of nearly 3 million in employment in manufacturing industry. That is a massive reduction and represents nearly 40 per cent. of the total in manufacturing industry over that time. I do not believe that that should have been the case. That has been precipitate and dangerous and it has not been associated with an increase in productivity which has led to our maintaining our relative manufacturing position...I have come increasingly to the view that the Government stand back too much from industry. In my experience, they do so more than any other Government in the European Community. They do so more than the United States Government. We have to remember the vast US defence involvement in industry. They certainly stand back more than do the Japanese Government. To some extent, the motive is the feeling that we have had an uncompetitive and rather complacent industry which must be exposed to the full blasts of competition, and if that means contracts, even Government contracts, going overseas, we should shrug our shoulders and say that the wind should be stimulating. That process has been carried much further in Britain than in any other comparable rival country. I am resolutely opposed to protectionism. I am sure that it diminishes the employment and wealth-creating capacity of the world as a whole. That would be the result of plunging back into that policy. I also believe, however, that this totally arm's-length approach in the relationship between Government and industry is something that no other comparable Government contemplate to the extent that we do. It is not producing good results for British industry and it is a recipe for a further decline in Britain's position in the Western world. The Government should examine it carefully and reverse it in several important respects.

First, there is really no sign at all of any significant reduction in unemployment without a major change in policy...Unemployment has probably levelled out but at a totally unacceptable figure. Secondly, contrary to what the Secretary of State said, the post-oil surplus prospect—not merely the post-oil prospect, because the oil will take a long time to go, but the surplus, the big balance of payments surplus, which is beginning to decline quite quickly—still looks devastating...our balance of payments is now overwhelmingly dependent on this highly temporary and massive oil surplus. Our manufacturing industry is shrunken and what remains is uncompetitive...We have a manufacturing trade deficit of approximately £11 billion, all of which has built up in the past three to four years. This is containable by oil and by nothing else. Invisibles can take care of about £4 billion or £5 billion but they cannot do the whole job. As soon as oil goes into a neutral position we are in deep trouble. Should it go into a negative position, the situation would be catastrophic...To sell off a chunk of capital assets and to use the proceeds for capital investment in the rest of the public sector might just be acceptable. However, that is not what is proposed, and what is proposed cannot be justified on any reputable theory of public finance; and when it is accompanied by a Minister using the oil—which might itself be regarded as a capital asset; certainly it is not renewable—almost entirely for current purposes, it amounts to improvident finance on a scale that makes the Prime Minister's old friend General Galtieri almost Gladstonian.

A rolling back of the frontiers of State surveillance is necessary. ... I have come to the conclusion that this side of MI5 has become more trouble than it is worth. It falls over its own feet too often. It arouses more suspicion and complaint than is justified by the results its achieves. ... On grounds of utility I would now close down the political side of its activities.

We had our liberal hour, when we passed the Sexual Offences Act which stopped all homosexuals being criminals. I'm not ashamed of that. We mustn't slip back into illiberal attitudes. You see, there are two strands in the Labour Party. The libertarian strand and the authoritarian puritan strand. By and large, the libertarians have come with us and the others have stayed behind.

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The two main parties feared the SDP more than they feared each other. Their narrow dogmas had alienated more and more people and would never achieve a widening appeal across classes, regions and occupations. They had replied by trying to pretend that the SDP was all things to all men and women. It was not true. ... It had no place for class warriors or for those who wanted to fight outdated ideological battles; no place for little Englanders; for those selfishly concerned with their own problems and not with those of their neighbours and the nation as a whole. The Labour Party went increasingly into its chauvinist bunker and the Conservative Party showed little or no concern for the problems of the developing and poor nations.

I therefore believe that the politics of the left and centre of this country are frozen in an out-of-date mould which is bad for the political and economic health of Britain and increasingly inhibiting for those who live within the mould. Can it be broken? ... There was once a book, more famous for its title than for its contents, called the Strange Death of Liberal England. That death caught people rather unawares. Do not discount the possibility that in a few years time someone may be able to write at least equally convincingly of the strange and rapid revival of liberal social democratic Britain.

[A]lmost without a struggle, we have just witnessed a major lurch to the left in policy-making. The supreme authority of the Labour Party committed itself nine days ago to...a near neutralist and unilateralist position, which would make meaningless our continued membership of NATO...a commitment to practical non-cooperation with the European Community, leading in all likelihood to a firm proposal for complete withdrawal...a massive further extension of the public sector, despite the manifold unsolved problems which beset our nationalised industries, and mounting evidence from all over the world that full-scale state ownership is more successful in producing tyranny than in producing goods. Capitalism has its crisis today, but so too does estate socialism. There is now no economic philosopher's stone. But more successful nations are those which embrace a mixed economy and follow it with some consistency of purpose, not forever changing the frontiers. What remains of the private sector is to have enterprise squeezed out of it by being subjected to a straightjacket far tighter than in any other democratic country in the world.
This is not by any stretch of the imagination a social democratic programme. Nor do I believe that it is the way to protect Britain's security, help the peace of the world, revitalise our economy, or represent the views of the great majority of moderate left voters.

During this conversation she vouchsafed her only awareness of Dimbleby. The Belgian Prime Minister was justifying his hesitancy about cruise missiles by citing his coalition difficulties. Mrs Thatcher turned to me with a mixture of belligerence, good humour and total self-satisfaction and announced to a slightly bewildered table – none of them elected by the British system – "And that is all your great schemes would amount to."

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You also make sure that the state knows its place, not only in relation to the economy, but in relation to the citizen. You are in favour of the right of dissent and the liberty of private conduct. You are against unnecessary centralization and bureaucracy. You want to devolve decision-making wherever you sensibly can. You want parents in the school system, patients in the health service, residents in the neighbourhood, customers in both nationalized and private industry, to have as much say as possible. You want the nation to be self-confident and outward-looking, rather than insular, xenophobic and suspicious. You want the class system to fade without being replaced either by an aggressive and intolerant proletarianism or by the dominance of the brash and selfish values of a 'get rich quick' society. ... These are some of the objectives which I believe could be assisted by a strengthening of the radical centre.

Do we really believe that we have been more effectively and coherently governed over the past two decades than have the Germans, with their very sensible system of proportional representation? The avoidance of incompatible coalitions? Do we really believe that the last Labour Government was not a coalition, in fact if not in name, and a pretty incompatible one at that? I served in it for half its life, and you could not convince me of anything else.

[The effect of the Suez Crisis on the French was quite different.] We turned across the Atlantic. They turned across the Rhine, and Europe was built without us. There is room for argument about the causes of what followed. There is no doubt about what happened. Over the first 13 years of the [European] Community's life national income per head increased by 72 per cent in the Six and by 35 per cent in Britain. The result was that from being almost the richest country in Western Europe we became one of the poorest. France for the first time since the industrial revolution surpassed us in economic strength. The German economy achieved nearly twice our weight.

We must relaunch with a newly defined relevance to the circumstances of the late 1970s the drive towards economic and monetary union. We must find ways of avoiding recourse to the danger of psuedo-solutions of national protectionism to threats to sensitive sectors of the economy.