Thatcherism : the second stage Flashcards
Supply side economics
From the mid 1980s, monetarism was largely abandoned. Supply side economics was pursued in its place.
Rested on the belief that side-supply economics had distorted the operating of the economy.
Side supply economics argued that people would work harder and more productively if they were allowed to keep more of their earnings.
Chief principles were:
Reducing taxation
Encouraging competition in order to lower prices.
Limiting the powers of the unions
Cutting wasteful production.
Deregulation
A critical move towards free enterprise.
This was a concerted effort to remove the financial and legal restrictions that Thatcher believed had prevented efficiency and profitability in many areas of social and economic activity.
Included:
Finance- credit and exchange controls were abolished
Transport- bus companies were deregulated to encourage competition
Education- schools were entitles to opt out of state sector and become responsible for own financing.
Heath- hospitals were requires to operate an internal market, by taking control of their own finance and matching needs to resources.
Housing: the right to buy
Housing act 1980, encouraged council house tenants to buy the homes that they were renting.
Move towards the ideal of Britain as a property owning democracy.
By 1985, over 800,000 tenants had begun to purchase their properties.
Figure for home ownership was at 68% in 1990, an increase of 15% since 1981.
Privatisation
Provided the state with large additional funds, the policy aimed at increasing popular capitalism, by giving a much greater number of ordinary people the chance to become stakeholders.
Between 1979-90, the number of stakeholders increased from 3 million to 9 million.
Financial deregulation encouraged banks and building societies to advance larger loans to their customers. A significant part of the money borrowed was then spent on consumer goods from abroad. The result was, between 1980-89, Britain’s balance of payments deficit rose from £16 million to £47 million.
Between 1988-90, the government acquired £7 billion from privatisation.
North sea oil
In 1976, the Labour government had established the British national oil corporation, as a means of keeping North Sea oil under public control. However, in 1982, Thatcher sold off its majority shareholdings to the private sector.
Key stats
Comparison of the GDP growth rates:
1979-89- Britain = 2.1% while European average was 1.9%
Rise or fall in real wages of workers 1979-94:
Britain= 26%, compared to Frances 2% and USA -7%.
Number of industrial workers in Britain:
1980= 7 million
1990= 4 million.
Taxation under Thatcher
Period of low taxation. Significant reduction in income tax but an increase in indirect taxes.
The Westland affair
- Revealed a division in the government.
Heseltine (the defence secretary) proposed that this company would be taken over by a European company.
Leon Brittan, the industry secretary, put forward an alternative option, that the company would be taken over by a US company, Sikorsky.
Thatcher chose to back the Sikorsky option.
Heseltine resigned on 9th January.
1987 general election
Some recovery by Labour, but the government retained its share of the popular vote and despite loosing 22 seats, it still had an overall majority of 100 in commons.
Tories got 42.2% of vote, compared to Labours 30.8%, while Liberal/SDP got 22.6%.
Local government reforms
In 1988 a series of reforms were introduced:
A system of standard spending assessments enabled central government to control the local government expenditure levels.
Councils were required to contract out their services to companies that could provide the best services at the lowest price.
Aimed to bring local councils in line with her ideas of public accountability.
Only a minority of people voted in local elections, which allowed socialist groups to dominate areas such as London boroughs. These were among high- spending labour authorities.
Greater London Council was abolished in 1983.
Education
Education act 1988 made the schools more responsible to the needs of the consumer.
Introduced by Kenneth Baker.
The provisions were:
School budgeting could be taken over by head teacher and governors.
Schools could opt to become grant maintained schools, which allowed them to become independent of their LEAs and financed by central government.
A National Curriculum was introduced.
Schools were to cover a set of key stages.
Parents could specify which school they wanted their child to attend.
League tables were to be published.
The Poll Tax
The community charge was introduced into Scotland in 1989 and England / Wales in 1990.
Plan was to tax people not property.
There would be 38 million poll-tax payers compared to only 14 million ratepayers. Payments for local services would be more evenly and justly spread.
This created fury around the country.
