Thatcher's Economic Policy: Stage 2 Flashcards
What did the government deem to be the most important economic factor to get control over?
Inflation
What was interest raised to in order to combat inflation?
17%
What was the downside of increasing interest rates?
It cost more for businesses to borrow money
I) What, other than raising interest, did the government do to combat inflation in 1979?
II) What was the disadvantage of this?
I) Increased the value of the pound
II) It made exporting more expensive, and thus more difficult
What was the overall effect of increased inflation in early 80s?
A decline in output and demand
I) What did inflation rise to by May 1980?
II) Why?
I) 22%
II) a recession led to huge unemployment
What did inflation fall to by 1986?
2.5%
What led to the UK joining the ERM by the late 1980s?
Further recessions
What does ERM stand for?
European Exchange Rate Mechanism
Why was unemployment dealt with less in in Thatcher’s stage 2 economic policy?
Inflation was seen as more important to deal with than unemployment
What was a key criticism of the privatisation of British businesses, and what was the theory behind this?
That the stocks were sold off at a cheaper cost than they should have been to make sure all of them were sold
Was the economic state in the years 1990-1992 positive or negative overall?
Negative
Was the economic state in the years 1992-1997 positive or negative overall?
Positive
Give 3 indicators the economy was in a bad place by the end of 1990?
- Decline in manufacturing output
- High interests
- Rise in unemployment
What was the main effect on homeowners in 1991-early 1992?
They entered negative equity. This was especially a problem for conservative voters
What was a poor economic indicator in early 1992?
Government fell into high public spending and borrowing
Where was particularly in need of public spending in 1992?
The NHS
I) When was black Wednesday?
II) What happened on that day?
I) 16th September 1992
II) Britain left the ERM due to the collapsing value of the pound
What was the major benefit to leaving the ERM?
Britain no longer ha to keep high interest rates
Give 3 positive economic indicators between 1992-1997
- Unemployment slowed
- housing picked up
- Benefits caused by flexible working practices (Thanks to deregulation) were felt
Why did world trade increase between 1992-1997?
America was also coming out of a recession
What were 3 key parts of the economic state of the UK by 1997?
- Unemployment down
- Consumer spending (and car ownership) up
- productivity was up, though not a lot
What was the 1986-1988 “Lawson boom”?
Rapid economic expansion due to Chancellor of the Exchequer Nigel Lawson
I) When did the stock market crash after the “Big Bang”
II) Why?
I) 1987
II) Deregulation
What was the GDP growth in the 1980s
2.2%
What was the goal of the loan guarantee scheme?
To make it easier for businesses to get loans
I) What did the Enterprise Allowance Scheme aim to do?
II) How?
I) Help unemployed people start businesses
II) Give them £40 a week for up to a year
I) What was inflation at by 1990?
II) Was this higher or lower than it had been in 1980?
I) 10.9%
II) Higher
What did did income tax drop to from 83% by 1988?
40%
What had standard tax dropped to by 1988 from 33%?
25%
Why did Thatcher dislike labour councils?
She thought they wasted a lot of money
I)Which council was Thatcher’s main conflict with?
II) Who was in charge of this council?
I) The Greater London Council
II) Ken Livingstone
I) When was rate Capping introduced?
II) What was it?
I) 1985
II) A limit on the amount a council could tax residents
What did Sheffield and Liverpool councils do in protest of Rate Capping?
Refused to set a budget, but backed down due to the threat of bankruptcy
I) When was the Local Government Act passed?
II) What did it do?
I) 1986
II) Abolished the GLC and other Metropolitan local authorities
What was the main argument against the Local Government Act?
Power was too centralised and as such it was less democratic
Did Thatcher ever manage to reduce public spending?
No
I) When does chancellor Nigel Lawson abandon his spending targets?
I) Why was this a blow to his reputation?
I) 1986
II) He was a staunch Thatcherite and so agreed cutting public spending was important
When did Privatisation accelerate?
1984 with the sale of BT
What were interest rates raised to in 1979?
17%
What did Inflation rise to in 1980?
22%
What did inflation fall to in 1986?
2.5%
What did inflation rise to by 1990?
11%
What was the effect of higher interests on businesses
Output and demand fell
In just two years how was I) Manufacturing output II) Production in the west midlands III) Steel production effected?
I) Fell 15%
II) Fell 25%
III) Fell 30%
How did Thatcher encourage the employment of younger workers?
The Youth Employment Scheme
How high was unemployment until 1987?
3 Million
What was a major external change that effected British industry?
Foreign competition and increasing globalisation
What did Geoffrey Howe argue should be the fate of cities like Liverpool?
They should be subject to “managed decline”
What is a result of the Economic alignment?
1981 riots in Brixton, Handsworth, Chapeltown and Toxteth
What did the Scarman Report find to be the cause of the riots
Race, poverty and Unemployment
Who led the regeneration of the deprived inner cities?
Michael Heseltine
When were there further riots despite the repeal of the sus laws?
1985
What becomes the second biggest financial district in the country thanks to Heseltine?
Canary Warf
