The economy under Thatcher

Question 1

When was Thatcher’s first term?

Answer 1

4th May 1979 - 1983

Question 2

When was Thatcher’s second term?

Answer 2

1983 - June 1987
1983 landslide majority - 144 seats

Question 3

When was Thatcher’s third term?

Answer 3

1987 - November 1990
1987 landslide majority - 102 seats
Vote of no confidence

Question 4

What was the continuing of Thatcher?

Answer 4

Major continues in office
In 1992 election, he wins 21 seat majority
New Labour begin to rise from 1995. Elected 1997.

Question 5

What were Thatcher’s key ideas in office?

Answer 5

• Conviction politics
• Economy
• Rule of Law
• Nationalism

Question 6

What was conviction politics?

Answer 6

• Politics should be rooted in the fundamental beliefs of the political leader rather than in consensus and compromise
  →Heath’s u-turn was an example of this problem

Question 7

What were Thatcher’s ideas towards the economy?

Answer 7

• Against dependency culture, high tax, powerful unions.
• Valued hard work, low tax (reward for your effort), individual enterprise, economy efficiency.

Question 8

What was Thatcher’s rule of law?

Answer 8

• Felt you should trust the law to defend your rights
• Suspicious of radical protest (strikes, marches)
• Felt reform should be through elections

Question 9

What was Thatcher’s view towards nationalisation?

Answer 9

Opposed interference in British affairs by other countries.

Question 10

What monetarism? (1980-82)

Answer 10

An attempt to bring down inflation by controlling the money supply in the economy.

Question 11

What was the aim of monetarism? (1980-82)

Answer 11

Less money in society = money has a higher value and prices fall.

Question 12

How did the Conservatives aim to achieve monetarism?

Answer 12

Conservatives sought to reduce money supply by spending cuts and raising interest rates (to decrease borrowing).

Question 13

How was Thatcher’s economic policies a success?

Answer 13

Thatcher’s free market policies reversed Britain’s relative economic decline.

Question 14

How was Thatcher’s economic policies a failure?

Answer 14

• Thatcher’s policies did little to change Britain’s long-term economic performance.
  -Thatcher’s economic policies weakened British industry.

Question 15

How did Thatcher’s economic policies impact class?

Answer 15

She unbalanced Britain’s economy and created massive inequality of wealth - both regionally and class wise.

Question 16

What was Thatcher’s problem of inconsistency with monetarism?

Answer 16

Thatcher didn’t apply monetarism consistently.
-In her first two years, allowed above-inflation pay settlement of 16% to end steel strike and awarded public sector a 25% pay rise.

Question 17

How was the cabinet divided?

Answer 17

Divided into ‘wets’ (opposed) and ‘dries’ (supporters)

Question 18

What did Thatcher assert after this cabinet divide?

Answer 18

1980 Conservative Conference: Thatcher asserted monetarism would continue.
→“You turn if you want to: the lady’s not for turning”

Question 19

How did monetarism begin to fade out?

Answer 19

Monetarism became less significant from 1983.

Question 20

What economic policy did Thatcher switch to after monetarism?

Answer 20

Shift towards ‘supply-side’ economics.

Question 21

What was ‘supply-side’ economics?

Answer 21

Stimulating the free economy and not limiting it → tax reductions, deregulation, decline of union power

Question 22

What was the impact of monetarism at first?

Answer 22

→1981, Chancellor Geoffrey Howe found public sector borrowing was increasing (£9.25b in 1978-9 to £14.5b by end of year).
→364 economists encouraged govt to abandon monetarism but they didn’t.

Question 23

How did commitment to monetarism pay off?

Answer 23

→Inflation fell from high of 21.9% in May 1980 to 5% by Dec 1982.
→Helped Thatcher win 1983 election.

Question 24

What happened to monetarism in Thatcher’s second term?

Answer 24

Monetarism phased out in favour of supply-side economics.

Inflation never rose above 9% for the rest of the 1980s.

Question 25

How did monetarism fail in terms of inflation?

Answer 25

Inflation stood at 10.3% in 1979 and 10.9% in 1990
→ ultimately, no major change

Question 26

How did monetarism fail in terms of unemployment?

Answer 26

• Slashing of govt spending in 1980 and 1981 budgets led to riots in cities (incl. Brixton in London)
• Firms went bankrupt →3 million unemployed in 1982
• Unemployment benefits forced up government spending.

Question 27

How did monetarism fail in terms of production?

Answer 27

Manufacturing fell by 14% in 1980-81.

Question 28

What was the intention of privatisation?

Answer 28

Make companies more efficient: by 1979, many nationalised companies were running at a loss and requiring govt subsidies.
→British Airways made a £544m loss between 1981-82.

Question 29

What was the aim of privatisation?

Answer 29

Gain revenue (money) for govt from ‘popular capitalism’ (involving more people in capitalism by enabling them to buy shares).

Question 30

What was privatised?

Answer 30

Privatised British Airways, Steel, Telecom, Gas and Britoil.

Question 31

How was privatisation promoted?

Answer 31

Campaigns encouraging people to buy shares
→ ‘Tell Sid’ Campaign accompanied British Gas sale and stressed how easy it was to buy shares

Question 32

What was the success of privatisation in terms of government money?

Answer 32

Raised £19 billion - funded government cutting taxes

Question 33

What was the success of privatisation in terms of shareholders?

Answer 33

In 1979, 7% of population owned shares
By 1990, 25% did.

Question 34

How did privatisation improve customer service?

Answer 34

• Privatisation of 10 state-owned regional water authorities in 1989 → number of customers at risk of low water pressure fell by 99%.
  -BT privatisation led to better customer service: wait time for installation reduced from 6 months to 15 minutes

Question 35

How did privatisation fail in terms of job losses?

Answer 35

200,000 jobs lost due to coal privatisation.

Question 36

How was privatisation a failure in terms of shareholders?

Answer 36

Distribution of shares uneven: 9% unskilled male workers owned shares compared to 50% of professional males.

Question 37

How did privatisation a failure in terms of conservative principles?

Answer 37

• Harold Macmillan described privatisation programme as ‘selling off the family silver’
• Against traditions of Conservative Party.

Question 38

What was the commitment to deregulation?

Answer 38

• 1986 Financial Services Act: made trading of stocks and shares easier to attract foreign investment
• Rise of computers meant stock exchange started computer trading (enabled instant transactions)

Question 39

What was the Lawson Boom?

Answer 39

To keep the boom going, Chancellor Lawson permitted the relaxation of credit controls and lowered interest rates (made borrowing easier)

Question 40

What was the success of deregulation (Lawson Boom)?

Answer 40

Economic growth reached 4% a year in 1985-88 under Chancellor Lawson

Question 41

What was the success of deregulation? (‘Big Bang’)

Answer 41

City of London grew rapidly and became a major world financial centre.
→’Yuppie-Culture’: young, upwardly mobile professionals, often involved in stock trading

Question 42

What was the success of deregulation? (Overseas Investment)

Answer 42

• Removal of exchange controls fuelled overseas investment
• This ultimately led to profits returning to Britain.