5 Thatcher Flashcards
Thatchers= economic views
-mixture of moral upbringing and the influence of new right thinkers such as Frederick Hayek
-more practical than theoretical
-wanted to smash the restrictive and undemocratic practices of the trade unions in order to:
-promote individualism, overcome inefficiencies of state owned business, promote growth by lifting the tax burden on rich, fostering a greater sense of public participation in the economy through ownership of shares and property
-before this, she had to tackle the evil of inflation
The fight against inflation
-willing to risk high unemployment to tackle inflation
-access to money should be cut, increasing interest rates - manufacturing businesses struggled to survive
-1978, inflation 11%, 1980, 22%
-refused to print money to cover inflation as it published careful savers and rewarded reckless borrowers
-monaterism; governments should prioritise low inflation and should achieve this by controlling that amount of money in circulation
-never fully understood by thatcher or the public
-key problem was that no one was sure how to measure how much money was in circulation - just notes and coins or bank as well?
-by 1983, fans of monetarism such as chancellor Lawson began to give up on the idea of setting targets for money supply
Supply side policies
-introduced to replace monetarism, included cuts to income tax, welfare payments and a wide range of deregulation
-went against the demand side post war consensus
-the1980 and 1981 budgets slashed government spending with especially unpopular cuts to housing and social security
-cuts had negative impacts on people living in inner cities areas, riots in Leeds, Birmingham and Liverpool -in 1980 and 1981, manufacturing production fell by 14%
-by1982, unemployment rise to over 3 million, highest since the depression in 1930
-scale of unemployment benefits forced up government spending
-despite this, inflation was reduced to single numbers and never rose over 9% for the rest of the 1980s
Privatisation under thatcher
-to solve stagnation: removal of government monopolies, and the contracting out of services
-cut government expenditure on loss making industries and cut the number of civil servants by replacing them with private employees
-privatisation promotes competition and innovation
-revenue form sale of assets would also a reduction in tax
-sale of assets would help to create a wider ownership of shares, ordinary people would have a greater incentive t work harder, knowing that they owned a slice of the company for which they worked
Long term successes of privatisation?
-sale of British telecom in 1984 and British has in 1986 that saw the launch of what thatcher came to call popular capitalism
-shares were sold cheaply to ensure quick sale and wide take up. 1979-1990,share owners increased from 3 mill to 11 million
-rapid sale of most shares for a quick profit to large pension or investment firms: individuals owned 38% of shares in 1975 but only 20% in 1990
-most successful part of popular capitalism was the sale of council houses, over a million sold 1979-1988
-sum of £19 billion was raised by the sale of assets, which was used to pay for tax cuts
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Privatisation AFTET thatcher
-privatisation of British rail between 1994 and 1997, led to a highly confused situation where the government continued to subsidise private firms that operate trains
-government spending on trains has doubled since 1994, while most commuters would agree that the service had not improved
-launch of the private finance initiative, john major, led to an increase in privatisation after thatchers departure in 1990
-public private partnerships were designed to inject private funding into traditionally state run concerns such as hospitals and schools
-t became cleat that by 1997, the future generation of taxpayers would have to pay a huge amount of money to the private firms who put in the initial investment
Deregulation
-keen to re,I’ve the rules and regulations that she believed stifled innovation and competitiveness
-removal of exchange controls in 1979, this fuelled greater overseas investment which returned profit to Britain, but also led to a huge increase in consumer spending on foreign goods, drained wealth from Britain
-“big bang” of October 1986, replaced rules on ownership and trading operation of banks, resulting in growth of financial services
-the city of London grew rapidly to become one of the major financial centres of the world - offered riskier financial products
-in the longer term, deregulation enabled unscrupulous individuals to make a lot of money in an unsustainable and illegal fashion
Big bang modernised bank and stock market
-unregulated finance led to the rise in private household debt
-easier access to mortgage, meant mortgage debt rose from 43 billion to 235 billion
-by 2003, personal debt including mortgages stood at 1.3t trillion
Credit cards
-first credit card was launched in June 1966, by 1980, there were 10 million credit cards in britain, which had risen to 27 million by 1990
New legislation relaxing the regulation in the London stock exchange
-scrapped fixed commission rates
-abolished rules barring foreign companies from buying city firms , leading to 65% of city’s workforce having non British employers
Taxation and incentives
-known not to believe that taxation should be used to take money form the rich to subside the poor
-this led to a lack of incentive for the poor and also bred dependence at the bottom of the social scale
-her hope was that tax cuts for the wealthy would promote more investment, growth and therefore more government income, allowing her to cut taxes further
-chancellor Nigel Lawson pointed out that due to a decline in avoidances chemestax , the wealthiest 5% of individuals paid as much tax in 1988 as they had done in 1978, when they were taxed at 83%
-the average tax bill rose 6% 1979-1990 due to value added tax and national insurance payments
-1979, VAT increased from 8 to 15%
-both VAT and national insurance are regressive and take a higher proportion of income from the poor than the rich
Trade union legislation
-keen to smash the power of the trade unions
-in her view, trade unions bullied individual workers into joining them, forced them into strike action they often had no wish to take part in and acted irresponsibly with no regard for democratically elected government
-1980 education act meant workers did not have to join a union when they joined a particular firm, unions could only organise strikes against their direct employers and were not allowed to strike in sympathy
-the 1982 education act meant that unions could be sued for illegal strike action
-the 1984 trade union act meant that a strike had to be approved by a majority of union ,e,bears in a secret ballot before it was illegal
-in 1984, thatcher also built up a coal reserves that would enable the government to resist a miners strike without resorting to a three day week as heath had done
The miners strike 1984
-thatchers enemy Arthur scargill madedeveral tactical errors that undermined the miners strike
-the strike emerged from winter and UK demanded less energy
-scargill did not ballot NUM members about striking, choosing instead to launch the strike with flying pickers which causes miners in Nottinghamshire to leave the NUM and set up their own union, which voted to keep the mines open
-scargill lost public sympathy due to what were seen as provocative methods
-strike was defeated 1985
Defeat of the NUM
-unions became more willing to work with the government
-total number of trade union members fell from 13.5 milllion in 1979 to under 20 million in 1990
-coal industry had become increasingly uncompetitive since the war and pit closures had led to large scale redundancies since the 1960s
Legislation after miners
-removal of government subsidies for struggling older industries saw a decline in the percentage of the labour force employed in manual labour
-the nu,her of miners fell from 200,000 to 10,000 1974-1991
-shipbuilding in Sunderland, steel in Sheffield struggled
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