Reduce Inflation.

Question 1

what had happened to retail prices between 1973 and 1979

Answer 1

they had doubled

Question 2

what did inflation cause

Answer 2

eroded middle class savings, caused strikes, made industry exports overpriced

Question 3

how did Howe reduce the money in circulation, and when did this help to reduce inflation by

Answer 3

cutting welfare payments including housing- ‘monetarism’, and by 1983 this helped to reduce inflation

Question 4

What did government expenditure rise by from 1979 and 1990?

Answer 4

13%

Question 5

What did Howe do in 1980 in terms of direct tax?

Answer 5

reduced direct tax from 83% to 60% for the highest earners

Question 6

what happened to the rate at which prices rose from 1979-1990?

Answer 6

decreased from 18% in 1980, to 4.5% by 1983
and never rose about 9% up to 1989

Question 7

by 1982, what had happened to Britain’s growth rate and British industry?

Answer 7

began to show signs of recovery- although weaker businesses collapsed, strong ones thrived
British industry became more competitive

Question 8

What did Chancellor Howe do to make him the ‘most unpopular in history’?

Answer 8

cut government expenditure in 1980 and 1981 budgets
reduced government borrowing
increased indirect taxes

Question 9

What did Howe do in 1979 to tax and how did it impact, and what happened to VAT?

Answer 9

shifter taxation from direct to indirect taxation, but the VAT increase (from 8% to 15%) pushed up prices of goods which initially worsened inflation.
Indirect taxes impact what people buy rather than what they earn affecting lowest incomes.

Question 10

how much did manufacturing output fall by, and what happened to firms?

Answer 10

14%, and many firms went bankrupt as government refused to help

Question 11

what happened to unemployment and what did this lead to?
what happened to the number of people under the poverty line?

Answer 11

more than doubled between 1979 and 1983 to over 3 million, which contributed to causing riots in Brixton in April 1981, and Liverpool in July 1981-places of high unemployment.
Between 1979-85 the number of people below the poverty line increased by 55% to 17% of the population.

Question 12

what did happen to inflation by June 1989?
what did Lawson do in 1989 to try to control inflation, and what did it reach?

Answer 12

it crept up to 8.3% by June 1989.
Lawson in 1989 tried to control inflation by raising interest rates, and in October 1989 these had reached 15%

Question 13

what was the counter argument to the idea that Howe’s deflationary policies caused the upturn in the economy?

Answer 13

the increase in North Sea oil production turned Britain into a net exporter of oil by 1980.