Thatcher's economic policies Flashcards
What was Thatcher’s economic aim?
- reduce government spending
- reduce inflation
- reduce public deficit
- reduce the size of the ‘state’ (government control)
- reduce power of the trade unions
-deregulate the market
What was the economic situation by 1980?
- Britain plunged into a deep economic recession - inflation above 15% + unemployment was rising, going above 2m - ‘stagflation’ was back
- Monetarist policies applied more intensely - government borrowing went down, grants to councils were cut
Who was behind monetarism?
Keith Joseph
Why was public spending going in wrong direction?
increased number of unemployed people claiming benefits
Who increased VAT and what to?
Howe, VAT from 8% - 12% to a standard 15% because cost of living went up
What was the result of monetarism?
Inflation comes down + policy of tax cutting, Lawson remained loyal too
What did monetarism assume?
That if there was a fall in output or a rise in unemployment, better control of the money supply would cure these overtime
As inflation rose, what was Howe forced to do?
- Raise interest rates again - from 12%-14% in June 1979 to 17% in December = borrowing more expensive - individual buisnesses
What was cutting public spending through ‘rate capping’ and what did it lead to?
- It limited the amount of money the council was allowed to raise in local taxation
- It led to clashes between central government and many Labour controlled councils - fight between left-winger Ken Livingstone - been part of ‘loony left’
Who did the first chancellor, Geoffrey Howe do?
- Reduced standard rate of income tax from 33% to 30%, rate for higher earners from 83% to 60%, tax on unearned incomes from 98% to 75% (this all reduced government income)
What did monetarism aim to do?
- To fix the economy - a central bank should increase or decrease how much money is active in the economy.
