The Margaret in question is of course Margaret Thatcher, the British Prime Minister during the 1980s. Absurdly enough, due to his comments wishing for the death of Thatcher, Morrissey had his house searched by the police, as he later documented in the song He Knows I'd Love To See Him.
This song sees the introduction of one of Morrissey's favourite gambits, the melodramatic sound effect, with the sudden guillotine sound closing the song and the album.
The title of this song was originally intended to the title of The Smiths' album The Queen Is Dead.

The Queen Is Dead borrows it's title from a section of Hubert Selby Jnr's book Last Exit To Brooklyn.

...Dunno how to tell you, but this is a Morrissey song... it's on Viva Hate. Although the fact that it as originally the title for The Queen Is Dead is accurate.