Topic 4: Economics/Industrial (1979-87)

Question 1

2

Describe monetarism

Answer 1

• Restrict money supply and reduce public expenditure to tame inflation
• Done through raising interest rates, making cuts and strengthening the pound on the FOREX

Question 2

4

Describe Thatcher’s supply-side economics

Answer 2

• Low taxation encourage consumption
• More flexible labour regulations to encourage enterprise
• Re-organisation from direct to regressive indirect tax
• taxes on petrol, cigarettes and alcohol went up in almost every single budget from 1979-87

Question 3

4

Describe Howe’s June 1979 budget

Answer 3

• Income tax: top rate cut from 83% to 60%; lower rate cut from 33% to 30%
• VAT up from 8% to 15% to finance income tax cuts
• Public spending reduced by £4bn
• Interest rates increased from 12% to 14%

Question 4

4

Describe the effects of 1979 budget

Answer 4

• 1980, serious recession occurred
• led to rise in public spending as benefit payments increased
• Unemployment reached 2m (13.2%) - highest in Western Europe
• 1980 Tory Party Conference, Thatcher indicated she would not reverse policy with aimed dig at Heath (‘U-turn if you want to…’)

Question 5

3

Describe the economy by 1980

Answer 5

• Inflation stood at 22% in early 1980
• Mood worsened by Tebbit’s comments for the unemployed to get on their bike and find work
• Only North sea oil receipts kept balance of payments in reasonable condition

Tebbitt a junior minister at time

Question 6

6

Describe the terms of 1981 budget

Answer 6

• Many expected governmental reversal, instead they doubled-down
• Marked monetarist triumph against Keynesian Treasury orthodoxy
• 20p increase on petrol tax
• £3.5bn spending cuts
• Grants to local councils cut
• No changes to low income tax

Question 7

5

Describe the effects of the 1981 budget

Answer 7

• Amounted to biggest fiscal squeeze in peacetime
• expenditure rose due to collosal bill of social security payments stemming from increased unemployment
• from 1979-81, British GDP fell by 2.5%
• productive capacity falling more rapidly than ever recorded before
• return of stagflation

Question 8

2

Describe the response to the 1981 budget

Answer 8

• Government standing fell to 27% in opinion polls
• In a famous letter to the Times, 364 economists denounced the government’s economic approach as ruinous

Question 9

2

Describe the 1982 budget

Answer 9

• £1.3bn tax giveaways
• condemned by Con MP Ian Gilmour who had advocated £5bn reflation package

Question 10

2

Describe privatisations in Thatcher’s first term

Answer 10

• Majority of shares in British Aerospace sold in 1981
• Sale of Amersham International 1982

Question 11

4

Describe the sale of Amersham International 1982

Answer 11

• Radiochemical Centre, a specialist medical services group
• Renamed to Amersham International in 1981and sold in 1982
• First complete privatisation where govt sold 100% of shares
• $130m paid to government was $38m less than the prevailing market share of the company - set negative precedent

Question 12

4

Describe the shift in inflation levels (1979-83)

Answer 12

• early 1980 - 22%
• 1981 - 12%
• 1982 - 8.8%
• 1983 - 5%

Question 13

3

Describe the economic positives of Thatcher’s first term

Answer 13

• Productive capacity would have worsened had the govt continued to support ‘lame duck’ industries of British Leyland and Rolls Royce
• Delivered on pledge to reduce inflation
• Monetarism quitely abandoned by 1984 through falling exchange rates and loosening of money supply limits

Question 14

5

Describe the economic negatives of Thatcher’s first term

Answer 14

• Inflation reduction due to mass unemployment
• Monetarism destroyed value of privatised companies
• productive capacity was falling more rapidly than ever recorded
• 25% of manufacturing capacity lost in 1st term
• 81 other nations saw GDP rise by 5%; britain’s fell more rapidly than ever before

Question 15

4

Describe Nigel lawson as CX

Answer 15

• Became chancellor following re-election in 1983
• Exuded econmic competence
• Abandoned monetary control and shifted to supply-side focus
• Urged cuts in public spending though spending increased anyways due to high unemployment

Question 16

4

Describe the 1987 budget

Answer 16

• £2.6bn tax giveaways
• Cut standard rate of income tax from 29p to 27p
• Corporation tax cut fom 29p to 27p
• Funded through previous increases in VAT which led to £16bn budget surplus, confirming success of supply-side policies

Question 17

5

Describe Lawson’s privatisation policy (1983-87)

Don’t need to know all firms, but major ones will suffice

Answer 17

• Substantially more privatisation than first term
• 1984, British Telecom sale cost Government £3m as a result of underpricing and lavish advertising campaign promoting buying shares
• 1986, British Aerospace, Britoil and British Gas
• Rolls Royce, British Shipbuilders, British Leyland and British Airports followed
• Former PM Macmillan likened privatisation to ‘selling off the family silver’

Question 18

3

Describe the sale of British Gas 1986

Answer 18

• Sold for £5.434bn
• Shares went public with famed ‘Tell Sid’ campaign
• Allowed ordinary people entry into stock-market sphere - increased sense of stakeholding in society

Question 19

2

Describe the Lawson’s deregulation policy (1983-87)

Answer 19

• Big Bang 1986
• Proposed relaxation of Sunday Trading laws defeated

Question 20

5

Describe the Big Bang 1986

Answer 20

• Reform of London Stock Exchange
• Abolished fixed commissions
• Opened up trading to wider financial institutions, notably foreign banks
• implemented electronic platform to allow faster computerised dealer networks
• Replaced archaic ‘open outcry’ whereby traders mulled Exchange Floor

Question 21

4

Describe the positives of economy by 1987

Answer 21

• Easy credit availability drove up household consumption boom, especially in South
• Average earning rose consistently above inflation throughout in the 1980s (reached peak 4.5% difference in 1986), especially in service-sector
• Average annual growth rate of 4%
• Inflation continued to fall

Question 22

6

Describe the negatives of economy by 1987

Answer 22

• In 1983, balance of trade in manfactured goods went negative for first time
• by 1985, the poorest 20% held only 5% of national wealth
• Unemployment reached 3.3m in April 1985
• House prices appreciated higher than annual incomes, accentuating regional inequality
• Economic growth was in part due to worlwide expansion of trade
• Skills shortages in tight labour markets had pushed up wages

Question 23

3

List the points you could consider in an essay on whether there was an economic miracle 1979-97

Answer 23

• Growth and productivity (tax cuts, supply-side policies, consumption boom, inflation, GDP)
• Structure of economy (privatisation, Big Bang, balance of payments)
• Industrial factors (trade union legislation, strikes)

Question 24

5

Describe the Employment Act 1980

Answer 24

• ‘flying pickets’ made illegal - strikers travelling nation to prevent entry to work
• Restrictions on closed shops
• Restricted legal immunity for sympathy strikes
• Introduced ballot requirements prior to strike - Scargill would disobey
• Removed provisions of Employment Protection Act 1975 which obligated employers to reinstate employees after maternity leave, claiming it damaged small businesses

Question 25

3

Describe the Employment Act 1982

Answer 25

• Challenged immunity unions had received from financial charges incurred during strike
• Had been a privilege dating back to 1906
• Several Unions fined this way e.g. National Graphical Association

Question 26

4

Describe the effects of the Employment Act 1980 and 1982

Answer 26

• 4.2m days lost to striking in 1981 compared to average of 13m in 1970s
• Union membership had fallen from 13m in 1980 to 10m in 1983
• Union members unwilling to risk strike action in ballots for fear of unemployment
• Unions wary of running up huge fines in court

Question 27

2

Describe limits to the Employment Act 1980 and 1982

Answer 27

• Arguably recession and resulting unemployment had driven down union membership and strikes rather than legislation
• Economic shift to service-sector further eroded powers of union

Question 28

3

Describe the terms of the Trade Union Act 1984

Answer 28

• Thatcher used huge majority to pass contentious legislation
• Required unions to select new general secretary every 5 years
• Required unions to ballot members on retention of their political funds

Question 29

2

Describe the effects of the Trade Union Act 1984

Answer 29

• Intended to damage Labour funding, though majority of unions continued to support them
• Conservatives continued to benefit from individual and corporate funding

Question 30

3

Describe the background to the Miners strike (1984-85)

Answer 30

• 1984, NCB faced strike by NUM
• Clash bewteen abrasive style of marxist Scargill (leader of NUM) and Thatcher-installed Ian Macgregor (NCB Chairman)
• Macgregor had been tasked with overseeing the closure of uneconomic pits

Question 31

6

Describe Government preparation for the Miners’ Strike (1984-85)

Answer 31

• Ensured coal supplies were well stocked, aided by low demand and cheap market price
• Pits now only supplied 1/5th of nation’s energy supply, far behind oil
• Protected power networks with aid of European nations
• Police powers increased in anticipation, especially over ‘flying picket’ control
• Imposition of roadblocks to prevent the travel of striking miners to picket lines
• Prevented repeat of strikes under Heath

Question 32

4

Describe the UDM split in miners’ strike (1984-85)

Answer 32

• Scargill failed to ballot members
• Properous Nottinghamshire coalfields broke away to form UDM to continue work
• UDM criticised Scargill for using strike to advance his hard-left politics to the detriment of miners
• Supplied coal for entire nation, permitting government victory

UDM - Union of Democratic Miners

Question 33

4

Describe the end of the miners’ strike (1984-85)

Answer 33

• Strike lasted almost a year, demonstrating deep illusionment within mining communities
• Entire families had depended on charitable handouts
• Scargill determined to reject compromise but could not sustain support as miners’ drifted back to work
• Ended in March 1985

Question 34

1

By what margin did the NUM vote to end the 1984/85 miner’s strike by?

Answer 34

98-91

Question 35

3

Describe the political impact of the miners’ strike (1984-85)

Answer 35

• Kinnock distanced Labour from the revolutionary ideals of Scargill and the NUM
• Thatcher proved that she could protect public against mass industrial action unlike predecessors
• Capitalised on this success in 1987 election

Question 36

4

Describe the industrial impact of the miners’ strike (1984-85)

Answer 36

• Decimation of mining industry accelerated due to weakness of unions post-strike
• By 1989, less than 5k miners in Wales (formely 250k)
• Even UDM collieries closed encouraging bitter resentment
• Militant Kent coalfields closed entirely

Question 37

3

Describe Battle of Orgeave

Answer 37

• June 1984, Rotherham
• Attended by 5k miners
• Violence led to injuries of 51 miners and 72 police

Question 38

3

Describe the death of David Wilkie

Answer 38

• Welsh taxi driver
• Attempted to take 2 scabs to work
• November 1984, killed when concrete slab dropped on his car

Question 39

2

Describe the involvement of women in the 1984-85 miner’s strike

Answer 39

• National Women Against Pit Closures rally held in August 1984
• They presented a petition to the Queen

Question 40

2

Describe shifts in employment 1979-87

Answer 40

• Technological advances and recession 1980-82 had reduced demand for unskilled and semi-skilled labour
• between 1978-85, the number of semi-skilled/unskilled jobs reduced by 1m