Impact of Thatcherism: Economy

Question 1

How was inflation affected?

Answer 1

• prioritised lowering it above employment
• 1979 rate of interest raised to 17%, rate-capping placed on local gov finances + VAT increased from 8-15% which all led to inflation falling eg 2.8% 1986
• surges of inflation eg May 1980 22%
• abandonment of monetarism from 1985 led to rise to 10.9% by 1990

Question 2

What was Thatcher’s policy on employment? What was the result?

Answer 2

• monetarism involved a “natural rate of unemployment”
• permanent closure of manufacturing led to over 3 mill unemployed by 1983 (13.5% of workforce) until 1987
• liverpool unemployment rate = 25%
• youth employment schemes (YOP + YTS) attempted to offset unemployment
• employer national insurance rates cut for low paid jobs to encourage firms to employ workers

Question 3

What was Thatcher’s policy for privatisation? What was the result?

Answer 3

• large programme involving 16 major areas eg 1979 petroleum, 1984 telecommunications, 1986 gas and 1990 electricity
• driven by anti-socialist ideology
• individual shareholders 3-9 mill from 1979-1990
• ST increase in gov revenue but LT loss as process involved “selling off the family silver” (eg British gas)
• job cuts through “rationalisation”
• security of employment and pension provision fell

Question 4

What was the policy of deregulation? What was the result?

Answer 4

• removal of “red tape” and measure to encourage start up of new companies in private sector
• Loan Guarantee Scheme made it easier for businesses to borrow
• Enterprise Allowance Scheme provided £40 a week for a year for new businesses
• financial deregulation of BofE led to “big bang” in Oct 1986
• computer screen trading on stock exchange and competition including foreign banks as stockbrokers led to London as key international financial hub

Question 5

What was growth like?

Answer 5

• 2.5% overall growth in 80s and 70s
• high interest rates led to decline in export markets and recession in 1980s
• manufacturing output fell by 15% from 1979-1981, steel production by 30% and output in West Midlands by 25%
• growth better mid 1980s after ‘Lawson boom’ in which consumer spending rose
• attempts to control inflation led to second recession and lower growth

Question 6

What was Thatcher’s policy of economic realignment?

Answer 6

• deliberate of not following “regional policy” economically eg no general policy of supporting regions where employment and production falling.
• instead policy was allow markets to “re-align” economy from state
• chancellor Geoffrey Howe said cities can “manage decline”

Question 7

What did the policy of economic realignment lead to?

Answer 7

• serious riots in 1981 in areas like West Midlands, South Wales and industrial north
• 1979-1990 manufacturing underwent 2.1 mill drop in employment
• service industry gained in employment and women had a bigger role
• regeneration of Canary Wharf and Albert Dock brought new growth to areas
• U-turn from monetarism to supply side economics