Having been elected with a comfortable majority, Thatcher set about transforming the governance and economic landscape of the UK. Her government was composed largely of new faces, younger, more radical politicians with little or no ties to any previous Conservative governments. Edward Heath, the preceding Conservative Prime Minister, was henceforth treated rather like that embarrassing old aunt at family gatherings, shunted off into the corner and given tea and crumbs, and best forgotten about. The "one nation" Tories were informed that their era was over.
One of Thatcher's key leadership styles immediately became apparent. She demanded total fealty, publicly and privately. Any minister or government official who dared, however politely, to disagree could expect a tough time, and if disagreement continued, a blunt My-Way-Or-The-Highway ultimatum. This would have profound long-term consequences, but at the time it simply looked like Decisive Leadership.
One of the first items of business was the taxation system. The UK had progressively increased marginal tax rates for high income earners, starting in the late 1940's, initially to pay for the National Health Service, but also to pay for any new government programs that did not generate income. (The UK was basically almost bankrupt at the end of World War II, so there was no national kitty to raid to support government spending increases). By the end of the 60's, the top marginal rate for earned income was a confiscatory 83%. The top rate of tax on investment income was an even more mind-boggling 98% (and, unbelievably, somebody in a Labour government, quite seriously, proposed increasing it). These confiscatory tax rates had the effect of sending a significant number of high-earning individuals into what was known as "tax exile', either in the local self-governing UK provinces such as the Isle Of Man or the Channel Islands, which retained different taxation laws, or, if really large amounts of income were involved, more exotic locations such as the USA, the Caribbean, or even Monaco. At the time that Thatcher took office, for example, the three members of The Police, who had just broken into the big leagues of pop, were all coming to terms with life in rented country houses in Ireland, advised to flee there for a minimum of a year by their accountants.
The government slashed the top marginal rate down to 40% and similarly slashed the investment tax rates. They also began to simplify the entire taxation system to reduce the cost of collection. That simplification was eventually a bi-partisan initiative, and today the UK taxation system is a model of simplicity compared to the USA. The reduction in rates did not just impact showbusiness and business leaders, it had a positive impact on middle and high earners in the whole of the UK.
The defining event of the first Thatcher electoral period however was the Falklands War.
The Falkland Islands were one of a number of British Empire acquisitions scattered around the globe, retained over the centuries not because of their profitability, but for geopolitical reasons. They mostly comprised islands and archipelagoes, some of them in higher latitudes. The Falklands, lying off the coast of Argentina, were like the Hebrides South - a treeless collection of windswept moorlands, occupied by sheep and a collection of hardy farmers and fishermen, all of them fiercely loyal to the Crown despite the 9000 mile distance between London and the Falklands capital of Port Stanley.
To Argentina however, the Islas Malvinas were a national humiliation, an embarrassing turd in their yard. They claimed the islands as their own, and had been asking for them back for hundreds of years, receiving an almost-annual brush-off from the UK.
Finally, under economic pressure at home, the Argentinian military government decided to up the ante and invade the islands. They duly assembled a flotilla and set off to reclaim "their" Islas Malvinas. It is interesting that, like the Gulf War of 1991, there is evidence that the Argentinians decided to invade partly because the British government, over a period of years, had been insufficiently firm in its responses to Argentinian demands over the Falklands, thus lulling foreign policy experts in Argentina into the conclusion that Britain would not ultimately prevent the seizure of the islands. That potentially embarrassing issue was never properly investigated after the war was over; official government inquiries managed to swerve around it.
The Falklands were lightly defended by the UK, being generally regarded as the sort of place that nobody in their right mind would want to invade anyway. The Argentinians duly occupied the Falklands and the neighboring (and even more inhospitable) South Georgia in a matter of days. They calculated that the UK would huff and puff but would ultimately concede. The Falklands were a long way from the UK, and who would care about a couple of million sheep and a couple of thousand farmers?
This was a grave miscalculation. The UK government announced that it regarded the invasion as an act of war, and was going to reclaim the islands. In a mobilization not seen since World War II, the UK assembled a combined forces task force of carriers, ships, soldiers and airmen, and made it clear that they were going to the South Atlantic to get the Falklands back. The move ignited national jingoism and fervour. Thatcher had tapped into hidden British reserves of determination, appealing to aspects of British DNA not activated since we had mobilized to fight Mr. Hitler. The appeal was reminiscent of Kitchener and Churchill in previous wars, fuelled by a jingoistic media. Newspapers owned by Rupert Murdoch, a Thatcher supporter, would run tasteful banner headlines such as "Up Yours Galtieri!", referring to the Argentinian military President.
The USA, fearful of the negative consequences for its interests in Latin America, sent Alexander Haig on a shuttle diplomacy tour to head off the conflict, but he withdrew after discovering that both sides were unwilling to meet anywhere other than where they stood. The USA then fell in line behind the UK, providing covert support.
The task force duly sailed south, and after a few weeks of sometimes fierce fighting, the Argentinian invaders were rounded up, captured, and sent back to Argentina. The biggest controversy, which continues to this day, was the torpedoing of the Argentinian cruiser General Belgrano, with significant loss of life, when it was allegedly sailing away from the Falklands.
The Falklands War cost the Argentinian military rulers their credibility and they were soon replaced. Margaret Thatcher, on the other hand, had presided over a war victory, which was political gold. She soon called another General Election. The Labour Party, led by Michael Foot, was in shambles, torn by infighting over how to adjust to the new political reality in the UK. Most of the party loyalists demanded "more socialism", but that turned out to be a losing strategy, and the mild-mannered, intellectual Foot was no match for the aggressive and domineering Thatcher. In the 1983 election, the Conservative party was returned to office with a massive majority.
The stage was now set for another defining moment of Thatcher's political career - the collision with the trade union movement. Thatcher regarded the trades unions with disdain, in her opinion they had become way too powerful, almost a shadow government, and their role seemed to have coalesced around the idea of less work for more pay. Previous governments, fearful of the damaging impact of strikes, had pandered to the trade unions, inviting them to stage-managed displays of "tea and sandwiches" in 10 Downing Street (the London office of the Prime Minister). These tactics had merely emboldened many of the larger unions, whose leaders often seemed to be venal and hubristic.
The opportunity arose for a conflict when the National Union Of Mineworkers threatened a national strike over pay and conditions, and plans by the coal industry to begin a new round of pit closures. The NUM was led by Arthur Scargill, a charismatic, articulate Yorkshireman who had talked himself into the role of Chief Working Men's Opponent of Thatcher.
Although Scargill made all of the right public noises about workers rights and other socialist issues, in reality he was a deeply hypocritical Stalinist. He was a fan of democracy as long as his members kept electing him, and elections delivered the results he wanted. Many of his tactics would have been highly familiar to George Orwell. His membership seemed unwilling to notice that he awarded himself a very large salary and drove expensive union-provided cars, for example.
The NUM leadership decided to call a nationwide strike, despite not formally balloting its members about whether a strike was the correct approach. Scargill contemptuously waved off demands for a ballot as outside interference. In reality the NUM was a collection of regional unions with differing levels of militancy, and several of the regions were not overly enthusiastic about a strike. The refusal to hold a strike ballot was a major strategic blunder, which undercut the perceived legitimacy of the strike from day one.
When the strike started, the NUM began organizing picketer parties to ensure total obedience to the strike call. The government in turn aggressively used public order laws to try and impede the pickets. There were numerous clashes at coal mines and distribution depots, and large numbers of miners and other sympathisers were arrested, some of them on decidedly dubious grounds. Over a period of months, the actions by the government, together with tactical errors by the NUM, led to the strike slowly breaking down, and one by one the union regions folded and miners returned to work.
At the end of the strike, the NUM had achieved nothing except to weaken itself, and Scargill's hubris was exposed. The failure of the strike was a major setback to trade union cohesion and power. The government swiftly took advantage of the situation, passing or repealing laws that reduced the ability of unions to run "closed shops", and to make it easier for employers to fire striking workers. The coal industry also rapidly contracted through the 1980's, with numerous coal mining areas being closed down. This would have significant social consequences, many of them negative, as entire communities were gutted by the loss of their only source of employment.
To date the government, led by Thatcher, had won almost every conflict that it entered. It had even renegotiated the terms of Britain's membership of the EU. The UK was paying in a lot more money than it was receiving from the EU, and Thatcher decided that it was time to redress the balance. Bold and aggressive, she annoyed just about every European leader by consistently referring to the money in public speeches and press conferences as "Britain's money", and took a hard line in negotiations. Eventually a new deal was agreed that was much more favorable to the UK, although the UK's image in Europe suffered, as many mainland Europeans regarded the UK as a whining lackey of the USA (the Europeans had noticed the mutual admiration that seemed to exist between Thatcher and Ronald Reagan, and did not like what they saw).
Another pivotal moment occurred when a deputation of car industry leaders went to see Thatcher to ask for more government aid. The car industry in the UK was in deep trouble, crippled by high labour costs and poor design and engineering. By the 1980's, many people had given up buying British cars, so bad was the design and reliability. The car makers had already burned through many hundreds of millions of pounds in subsidies and grants from previous governments, none of which seemed to have actually helped them to make better quality vehicles. When they went to see Thatcher to ask for yet more government aid, she smoothly told them that they needed to build cars that people would actually buy, then they would probably make a profit. The makers went away empty-handed. The message was clear: failing industries could not expect government handouts.
By the end of 1985 Thatcher's personal popularity was still high, helped by a sustained economic boom that led to the government being able to dispose of much of the UK's medium and long term debts. However, she had rapidly become a polarizing figure in the UK. There were areas of the country that she would have been well-advised to stay out of, so great was the disdain for her personally. She had also managed to alienate almost the entire artistic and musician communities in the country. Many of them used their art to attack her on a personal level, and the animosities continue to this day. One of Thatcher's weaknesses was that she was never convincing as an advocate of the arts. She always gave the impression that art should be left to its own devices, an approach decidedly at odds with that of other European governments.
After 6 years, Thatcher strode the political landscape in the UK like a colussus. The government was confident, aggressive in its pursuit of solutions based on reduced government expenditures, lower direct taxation, and a robust foreign and European policy. However, in hindsight, this was the high water mark of her period as Prime Minister. The next 5 years would be a lot more difficult.