80s - Thatcher's Economics

Question 1

What is monetarism?

Answer 1

An economic theory arguing that the best way to control inflation was by restraint of government spending/borrowing and strict curbs on money supply

Question 2

Where was unemployment and inflation at in 1980?

Answer 2

Inflation over 15%, and over 2 million unemployed.

Question 3

What saved Britain from a severe BOP crisis in 1980?

Answer 3

North Sea oil and gas.

Question 4

Contrary to popular expectation, what did the 1981 budget include?

Answer 4

Further monetarist policies - a decrease in government borrowing, local council grants cut and benefits frozen. Known as the most unpopular budget in history.

Question 5

What was the tax shift in 1981?

Answer 5

From direct to indirect tax - the top rate of direct tax fell from 83%-40% but VAT increased from 8%-15%.

Question 6

Which 3 goods did tax increase annually on, 1979-1987?

Answer 6

Petrol, cigarettes and alcohol.

Question 7

What were the two sides of the debate over the tax shift in 1981?

Answer 7

Supporters argued this incentivised wealth creation by allowing people to keep what they earnt, and critics argued it hit poor people too hard.

Question 8

What were the political bodies that Thatcher clashed with throughout her tenure, particularly in the early 80s?

Answer 8

The Labour-run councils - Thatcher blamed them for wasting money.

Question 9

Who did Thatcher clash with particularly during this period?

Answer 9

Ken Livingstone - the head of the Greater London Council. Thatcher treated every education or public transport policy as a provocation. In response to this, Thatcher demonised him as the face of the loony left.

Question 10

What was introduced to control Labour council overspending?

Answer 10

Rate capping:
- Limited the amount of money the council were allowed to raise in local tax.

Question 11

Which councils rebelled against rate capping?

Answer 11

Sheffield and Liverpool - in 1985 they tried to rebel but backed down due to the threat of bankruptcy.

Question 12

What did the 1986 Local Government Act do?

Answer 12

Abolished metropolitan authority councils set up by Heath in favour of peripheries of Thatcher’s government.

Question 13

What was the 1986 Local Government Act seen as?

Answer 13

A clear victory over the Loony Left, but later served to minimise local accountability.

Question 14

Did Thatcher ever actually manage to cut public spending?

Answer 14

No, because spending on social security increased massively in response to mass unemployment.

Question 15

What was Thatcher’s U-turn in 1986/7?

Answer 15

Getting rid of monetarism in 1987 after Lawson abandoned spending targets in 1986.

Question 16

What was the main emphasis in the 1987 budget?

Answer 16

There was greater emphasis on the supply-side over the demand-side.

Question 17

What were the 4 significant privatised companies?

Answer 17

BP in 1979, BA in 1980, BT in 1984 and BG in 1986.

Question 18

What accompanied the sale of British Gas in 1986?

Answer 18

A campaign intended to maximise purchase of shares by ordinary people.

Question 19

What was the increase in individuals owning stocks or shared 1979-1990?

Answer 19

3m-9m, 3x.

Question 20

Why did Thatcher believe that the private sector was more efficient at running goods and services?

Answer 20

Business competition and profit-driven management encourage innovation.
Outsourcing by the State became more common, so Competition grew.

Question 21

What was the benefit of privatisation to the government?

Answer 21

They no longer had to commit money to the companies and profited off of the sale.

Question 22

What was the main issue with privatisation?

Answer 22

The companies, interested solely in profits, either cut workers or mechanised factories, leading to higher unemployment rates.

Question 23

How many industries/companies were privatised by 1990?

Answer 23

16.

Question 24

What was deregulation?

Answer 24

The removing of red tape around banking, trying to create a free market by making it easier for businesses to trade and grow, and encouraging entrepreneurship and wealth creation.

Question 25

What was the Loan Guarantee Scheme?

Answer 25

It made it easier for small businesses to borrow

Question 26

What was the Enterprise Allowance Scheme?

Answer 26

It gave the unemployed £40 a week to begin their own business.

Question 27

What was the biggest impact of deregulation?

Answer 27

It opened up the City of London and financial markets from tight controls of the Bank of England. October 1986 was the ‘Big Bang’, which was the start of deregulation and allowed for free economic competition.

Question 28

Which entities could operate as stockbrokers now, and what was the impact of this?

Answer 28

Foreign banks, and this restored London as a world financial centre, with the Yuppies becoming iconic of the 80s and rivalling Wall Street.

Question 29

What were the Yuppies?

Answer 29

Young Urban Professionals.

Question 30

As the economy grew, what remained stagnant?

Answer 30

Productivity - the GDP growth of 2.2% was hardly any larger than it was in the 1970s. This is unreliable, however, as the significant growth in the late 80s is averaged out by the early 80s.

Question 31

What were the issues of inflation, unemployment and economic realignment?

Answer 31

Increased value of the £ made export harder
High interest rates led to a decline in output and demand
The economy went into recession with businesses declaring bankruptcy - high unemployment.

Question 32

What was used to control inflation in 1979 and what was the inflation rate?

Answer 32

Higher interest rates - 17% in 1979 and the inflation rate was 22%!!!

Question 33

What was the lowest point of inflation during Thatcher’s premiership?

Answer 33

1986 - 2.5%

Question 34

How did the low inflation in 1986 influence the 1987 election?

Answer 34

Voters ‘voted with their wallets’.

Question 35

What was unemployment control seen as secondary to?

Answer 35

Inflation control.

Question 36

What are the statistics on manufacturing decline as a result of monetarism?

Answer 36

The midlands were hit the largest, with a 25% decrease in production.
Manufacturing country-wide was down 15%.
Steel production cut by 30%.

Question 37

What was unemployment in 1983?

Answer 37

Over 3 million - 13.5% of the workforce.

Question 38

What was the Youth Employment Scheme?

Answer 38

Businesses got tax write-offs for hiring youths.

Question 39

How did deindustrialisation affect men?

Answer 39

More men were put out of jobs in the primary sector due to mechanisation, so women, mostly being in the service industry, became the main breadwinners.

Question 40

In what areas was economic realignment most prevalent?

Answer 40

Inner-city urban areas - young people moved away and there were increasing problems of urban decay, ill health, depression, drink and drugs.

Question 41

What caused the 1981 riots in London, Birmingham and Liverpool?

Answer 41

The Scarman report identified race and poverty as the prevailing factors - riots happened in economically deprived and socially isolated areas. This was exacerbated by the 1981 sus law, which arrested 1000 people in the first 6 months.

Question 42

What did economic realignment lead to in some of the deprived areas?

Answer 42

Heseltine spearheaded development projects in the London and Liverpool docklands - Canary Wharf going on to become the UKs second most important financial district.