On 26 January 1982, official figures revealed that unemployment in the United Kingdom had risen above three million for the first time since the 1930s. The total of 3,070,621 people out of work – representing one-eighth of the workforce – was a devastating milestone for Margaret Thatcher, who was three years into her first term as prime minister.

The year of 1981 was the most testing of Thatcher’s premiership. The prime minister’s approval ratings plummeted; riots in Brixton, Toxteth, and Moss Side raised the spectre of social upheaval. In April 1981, responding to a suggestion that rioting was caused by unemployment, Thatcherite enforcer Norman Tebbit maintained that unemployment of the 1930s was far worse than that of the 1980s.

He asserted, somewhat infamously: “I grew up in the ‘30s with our unemployed father. He did not riot, he got on his bike and looked for work.”

The new Social Democratic Party (SDP)-Liberal Alliance, meanwhile, was seen as a potentially existential threat to the deeply unpopular Conservative Party. The Conservative candidate was routed in the November 1981 Crosby by-election by Shirley Williams of the SDP.

Within the party, she faced significant criticism from senior “wets” – party grandees who opposed Thatcher’s monetarist reforms. Conservative party chairman Lord Thorneycroft’s comment about “rising damp” in February 1981 was interpreted as disillusion with Thatcher’s economic policies. On 14 September 1981, the prime minister conducted a wide-ranging cabinet reshuffle, dismissing such “wets” and promoting loyalists (‘dries’), those who shared her economic convictions, in their place. Thorneycroft was replaced by arch-Thatcherite Cecil Parkinson.

Thatcher, having already declared that she was “not for turning”, reaffirmed her refusal to change course in a new year message for 1982.

She declared: “January is the time-honoured month for New Year resolutions, and the greatest of all resolutions this January is resolution itself – determination, born of the conviction that the course we are following is the right one, that it is beginning to show results, and that we are winning our way through the most severe recession for 50 years.”

Thatcher argued that the “worst mistake of all… would be to relax our efforts now, at the very moment when we have the prospect of bringing about lasting recovery for Britain.”

The message served as a trenchant statement of her monetarist principles. Referring to the “twin evils of inflation and unemployment”, Thatcher said: “They are not alternatives.”

She added: “It is not a question of choosing to defeat inflation or unemployment, as our opponents would have us believe: it is a question of defeating inflation, and thereby defeating unemployment.”

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On 26 January, the Standard carried the news: ABOVE THREE MILLION.

The new unemployment figures represented an 11.7% jobless rate, up from 11.5% in December – more than double the level seen when Thatcher took office in May 1979. While inflation had fallen from 20% to 12%, manufacturing output had collapsed by 16%.

The House of Commons session on the afternoon of 26 January was highly charged. Thatcher, in attendance for prime minister’s questions, was greeted with repeated shouts of “resign”.

Labour MP Dennis Skinner was among those who pushed the boundaries of parliamentary decorum.

Skinner said: “Now that the official figure for unemployment has exceeded 3 million, is the prime minister proud of the fact that she has brought so much despair to so many families in the United Kingdom?”

He accused Thatcher of creating “more havoc in the British economy than the German High Command in the whole of the last war”.

He added: “Is it not time for the Westminster ripper to join the unemployment trail, pack her bags and go?”

Thatcher said that the government “deplore the tragic fact that unemployment has reached 3 million and so many people who want to work find themselves without a job”.

She insisted there were “encouraging signs” the economy was improving.

The prime minister said Skinner’s reference to the German High Command was “utterly distasteful, particularly for those who suffered or lost relatives in the last war.”

Michael Foot, the Labour leader of the opposition, asked if Thatcher understood “that, with her unemployment figures, 32 people are chasing every vacancy?”

Thatcher responded: “The only real answer to the right honourable gentleman is one that he will not accept, and it is that the consumer decides whether jobs go.”

Clip.

The following day, 27 January, the House of Commons considered a motion tabled by Tebbit, the employment secretary.

Tebbit said that commons stood on “common ground in our attitude to and in our feelings about the plight of [unemployed] individuals”; nor, he added, could there be any “disagreement that the 3 million unemployed in this country represent a tragic waste of our human resources”.

The employment secretary pointed to a “world recession” brought about “by the succession of oil price rises”.

He referred to the causes of a “British disease”, namely: “overmanning, restrictive practices, outdated production methods, poor industrial relations, weak management and pay rising far faster than output – the familiar litany of shortcomings that we know so well.”

Tebbit declared: “There are those who still believe that we could have fudged our way through this recession, as we have with others, and let the British disease run its course until the sick man of Europe became the pauper of Europe.

“For the Conservative government that is not an option.”

Eric Varley, the shadow employment secretary, accused Tebbit of delivering a “thoroughly nasty speech”.

He said: “When it exuded sympathy, it was at best unconvincing and at worst positively repulsive. It was full of the lame excuses that we have come to expect from the Conservative Party.”

Varley spoke of a “Thatcher blight” that has “hit metal manufacturing and textiles, engineering and footwear, distribution, both wholesale and retail, local government and the building industry.”

He added: “Nobody has escaped. Companies have fallen like ninepins.”

Shirley Williams, the new SDP MP, dismissed the government’s monetarism. She accused Thatcher of applying an abstract economic doctrine “to a complex, highly organised society of imperfect competition, assuming that it would operate as it operates in the economics textbooks.”

In a separate debate on 28 January, brought by the Labour Party, chancellor Geoffrey Howe said that unemployment was the “tragic symptom” of long-term “deep-seated economic problems”.

He stated: “Inflation, low competitiveness and low productivity are the real enemy, whose defeat is the key to continuing increases in prosperity.”

Labour MP Tony Benn accused the government of using the “dole queue and the statute book to prevent organised workers even from sustaining their present standard of living.”

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Unemployment would remain at 3 million until early 1987.

Thatcher’s political stock, however, surged following the Falklands War (1982). Britain’s decisive victory forged Thatcher’s reputation as the ‘Iron Lady’, and proved a significant factor in the Conservative Party’s landslide victory at the 1983 general election. Foot’s Labour Party suffered a historic defeat.

Inflation fell to 4.6% by 1983.

In his 1984 Mais lecture, the then chancellor, Nigel Lawson, explained: “It is the conquest of inflation, and not the pursuit of growth and employment, which is or should be the objective of macroeconomic policy.

“And it is the creation of conditions conducive to growth and employment, and not the suppression of price rises, which is or should be the objective of microeconomic policy.”

Thatcher’s monetarist economic policy remained a point of some contention, however. Former prime minister Harold Macmillan lamented the government’s economic programme in his maiden speech to the House of Lords as the Earl of Stockton. Some 60 years after his first appearance in the commons, Macmillan recalled the job of juggling four or five economic balls at once, including the preservation of “full employment.” He described the maintenance of full employment as the “second purpose” of good economic management.

Supermac, aged 90, stated: “The second purpose one might say was full employment. We somehow had that. In fact at one time we had what was called over-full employment.

“To use the jargon of the day, the economy had become overheated and we even had to put up the bank rate to try to stop it; not to spur it on, but to stop it. I think it went up to some appalling figure: it must have been about 6%.

“The average rate was 4.5% throughout those years.”