Thachers Economic Policies Flashcards
What was monetarism and why did thatcher support it?
Restrain government spending and borrowing.
Controlling the manly supply by making it more strict.
[in order to reduce inflation and increase economic growth ]
-also she believed individuals spent their money better than their governments did (so cut public spending and increase taxes on goods and services
How far did monetarist polices in thatcher government create economic growth?
• Taxation changes:
Budgets:
-(1979): VAT rose from 8% to 15% , inflation rose above 15%, unemployment rise above 2 million [stagflation]/reccesion
BALANCE: North Sea oil and gas flow prevented series run on pound
-(1981):
Reduced gov borrowing, local council grants cut, benefits frozen
‘Biggest fiscal squeeze of peacetime’
-Affect of all budgets: [ income tax fell from 83% to 40% and standard rate fell from 33% to 25%] [taxes on petrol cigarettes and alcohol rose in every budget]
= poeple kept more earnings so more wealth created, but indirect taxes = burden financially for poorer poeple
[local authority taxes]
-(1985) Rate capping: limited amount of money councils could raise in local taxation = stop labour authorities ‘Trotsky/ looney left’ overspending (waste resources)
BALANCE: impact poor but also caused rebellion (1985 at authorities like Liverpool), but backed down in face of bankruptcy
Abolish metropolitan local authorities (1986): increased gov central power and reduce local gov, IMPACT: weakened ‘looney left’ but damage local authority accountability
OVERAL BALANCE: public spending not cut completely as social security spending increased from high unemployment and deprivation
What policies by Thacker were unmometerist?
There was a Rise in social security spending from high levels of unemployment
What was privatisation?
Selling of publicly owned industries to private sector
What policies had enforced privatisation by the thatcher government?
-(1979) privatisation of British aerospace
-(1984) sale of British telecom
-(1986) sale of British Gas
What was the impact of privatisation?
Increase competition to encourage improvement and innovation
Private companies took on contracts to deliver goods
Increased government revenue
Increased job insecurity for business employees. As some jobs were lost as privatised enterprise cut staff back, less long term job security and reliable pension provision
(1979-1980) rise to 9 million stocks & shares owned by individual
What is deregulation ?
Loosening control of banks and financial markets . Which meant less government interference
What policies were there that enforced deregulation?
-Loan grantee scheme/LGS
-Enterprise allowance scheme/EAS
-(1986 ) October , deregulation of London stock exchange
What was the impact of deregulation policies?
Easier for businesses to trade . Hence more entrepreneurial ship and wealth creation
LGS= easier for small business to borrow money
EAS= give £40 a week for year for unemployed to start business
-Rise in computer screening trade
-free competition
-foreign banks ac as stock brokers
-London became one of the main financial capitals of the world
-introduction of the yuppie: people working in cities with lots of disposable income
How did thatchers attempt to control inflation and what was the impact?
Making high interest rates= economic recession, more expensive for businesses to borrow, increased value of pound, so exports are harder, making business go bankrupt . Increasing unemployment (raised by 17% in 1979)
May (1980) inflation was at 22%
By (1986) it was at 2.5%
By (1990) rose to 10.9%
What was the impact of monetarist policies on unemployment ?
Caused industrial plants to close down. Meaning manufactural output fell by 15% in 2 years and steel production to be cut by 30%
In (1983) unemployment rose over 3 million (which had included 13.5% workforce)
[unemployment not felling bellow 3 million until 1987]
[Employment in Liverpool had only rose to 25% at its highest in the 1980s]
What polices did thatcher government enforce to control unemployment? And impact?
-youth employment scheme: employers received subsidiary to take on young people
-employer national insurance rates reduced for lower paid jobs
How did thatchers policies create economic realignment ?
-labour intrusive industries: dominant in (north, midlands, Scotland and wales) .Those focused on coal mines, shipyard and steel works faced challenge from foreign competition and technological innovation ,
Britains economy was becoming less revolved around manufacturing/ heavy industry and more about services. Which thatcher embraced
Which created , (and sharpened) a north and south divide
What was the impact of economic realignment in the north?
-decay of urban city’s in those areas. Rise in Ill health & depression, rise in alcoholism and drugs
(1981) were riots in Buxton , handswith , Liverpool and Leeds
-more riots in (1985)
What did the Scarment report say the (1981) riots were caused from?
From poverty and race in areas that had suffered highest unemployment & deprivation. As well as the implications of the ‘sus law’ that caused outrage
What positive affects did economic realignment consequently do to some areas?
Created investment and regeneration in some areas
Micheal hesiltine pushed development projects in docklands & Liverpool
(Canary wharf became 2nd most important financial district in the uk)
What is supply side economics and how did thatcher incorporate this into her economic policies?
(1) business deregulation (low taxes) encourages enterprise and entrepreneurialship
(2) flexible labour makes it easier to hire/ fire workers
(3) employees spend on goods and services ( encouraged by low taxes)
(4) business make profits
(5) profits encourage expansion/ further investment into business
(Used in monetarist policies, privatisation, deregulation)
