Thatcher's economics policies- inflation

Question 1

what was first policy to tackle inflation

Answer 1

Taxation

Question 1

How did chancellor geoffrey Howe achieve this

Answer 1

• Howe raised VAT from 8-15 % at the same time raising indirect taxes he lowered direct taxation, cutting the standard rate of income tax from 33-30% and the top rate of tax from 83-60%

Question 2

what did thatcher believe about cutting income tax

Answer 2

• creates an incentive for people to work harder because they can keep more of their
• incentives entreprunership, creates wealth and a thriving private sector

Question 3

what was contreversial or consequeces for cutting income tax

Answer 3

• Because everyone pays VAT as its tax on spending , increasing VAT hit the less well of harder than the well off

Question 4

Because everyone pays VAT as its tax on spending , increasing VAT hit the less well of harder than the well off

Answer 4

• it targeted the less well off who spend a higher proportion of their income than the well off
• thefore cutting income tax helped the well off who had higher income than the poor

Question 5

Therfore

Answer 5

-increased the proportion of taxed payed by the less well off whilst reducing taxation for the well off

Question 6

what was the next economic change that thatcher did cuts in….

Answer 6

spending cuts

Question 7

what did thatcher do between 1980-82

Answer 7

-between 1980-82 thatcher made radical spending cuts

Question 8

by how much did public spending drop

Answer 8

• from 11 billion in 1980 to 9,000,000 pounds in 1981

Question 9

what was the purpose of public spending cuts

Answer 9

• public spending cuts were designed to rebalance the economy so that the economy did less in order to encourage the private sector to do more .

-it was a monerist policy to control inflation

Question 10

How was the 1981 budget a major turning point

Answer 10

• Because in 1981 the economy was in a serious recession . During periods of a recession governments do not usually raise taxes because it leads to even less consumer spending thus deepening the recession
• however contrary to conventional widom new taxes were introduced on North sea oil and one off windfall tax was imposed on the banks

Question 11

in total how much did tax go up in

Answer 11

• went up by in total how much did tax go up in

Question 12

at the same time she introduced cuts

Answer 12

• in education , health and benefit increases were downgraded

Question 13

what was this at the time

Answer 13

• this was a deflationary budget at the time when the economy was shrinking and unemployment .
• this was a complete change from the past decades when governments increased spending in a recession to boost growth and safeguard jobs

Question 14

the backlash from the 1981 budget

Answer 14

• the governments budget was so unconventional hat 364 economist wrote a letter to the times protesting the policy
• Even within the conservative party there was a great deal of concern

Question 15

therfore..

Answer 15

• thatcher’s policy softened in the middle of 1981
• a cabinet rebellion in july 1981 rejected a futher £5 billion of spending cuts , which they feared would make the recession deeper

Question 16

north sea oil

Answer 16

• by mid 1980’s North sea oil had become a major source of income for Thatcher’s government from 1983-85

Question 17

how much did the government recieve

Answer 17

-over 41 billion from north sea oil double double what the government recieved from the North sea in Thatcher’s first term (1979-83)

Question 18

How did this revenue help the government

Answer 18

• the north sea oil revenue helped to finance many of the government’s policies , including paying large amounts of unemployment benefits and tax cuts

Question 19

what do critics of thatcher say about this

Answer 19

• many critics of thatcher argue that she was fortunate to have this additional revenue from north sea oil, which is why her economic policies were succesful

Question 20

what do her supporters say

Answer 20

• supporters of Thatcher and her economic policies would not agree and would argue cutting public expenditure, lowering of taxes and ensuring inflation remained low meant that Britain economy was able to grow

Question 21

what did thatcher believe about state run industries and why

Answer 21

• Thatcher did not believe in state run industries
• first she believed they were inherently less efficient than private industries because they did not make a profit

Question 22

what did she secondly believe

Answer 22

• secondly she believes that government money should not be used to keep failing industries afloat in the long term

Question 23

who did she appoint in 1979 to try to reduce government spending on nationalised industries

Answer 23

In 1979 she appointed Sir kieth joseph , a fellow supporter of free markets as secretary of state for industry

Question 24

what did joseph do

Answer 24

• joseph let some national industries decline . He told the loss making British steel that they would no longer have government support

Question 25

Therefore british steel did what in 1979

Answer 25

• British steel made 53,000 workers redundant in 1979
• However, this policy led to the government having to pay out redundancy settlements

Question 26

between 1979 and 1981 what did sir kieth joseph do

Answer 26

-between 1979 and 1981 joseph authorised ove 1 billion payments to British steel more than labour had been paid in the last years of 1970s

Question 27

how much was british steel making a loss in 1981

Answer 27

• British steel was still making a loss of 450 million pounds a year by 1981

Question 28

how much did joseph invest in loss making car manufactuer British leyland

Answer 28

joseph also invested 990 million pounds of government money in loss making car manufactuer British leyland

Question 29

what was thatcher’s long term vision

Answer 29

• Despite the early setbacks , thatcher’s long term vision was clear she wanted to end the government subsidies for nationalised industries

Answer 30

• Thefore timetables were set for industries to become more efficient and start making money in all cases this meant laying off workers to cut wage bills .

-Joseph was only willing to invest government money in nationalised industries in return for guranteeed job losses

Question 31

British leyland was an example

Answer 31

• promised to lay off 30,000 workers in 1981 in return for government investment