Thatcher part 1: economic policies Flashcards
What is monetarism?
Belief that inflation in the economy is caused by the amount of money that there is in the economy
What did Thatcher think about the amount of money in the economy in 1979?
There was to much
What was Thatcher’s theory on tackling monetarism?
- Cut government spending
- Raising interest rates
Where had Thatchers theory of monetarism been seen before?
Tested once in Chile which during 1970s Chile was a military dictatorship
When did Thatcher introduce monetarism?
In her first term
What was a success of monetarism?
Inflation reduced to single figures by 1982, never rose above 9% for the rest of the 80s
What happened to budgets in 1980 and 1981?
They were slashed
How did the people react to the 1980/81 budget cuts?
There were riots in several cities (incl. Brixton in London)
What happened to manufacturing in 1980-81?
Fell 14%
What happened to inflation in 1980?
Rose to 22% due to soaring pay demands
How many people were unemployed in 1982?
3 million
What was an effect of unemployment?
Unemployment benefits forced up government spending
What happened to monetarism by 1983?
By 1983 monetarism was phased out in favour of more successful supply-side policies (tax cuts + deregulation)
What happened overall to inflation from 1979-90?
1979 inflation 10.3% - 1990 inflation 10.9% - no change
What was Thatchers opinion on privatisation?
Thatcher wanted more privatisation
Why did Thatcher want more privatisation?
She thought a big state made people lazy and non incentivised to achieve for themselves
What happened to British Telecom in 1984?
It was sold
Which British companies were sold before 1983?
- British Aerospace
- British Sugar
- British Petroleum
What did Thatcher specifically aim to cut to help privatisation?
Aimed to cut government expenditure, reinvigorate the economy and incentivize workers
Why did Thatcher believe in popular capitalism?
She believed everyone in society should own property and shares in companies
What happened to British gas in 1986?
British Gas sold
How much did British gas raise in 1986 when sold?
£5.4 billion
What were people encouraged to do when British gas sold?
People were encouraged to buy shares with the advertising campaign, ‘If you see Sid, tell him’
Why were shares sold quickly?
To ensure a quick, wide take up
What happened to British rail in 1994-97?
Became privatised, part of her privatisation legacy
How much money was raised due to privatisation?
£19 million, able to pay for tax cuts
What happened to the amount of shareholders?
Number of shareholders went front 3 million to 11 million between 1979-1990
What happened as a result of the privatisation of the 10 state-owned regional water authorities in 1989?
The number of customers at risk of low water pressure has fallen by 99%
What happened as a result of BT becoming privatised?
Better customer service - before customers waited 6 months for the installation of a BT line, today BT lines installed within 15 minutes
What % of unskilled male workers owned shares?
Only 9%
What was the distribution of shares like?
It was uneven
By 1990 what % of shareholders were owned by individuals?
20%
What does a lack in individual shareholders suggest?
There was a failure of popular captlism
What effect did privatisation have on prices?
Privatisation led prices to increase faster than inflation (gas)
What was the effect on jobs due to privatisation?
Less jobs
How many jobs were lost in the coal industry due to privatisation?
200,000
What did Harold Macmillan describe the privatisation as?
Harold Macmillan compared it to ‘selling off the family silver’ - seen against traditions of conservative
Did privatisation improve British rail?
Service did not improve while spending doubled since 1994
What does deregulation mean?
The removal of rules and regulation
Why did Thatcher adopt deregulation?
Thatcher hoped this would encourage innovation and competitiveness
When was the removal of exchange controls?
1979
What did the removal of exchange controls do?
Ended restriction on how many pounds could be converted and spend abroad
When was the ‘Big Bang’?
1986
What did the ‘Big Bang’ do ?
Relaxed rules of the ownership and trading operations of banks
What effect did the ‘Big Bang’ have on London?
City of London grew rapidly, became one of the major financial centres in the world
What effect did the removal of exchange controls have on oversea investment?
Fuelled greater overseas investment (with profits returned to Britain)
What was the ‘Lawson’ boom?
Economic growth reached 4-5% a year in the late 80s.
What effect did the removal of exchange controls have on consumer goods?
Increases spending on consumer gods, drained Britain
What negative effect did the ‘Big Bang’ have?
Riskier financial schemes - individuals made huge sums of money, in turn contributed to 2008 financial crisis
What did British people start to do becasue of deregration?
Borrow more money
What effect did British people borrowing money have?
Debt
How much did Private household debt increase by?
From £16 billion in 1980 to £47 billion in 1989
How much did Mortgage debt increase by?
Rose from £43 billion to £235 billion
What was Britain’s personal debt by 2003?
£1.3 trillion
What was Thatchers opinion on taxation?
Thatcher did not believe that taxation should be used to take money from the rich to subsidise the poor
What did Thatcher think socialism led to?
She thought this led to a lack of incentive to work hard and bred dependence at the bottom of the social scale
What was Thatcher’s aim with taxation?
Aimed to promote more investment, growth and therefore government income through tax cuts
What happened in the 1980 budget?
Top rate of income tax cut from 83% to 60%
What happened in the 1988 budget?
- Basic rate of income tax from 29% to 25%,
- Higher rate of income tax was cut to 40%
What is the 1988 budget referred to?
The giveaway budget
What were taxation cuts subsidised by?
The discovery of North sea oil
What happened to the average tax bill?
Rose by 6% between 1979 and 1990 due to increase in indirect taxation
What happened to 1979 VAT?
Increased from 8% to 15%
What happened to tax avoidance schemes?
Decline in tax avoidance schemes - wealthiest 5% paid as much tax in 1988 at the 40% rate as they did in 1978 at the 83% rate
Which boom did the tax cuts contribute to?
‘Lawson’ boom
Which tax brought down Thatcher?
Poll tax
What did an increase in regressive taxes do?
Regressive taxes like VAT and National Insurance Payments placed a higher burden on the poor - increasing wealth inequality
Overall how did Thatcher’s economic policies help Britain?
Reversed Britain’s relative economic decline
What impact did Thatcher’s policies have long term?
Thatcher’s policies did little to change Britain’s long-term economic performance
What did Thatcher’s econmic policies do to British industry?
Weakened British industry
What happened to the balance of wealth in Britian?
She unbalanced Britain’s economy and created massive inequality of wealth
What was Thatcher’s first priority when she came to leadership?
The economy
What did Thatcher set out to do with the economy? (4)
- Reduce budget deficit
- Reduce power of trade unions
- Reduce inflation
- Increase effeicency of economy
How many people were unemployed at the start of her economic policies?
3.6 million
What helped Thatcher get re-elected in 1983?
Success of Falklands war
What did Thatcher do during her 2nd term?
- Had confidence to expand privatisation of state owned assets
- Began to centralise more power in Whitehall at the expense of local authorities
What problems did Thatcher face in her 2nd term?
- Miner’s strike
- IRA
- Soviet Union
What did some people see Thatcher as?
Churchill-like patriot
What did Thatcher want to do with home and share ownership?
Encourage home ownership and share ownership
What did Thatcher want to do with major manufacturing industries?
Wanted to end state subsidies
Why did Thatcher pursue the supply side policies?
To increase efficiency and productivity
What were Trade Union strikes like during the 1970s?
At an all time high
What did they think were key factors in holding back industry?
Poor industrial relations and strikes
What helped reduce the power of Trade Unions?
A series of Employment Acts
How did the 1982 act affect Trade Unions?
Unions could be sued for illegal strike action
What did the 1980 act affect strikes?
Ended ‘closed shop’ and sympathy strikes
What did the 1984 act mean Trade Unions had to do?
Strikes had to be approved by a majority of union members in a secret ballot
What did Thatcher do to deal with coal strikes?
Build up coal reserves
What was the NUM strike?
Lasted 1984-1985
What did Thatcher brand strikers as?
‘The enemy within’
What was the NUM?
National Union of Miners
What problems did the NUM strike face?
- Strike began after winter, UK needed less energy.
- Scargill did not ballot members about strike action
How did the people react to the NUM strike?
His provocative methods angered the public - he held 79% disapproval rating during the strike
What happened to Trade Union membership during Thatcher’s time?
Fell from 13.5 million in 1979 to under 10 million in 1990
What happened to relationship between Trade Unions and the government after the NUM strike?
Unions became far more willing to work with government
What happened to the number of working days?
Fell from 10.5 million in 1980-84 to 0.8 million in 1990-1994
What happened to Government subsidies after the NUM strike?
Subsides for failing industries was removed?
What happened to crime rate during the 1980s?
It doubled
What happened to the number of of miners?
Fell form 200,000 to 10,000 between 1974-1991
What happened to communities within industry areas?
- Mass unemployment
- High crime rates
- Emotional suffering (deverstation)
