5 The Effect of Thatcher's Economic Policies Flashcards
What were Thatcher’s beliefs?
- Radically different beliefs to mainstream conservatives
- Conviction politician - believed politics should be rooted in the beliefs of leaders
- Rejected consensus politics - viewed them as morally wrong
- Believed main problems of Tory party were EH’s willingness to compromise in 1970s
What were Thatcher’s economic beliefs?
- Against dependency, high levels of tax, debt and powerful unions
- Thought everyone should work hard to earn a living, against state dependency
- Believed that hard work should be rewarded - low income tax
- Individual entreprise = economic growth, privatisation
What was the rule of law that Thatcher believed in?
- Believed GB law central to politics - democratic process that defended individual rights
- Thought reform should come through elections not radical forms of protest as thought they were undemocratic
How was Thatcher a nationalist?
- Thought GB had civilised values of individual rights, hard work and democracy
- Suspicious of black rights groups that accused the police of racism or feminist groups who campaigned for women’s liberation
- Opposed interference of GB affairs from other countries
What did monetarism involve in 1980-1982 and what happened?
- Controlling inflation through tax rises and spending cuts
- Thought it gave an incentive to work hard
- Increasing VAT hit the poor harder than the rich
- Cutting income tax benefited the rich more than the poor
How did Thatcher raise VAT between 1980-1982?
Raised VAT from 8% to 15%
How did Thatcher cut the standard and top rate of income tax between 1980-1982?
Cut standard rate of income tax from 33% to 30%
Cut top rate of income tax from 83% to 60%
What spending cuts did MT make?
Public spending dropped from £11 billion in 1980 to £9 billion in 1981. Designed to rebalance the economy so the gov did less and private sector could do more
What was controversial about the 1981 budget?
Raised income tax in the middle of 1981 recession. Taxes introduced on NSO and taxes imposed on the banks as a one off. Tax totalled £4 billion. 364 economists wrote to The Times protesting.
How did cabinet respond to the 1981 budget?
Cabinet rebellion of 1981 rejected a further £5 billion of cuts
Why did Thatcher nationalise industry?
Believed they were inherently inefficient as they did not have to make a profit and didn’t think that gov money should be used to keep dying industries afloat
How did Thatcher allow British Steel to decline?
53,000 workers made redundant in 1979 although further gov payouts for redundancy settlements made - £1 billion, more than had been spent in last years of 1970s
How successful was British Steel by 1981?
Still making a loss of £450 million
What is an example of the gov only willing to invest money into industry that made job losses?
£990 million of gov money invested into loss making car manufacturer in British Leyland. GB Leyland made 30,000 workers redundant in 1981.
Why did Thatcher shift to supply side economic in 1982-1987?
As not possible to measure money supply so monetarism abandoned. Inflation in single figures so she believed her policies had worked. Free market policy now embraced.
What tax cuts did Thatcher make in 1987?
Cut from 30% to 27%
When did Thatcher want nationalised industry to break even by?
Said nationalised industry should break even by 1982 - failed to happen even with large scale job losses, revised to 1985
How did Thatcher help industry break even?
- Grants to struggling industries fell from £3.8 billion in 1984 to £335 million in 1987.
- GB steel shed 95,000 jobs between 1979 and 1983
- National Coal Board closed 75 pits and 64,000 coal mines in 1984
What evidence is there that nationalised industry was ineffective?
1979 nationalised companies employed 25% of workers but only produced 10% of GDP. British Airways made a loss of £544 million between 1981 and 1982
How did Thatcher promote popular capitalism with the British Gas sale?
‘Tell Sid’ campaign stressed how easy it was to buy shares. £40 million campaign was big success = 4.6 million people bought shares
What impact did Thatcher’s popular capitalism have?
1979 only 7% owned shares whereas in 1990 it was 25%
What privatisations took place between 1982-1986?
- British Aerospace and Cable and Wireless
- Jaguar
- British Gas
- Britoil
- British Telecom - 1984 bought for £3.7 billion
In what state was the economy in 1987 in Thatcher’s third term?
Economy grew on average at 4% per year from 1985 to 1988 exceeded growth of anything since 1960. Inflation low and unemployment declining.
What characterised the economy in the 1980s?
- Millions of people bought their own council houses
- Privatisations popular
- Loadsamoney culture - London associated with YUPPIE culture
- Stock market was fashionable
- Nigel Lawson attempted to keep boom going
