4.14 Thatcher's economic policies and their impact Flashcards
What were the beliefs of monetarism?
Controlling the money supply would reduce inflation and lead to economic growth
By 1980, what was the state of the economy?
plunged into a serious recession
- inflation - above 15%
- sharply rising unemployment - above 2 million (‘stagflation’)
What did the 1981 budget do?
Applied even further monetarist policies
- government borrowing down
- grants to local councils cut
- benefits were frozen
What did Howe call the 1981 budget?
‘the most unpopular budget in history’
What had the top rate of income tax fallen to by 1988?
from 83% to 40%
What had the standard rate of income tax fallen to by 1988?
from 33% to 25%
What was VAT raised to in 1979?
from 8% to 15%
How did taxes on petrol, cigarettes, and alcohol increase?
went up in almost every single budget between 1979 and 1987
Argument in support of reducing indirect taxation
Would incentivise wealth creation by allowing people to keep more of what they earned
Argument in opposition to reducing indirect taxation
transferring the burden onto indirect taxation system was less progressive + hit poorer people harder
what was the ‘loony left’?
the name given by the right-wing press to left-wing councils that promoted liberal + politically correct policies
What did Conservatives do in order to control the overspending of Labour local authorities?
introduced rate capping - limited the amount of money the council was allowed to raise in local taxation
How did some councils try to rebel against rate capping? When?
In 1985, a number of authorities, including Sheffield and Liverpool tried to rebel against cap + refused to set budgets - eventually, threatened by bankruptcy, had to back down
What did the Local Government Act do? When?
1986 - abolished the big metropolitan local authorities that had been set up by the Heath government - greatly increased powers of central gov at expense of local government
Positive + Negative of the Local Government Act
+ clear victory against the ‘loony left’
- in the longer term, damaged local accountability
Despite her rhetoric, why did Thatcher never manage to cut public spending in real terms?
partly because spending on social security went up due to high levels of unemployment
When was the experiment with monetarism effectively ended by?
by Thatcher’s second term
What was the final nail in the coffin in the abandonment of monetarism?
Lawson abandoning spending targets in 1986
What is the focus and key ideas of supply-side economics?
Focus: Encouraging production (supply) of goods and services.
Key Idea: If producers (like businesses, entrepreneurs, or workers) are given more resources or incentives, they will produce more, which leads to economic growth.
(Lowering corporate tax rates to help companies reinvest in their business, expand, and hire more workers)
What is the focus and key ideas of demand-side economics?
Focus: Boosting consumer demand (what people want to buy).
Key Idea: If people have more money to spend, they will buy more goods and services, leading to higher production, more jobs, and economic growth.
(Stimulating the economy through government spending on public projects or providing tax cuts to the middle class)
What did Margaret Thatcher focus on supply-side economics look like?
concentrated on market reforms, such as privatisation and deregulation
What was denationalised/privatised in Thatcher’s first term?
BP in 1979
British Aerospace in 1980
when did the drive for privatisation gain real momentum?
with the successful sale of British Telecom in 1984
What became the biggest share offer in history
the sale of British Gas in 1986, with a high-profile advertising campaign seeking to maximise the purchase of shares by ordinary people
Between 1979 and 1990, how did the number of individuals owning stocks and shares increase?
Went up from 3 million (in 1979) to 9 million (in 1990)
