The impact of Thatcher’s economic policies

Question 1

What did Thatcher believe damaged the British economy?

Answer 1

Keynesian economics

Question 2

what were the 3 aims of thatchers economic polices?

Answer 2

Restore the health of the economy by controlling inflation.

Restore incentives to work hard.

To create genuine new jobs.

Question 3

Thatcher believd in neo-

Answer 3

Neo-Liberalism

Question 4

what were the 4 things of Neo-Liberalism?

Answer 4

• Limited government intervention.
• privatisation
• Reduced government spending (austerity)
• Enhance the role of the private sector.

Question 5

3 steps of thatcher’s economic policies

Answer 5

Step 1: Monetarism (1979-1982)

Step 2: Supply-side economics (1982-1987)

Step 3: Continuing the boom (1987-1990)

Question 6

who implemted monetrism and what was the aim

Answer 6

Geoffrey Howe

reduce inflation

Question 7

policies and outcome of monetarism

Answer 7

Increased direct taxation= inflation reduced- poor suffered.

Decreased direct taxes = rich benefited

Spending cuts = recession (a period of temporary economic decline during which trade and industrial activity are reduced,)

End of government subsidies = unemployment.

Question 8

Who implemented supply side economics and what was the aim

Answer 8

Nigel Lawson

Stimulate production in the private sector and help businesses to grow.

Question 9

policies and outcome of supply side economics

Answer 9

Tax cuts = Lawson cut standard rate of income tax from 30% to 27% =increased consumer spending

Popular capitalism = increase in public shareholders

Privatisation( to reduce spending + improve effieciny ) = huge government revenues.

Continued to withhold gov. subsidies = improved efficiency and profitability of business – unemployment.

Question 10

Who implemented th

e Continuing the boom (1987-1990) and what was the aim?

Answer 10

Nigel Lawson

Create a consumer boom and help industry to flourish.

Question 11

Policies and outcome: of continuing the boom

Answer 11

Finacial Deregulation + interest and tax cuts = encouraged a borrowing boom

Much of borrowed money spent abroad
=balacne of payment deficit £47 Bn 1990 from £16bn 1979)

easy availability of credit= personal debt increase e.g. Overall personal debt = 1.3 trillion 2003= highest in Europe

rising inflation

increased foreign investment (especially in the financial service industry) – Big Bang
interest and tax cuts = increased consumer spending- increased debt – increasing inflation

Ultimately = stock market crash.

Question 12

Thatchers psotive impact on unemployment

Answer 12

New jobs created in the financial sector

Question 13

Thatchers negative impact on unemployment

Answer 13

Unemployment spiralled under thatcher
Mid 1980s:
-1/5
-Rose every year.

1980-1989

• Stayed above 2 million
• Peaked 1986 at 3.4 million

1979 =3.4% of population
1990 = 9.1%

N.b.
Necessary price for economic improvement
Not the role of the state to create jobs.

Question 14

Between 1980 and 1989 unemploymetn stayed above what and peaked when

Answer 14

2 million

1986- 3.4 million

Question 15

in 1979 what % of population were unemployed and what did this change to in 1990

Answer 15

3. 4%

9. 1%

Question 16

Thatchers economic policy positive impact on inflation

Answer 16

Succeeded in reducing it via monetarism.
Came to office = 13.4%
1980 = 18%
1901-1988 = kept below 9%

Question 17

Thatchers economic policy negaitve impact on inflation

Answer 17

Inflation began to rise again by 1980
Lawson’s giveaway budget 1988 (following the SMC 1987)
-By 1990 9.5%

Question 18

Thatchers economic policy positive impact on Restructuring nationalised industry

Answer 18

improving the efficiency and profitability
and therefore competitiveness of nationalised industries.
-1984 £1.1bn in subsides
-1988 £1.3bn profit.

Question 19

Thatchers economic policy negative impact on Restructuring nationalised industry

Answer 19

heavy human cost – structural
unemployment regionally concentrated in the
North/Wales/Scotland

decline of
Britain’s industrial capability.

-British steel = -95,000 workers
-National Coal Board = closed 75 pits = 64,000
redundancies.

Question 20

Thatcher’s economic policy positive impact on privatisation

Answer 20

S.T. raised huge revenues for the government enabling tax
cuts.

-50 large industries sold
(B. Airways, Steel, telecoms. Cable and Wireless)
-Total = £20bn.

Popular capitalism (part of privatisation)

• Shares in newly privatised industry.
• Shareholders tripled – 11m by 1990

Sale of council houses contributed to the creation of a
property-owning democracy.

Question 21

Thatcher’s economic policy negative impact on privatisation

Answer 21

L.T. despite the state of valued national resources and
industry.

distribution of shares was not equal and arguably had
a limited impact.

• 9% of W/C.
• 50% professional males

Created L.T. shortages of council houses.

Question 22

Thatcher’s economic policy positive impact on industry and finance

Answer 22

The financial services industry boomed.
-Investment increased by 300%

There was a huge growth in small businesses

• 1.9m to 3m
• 3.5 self employed workers by 1990/

Question 23

Thatcher’s economic policy negative impact on industry and finance

Answer 23

rapid decline of Britain’s industrial
production.

-Manufacturing only grew by 8%

• 1960 industrial output = 60% of GDP
• 1997 = 21%

growing balance of payments
problem – increasing reliance on imports.

• 1979 = import/export deficit = £5bn
• 1990 = £20bn.

Question 24

Thatcher’s economic policy positive impact on Economic growth

Answer 24

economy continued to grow.

-Industrial production increased by 4.2% each year in the
1980s.

-Supply-side miracle.

Question 25

Thatcher’s economic policy negative impact on Economic growth

Answer 25

grew at a slower rate than during previous
periods.

-Slower than in the 1950s and 1960s.

• 1950s= Britain’s GDP ranked 6 th in the world.
• 1997 = 14

Unable to prevent long term decline.

Balance of payments deficit of £47bn by 1990
1979= 16bn

Question 26

Thatcher’s economic policy positive impact on Taxes

Answer 26

Income taxes fell dramatically by 1990.

• 1988 Standard rate fell from 27% to 25%
• 1988 Top rate fell from 60% to 40%

Question 27

Thatcher’s economic policy negative impact on Taxes

Answer 27

Overall, the average tax bill increased by 6% during 1990.

Emphasis on indirect (regressive) taxes disproportionately
hurt the poorest.

• VAT = 8% TO 15%
• NI = 6.5% TO 8%.
• 1991 rich poor gap widest since records began.
• 1981 Poll Tax = riots – cost 2.5 times more to collect.

Question 28

Thatcher’s economic policy positive impact on wages

Answer 28

-General period of affluence

• Av worker = 10% real wage increase between 1979 and
  1994.

France = 2%

Question 29

Thatcher’s economic policy negative impact on state spending

Answer 29

T. failed to reduce government spending.

-Social Security (unemployment benefits) and welfare
spending rose by 60% in real terms.

-Law and order spending rose by 36%
These were due to unemployment and social unrest.

-1980s = Military spending increased 3% every year.
Due to costly defence commitments.

-By 1990 deficit = £30bn – all time high.