Thatchers Economic Policies And There Impact Flashcards
What was monetarism
What did it mean for the thatcher government
Promoted by Milton Friedman and the Chicago school of economists
The best way for the government to control inflation was by restraining the governments spending and borrowing and strict curbs on the money supply
- government borrowing went down, local councils were cut and benefits were frozen.
Howe “the most unpopular budget in history”
What happened to the economy by 1980
What saved the economy from the run of the pound
Serious recession
Inflation above 15%
Rising unemployment above 2 million
Stagflation was back
The flow of the North Sea oil and gas
What did the belief that people rather than the government spend money led to
A shift away from direct taxation, I.e- away from taxes on people’s income or property and towards taxes on the goods and services on which they chose to spend their money on.
This created an incentive as people could spend more of what they earned.
What happened to taxes as a result of monetarism policies
Top date of income tax fell from 83 % to 40% by 1988
standard rate fell to 25% from 33% over the same period.
VAT went up from 8% to 15% in 1979.
Taxes on petrol, alcohol and cigarettes went up in every single budget between 1979 and 1987
What did critics argue transferring the burden onto a direct taxation system would do
What did cutting public spending lead to
- Argued it was less progressive and it would hit poorer people harder
- clashes between conservative centred government and many labour controlled councils
How did thatcher view left wing councils
Give an example of a clash between them
As the enemy for their ideology and they blamed them for wasting resources.
The greater London council headed by left winger Kevin livinstone. Thatcher treated many of there education and public transport policies as provocation. Kevin was demonised the face of the lonely left
What was the loony left
The name given by right wing press to left wing local councils that promoted liberal and politically correct policies eg gay rights. Many myths were made up for instance the hackney council banning baa baa black sheep for being racist. This name harmed the labour party’s electoral credibility
What did the conservative government introduced to control labour local authorities over spending
What did the local government act abolish in 1986
Rate capping, this limited the amount of money that the council was allowed to raise in local taxation. A number of council for instance Liverpool tried to rebel against the cap and refused to set budgets but threatened by bankruptcy they had to backdown.
-the big metropolitan local authorities that had been set up by health. The powers of the central government was increased at the expenses of the local government. In the short term this was a clear victory against the looney left but in the long run it damaged local accountability
Why did monetarism come to an end
What continued
Ended by thatchers second term when Lawson abandoned spending targets in 1986.
There continued to be a greater empathises on the supply side economics rather than a return to the demand side economics of the post war consensus. This concentrated on market reforms such as privatisation and deregulation.
What companies were first to be privatised
1979-BP
1980- Aerospace
1984- British telecom
1986-British gas
1979 and 1990 the number of individuals owning stocks and shares went up 3 million to 9 million.
What did financial pressure of the local government led to
What did critics argue about privatisation
Rolling back to the frontiers of state
Outsourcing- whereby private companies took on contacts to deliver goods and services previously provided by the states, this became increasing widespread.
Privatised enterprise were sold off cheaply in order to ensure all shares were taken up. Made life more insecure for many employees they could no longer rely on long term job security and on reliable pension provisions.
What did radical Thatcherites want to push ahead ( privatisation)
What did privatisation signal
Further privatisation - including the coal industry and the railways and drew up plans to privatise part of the NHS.
The end of the post war consensus about economic management
What was the other key element of supply side economics
What made it easier for small companies to borrow money
Deregulation - removing red tapes and making it easier for business to trade and grow encouraging entrepreneurship and wealth creation.
- the loan guarantee scheme and the enterprise allowance scheme encouraged the unemployed to start up there own business by giving them 40 pound a week for a year to get there business on the ground.
What was financial deregulation
What did it do
The loosing control on banks and financial markets which led to a massive boom investment banking and financial speculation. This became. The became very controversial in the great crash of 2008.
It freed up to city of London and the financial markets from the tight controls of the Bank of England
When was the Big Bang and what did it do
27 October 1986 - deregulated the London stock exchange opening the way for computer screen trading and replacing the old boy networks with the free, foreign banks could now operate as stockbrokers. Restored londons position as a world financial centre.
