Major economy Flashcards
What was unemployment in mid-1991 and early 1992?
1991- 1.6 million
1992- 2.6 million
What caused inflation pre-‘92 election?
Election looming had to increase public spending
High unemployment meant more spent on benefits
Subsidies given to transport
Increased NHS spending to borrowed money
All lead to increased inflation
Pre-‘92 negative equity
Having to repay mortgages worth more than the current value of their houses, many houses repossessed
Why was it a shock that Tories won ‘92 election, despite economic situation?
Recession hit middle class Tory voters Shows that despite this, public still didn't trust Labour w/ economy and abolition on Poll Tax (cost £1.5 bil) proved popular policy
What was Black Wednesday?
Few months after election, govt. faced economic crisis and forced to leave Exchange Rate Mechanism
Why did Britain join ERM in first place?
Joined in ‘90 to combat inflation + B £ had to be tied to fixed exchange rate
2.96 German Marks to the £ with very little room for fluctuation
What caused Black Wednesday?
Sept ‘92 £ under pressure and govt. determined not to devalue or leave ERM
But as £ decreased further, Lamont announced live in TV that B were leaving ERM
What were the impacts of Black Wednesday?
Not as bad as initially thought, economy quickly re-established and inflation + unemployment decreased
Tory reputation damaged, Major criticised + Labour shot ahead in polls
Some saw this as ‘beginning of the end’ for Major
What was the economy like after Black Wednesday?
Interest rates no longer kept high to protect £ value so ^ in borrowing, entrepreneurship + investment
Exchange rates decreased helping BofP
US economy coming out of recession- expansion of world trade
Business continued to grow due to Thatcher’s deregulation
What was the economy like by 1997?
Booming, productivity, consumer spending and car ownership all ^
Negative equity disappeared
Ppl reluctant to credit Major for this despite inheriting a weak economy yet leaving when it was booming
