Unit 1.3 Flashcards
The New Right
The New Right is a collective name for a number of academic and theoretical organisations which challenged the Keynsian orthodoxy.
They drew on the work of Milton Friedman and Friedrich von Hayeck both of whom worked at the Chicago School of Economics. The New Right included the Centre for Policy Studies, established by Keith Joseph after the 1974 election defeat, and the Adam Smith Institute formed in 1977 to promote free-market policies. It attracted a number of converts such as Peter Jay, an economist who was also James Callaghan’s son-in-law, and a previous editor of the left-wing New Statesman magazine, Paul Johnson. Socially Conservative but liberal in economics.
Margaret Thatcher
Studied Chemistry at Oxford and came from a suburban trade family. She was resolutely middle class, self-resilience and self-improvement lay at the heart of the Thatcher’s upbringing and informed her political beliefs.
She was a conviction politician and was dismissive if the post was consensus. Thatcherism was based on some traditional conservative thinking, as well as a number of New Right think tanks + academics who rejected Keynesism in favour of free market and monetarist economy.
As Leader, she cut back on state spending and returned to policy of industrialisation. She also favoured tough policing to maintain law and order.
How the Conservatives won the 1979 election - results
Conservative - 43.9%, 339 seats
Labour- 36.9% , 269 seats
Liberal - 13.8%, 11 seats
How the Conservatives won the 1979 election - Labour Weaknesses
-The 1979 election was decided largely in London, the south of England and the Midlands where approximately 40 seats changed hands from Labour to the Conservatives. These voters were punishing Labour for its perceived failure to deal with inflation, unemployment and the ‘over-mighty’ trade unions whose reputation had been damaged, even many skilled and unskilled workers began to consider voting Conservative.
-As in previous elections, the Liberal vote was also significant in determining the outcome. Although the Liberals held on to most of their seats in their strongholds, their total vote dropped by over a million because some voters blamed them for keeping Callaghan’s government in office since 1977.
-Then, in March 1979, the government lost a vote of no confidence in Parliament, on the issue of Scottish devolution. The government was forced to resign, the first time since 1924 that a government was brought down by a confidence vote.
-The images of the ‘winter of discontent’ dominated the media and the press for weeks on end. Most of the press, including The Times, The Sun, the Mail and the Express, were supporting the Conservatives. The Conservatives were able to fight the campaign mostly by hammering away at the unpopularity of the government, especially on the issues of unemployment, law and order, and the excessive power of the unions. In fact, many of the strikes in 1979 showed the weakness of the old union leaderships and their failure to control the new militancy of their workers.
How the Conservatives won the 1979 election - Conservative Strengths
-In many constituencies in the Midlands and south, the collapse of the Liberal vote was enough to hand the seat to the Conservatives even though the Labour vote did not significantly decline.
-The previous decades had created an enlarged middle class who felt increasingly resentful about strikes and trade union power. The piling up of rubbish during strikes in 1979 seemed symbolic of a decline in standards.
-The Conservatives benefited from a sharp drop in support for the Liberals and for the Scottish Nationalist Party.
-Right Wing Media Support
-First Female PM- Thatcher came across as strong
How the Conservatives won the 1983 election - Result
Conservative - 42.4% , 397 seats
Labour - 27.6% , 209 seats
Liberal- 13.7%, 17 seats
SDP- 11.6 %, 6 seats
(Liberal/SDP Alliance) - (25.4%) , (23) seats
How the Conservatives won the 1983 election
The rise in unemployment and economic problems had reduced the popularity of the government by 1981, but the election of 1983 saw another Conservative victory, even with a reduced popular vote. The victory in the Falklands War was seen as a sign of Britain’s greater confidence and unity. It increased the personal popularity of Thatcher in her own strongholds.
However, the disastrous split in Labour and the selection of Michael Foot as leader in November 1980 played an important part in the outcome. Foot lacked an assured manner on television and his belief in unilateral nuclear disarmament, further nationalisation of industry and government regulation seemed old fashioned. He and his policies made little appeal outside traditional Labour voters. The more moderate elements in the Party split away to form the SDP in March 1981, massively damaging the Labour Party.
The Labour manifesto was described as ‘the longest suicide note in history’ because it was so out of touch with the country as a whole. The Alliance between the Liberals and the SDP - the beginning of the modern Liberal Democrats - succeeded in splitting the anti-Thatcher vote. This allowed Conservative gains in some traditional Labour seats in the north.
How the conservatives won the 1987 election - results
Conservative - 43.4 % , 376 seats
Labour - 31.7% , 229 seats
Liberal- 12.9%, 17 seats
SDP- 9.7 %, 5 seats
(Liberal/SDP Alliance) - (22.6%) , (22) seats
How the conservatives won the 1987 election - Conservative Party
When Thatcher called an election in June 1987 the Conservatives were well ahead in the opinion polls.
*The government’s policies of selling council houses and shares in privatised industries appealed to many middle-class and skilled working-class voters.
* These people were either better off, or believed that the government supported their desire to increase their wealth and status.
* Unemployment was falling and the pound was strong.
* In both 1983 and 1987 the Conservatives benefited from a split in the left. wing vote.
How the conservatives won the 1987 election - The Labour Party
The Labour Party had not fully recovered from its defeat in 1983 but its new leader, Neil Kinnock, had very publicly criticised prominent left-wingers and brought the party back towards the centre.
Labour polled over 1.5 million votes more than in 1983 and won 20 more seats. However, Kinnock’s style had limited appeal to many voters. He was often long-winded in speeches and Thatcher seemed to be the stronger leader with a very firm hold over her colleagues and a growing international reputation. Labour was more affected by the Alliance who contested every seat in 1987, splitting the anti-Conservative vote.
Sir Geoffrey Howe
served as trade minister in Heath’s government until 1974 and was Mrs
Thatcher’s first Chancellor of the Exchequer from 1979 to 1983. He presided over the application of monetarist principles to economic policies. From 1983 to 1989, he was foreign minister but his views on Europe came into conflict with Thatcher’s. His resignation speech in 1990 helped to cause her fall from power.
Norman Tebbit
was an outspoken Essex MP who was appointed Trade Secretary in Margaret
Thatcher’s first cabinet and later became party chairman. His down-to-earth and abrasive style made him very popular with the new Thatcherites though not their opponents; Michael Foot described him as a semi-house-trained polecat. In 1987, he left the government, though he remained loyal to Thatcherite ideals.
Micheal Heseltine
was a millionaire who became a leading Conservative politician in the 1980s. Because of his long hair and flamboyant style, his nickname was “Tarzan. His ‘One Nation’ and pro-European views brought him into conflict with Thatcher and he resigned from her cabinet in 1986 over the Westland affair. Many Thatcherites blamed him for the fall of Thatcher in 1990. He was later deputy prime minister to John Major.
Nigel Lawson
served in Thatcher’s first term as Howe’s number two at the Treasury and replaced Howe as Chancellor in 1983. His expansionary budgets of 1987 and 1988 created the
‘Lawson boom. In 1989, Lawson resigned from the government, furious about the excessive influence wielded by Thatcher’s private economic adviser,
Professor Alan Walters.
Neil Kinnock
was a left-wing Labour MP from South Wales.
He succeeded Michael Foot as party leader in 1983. Kinnock changed his mind on key left-wing causes such unilateralism, nationalisation and withdrawal from the EEC.
He strongly attacked the hard left and set out to move the Labour Party back towards the political middle ground. He also started the process of modernising the party organisations and improving party discipline. Kinnock led Labour to two election defeats in 1987 and 1992 but did much to restore Labour’s political credibility.
MIcheal Foot
Left Wing - A man of strong socels. opinions and an impressive witer and orator, he was never able to establish an easy relationchip with the ordinary voter. His three years as leader (1980-3) saw the Labour Party lose touch with the electorate.
James Callaghan
Centre Right of the party with strong links with trade unions- PM until 1979.
Trotskyism
THose on left who follow the ideas of Leon Trotsky. Trotsky was one of the leaders of the Russian Revolution in 1917. He was a Marxist who believed in a permanent international revolution of the working classes. He became involved in a power struggle with Stalin in the 1920s and was expelled from the Communist party in 1927 and from the Soviet Union in 1929. He was assassinated on Stalin’s orders in 1940.
Militant tendency
Militant Tendency derived its name from the Militant newspaper that promoted Trotskyite revolutionary socialism. Militant was an entryst organisation, seeking to infiltrate the Labour Party from within. The Militant Tendency gained a foothold in Bradford and some London boroughs but its biggest success was in Liverpool, where it gained control of the city council, with Derek Hatton as deputy council leader. Their slogan was ‘Better to break the law than break the poor’.
Labour Problems in 1979-92 overview
-Labour closely associated with the Winter of Discontent.
-Labour became associated with losing elections- lost 4 between 1979- 92.
-Labour relationship with the unions and the industrial strife of the late 1970s and early 1980s cast doubt on thier ability to govern.
-Party was more concerned about internal splits within the party rather than government.
-Party split between the left and right.
Why Labour couldn’t effectively oppose Thatcherism - Labour Left
Apart from Foot himself, the outstanding spokesman of the left was Tony Benn. He had been a minister under both Wilson and Callaghan but, despite gaining a loyal following on the left of the party, was never able to convert his popularity into a successful bid for the leadership. Moderates regarded him with suspicion and the right-wing tabloid newspapers portrayed him as a dangerous representative of the ‘loony left’. From the 1960s, he was a consistent opponent of Britain’s membership of EEC and later the European Union, regarding these bodies as undemocratic and unrepresentative.
Benn had interpreted Labour’s defeat in 1979 as a sign not that the party was too left wing but that it was not left wing enough. He urged the party to embrace genuinely socialist policies instead of tinkering with capitalist ideas. As a step towards achieving this, he led a campaign to change the party’s constitution.
At Labour’s 1980 and 1981 conferences, the left forced through resolutions that required all Labour MPs to seek reselection by their constituencies. The aim was to give greater power to left-wing activists who, although being a minority in the party overall, were disproportionately stronger in the constituencies. Candidate, Michael Foot, a Bevanite and a supporter of unilateral nuclear disarmament. Foot was elected leader in 1980 instead of the obvious’ candidate, Denis Healey, from the centre-right of the party. Later, at the Blackpool party conference in September 1981, Healey narrowly defeated Tony Benn in a bitter contest for the depuly leadership.
Why Labour couldn’t effectively oppose Thatcherism - Emergance of the SDP
The Social Democratic Party (SDP) was born at the end of January 1981, when a group of leading Labour politicians, the so-called ‘Gang of Four, David Owen, Roy Jenkins, Shirley Williams and Bill Rodgers, issued their Limehouse declaration, announcing the formation of the Council for Social Democracy. The leaders of the new SDP and the 28 Labour MPs that followed them believed that they had been driven out of the Labour Party by the extremists who were now taking over and had divorced itself from peoples real needs by pursuing unrealistic political agendas. They believed that the best way to save the Labour Party was not to fight a losing battle against the Bennite’ Left (supporters of Tony Benn) within the Labour Party, but to build a new centrist alternative capable of appealing to the middle ground. The snapping point had come earlier in January 1981, at a special party conference held at Wembley, dominated by the Labour Left. The Wembley conference was notorious for the hostility shown towards speakers by hard-left hecklers. This helped to convince moderates such as Shirley Williams that it was time to give up on Labour.The new SDP soon made an impact on national politics. Shirley Willians won
asensational by-election in the Conservative scat of Crosby in November 1981 and the following March, Jenkins won Glasgow Hilhead. In anothr
by election, in the previously safe working-class seat of Bermondsey in East London, Labour was resoundingly defeated by the Liberals, who claimed they had “broken the mould” of the old two-party system.
The two centre parties forged a formal agreement known as the SDP. Liberal Alliance (which became known as the Alliance) and worked together in both the 1983 and 1987 elections. However, relationships between the two parties were often tense and there were differences between the leaders, the “Two Davids, Steel and Owen. Even so, the Alliance seemed able to have overtaken Labour as the credible opposition to Margaret Thatcher’s government until 1987. Labour was widely regarded as unelectable.
Why Labour couldn’t effectively oppose Thatcherism - Demographic Changes
As well as facing the Liberal revival, the new SDP, and internal bitterness, the Labour Party could no longer depend on its traditional working-class support.
Press coverage of Labour was almost universally hostile. Whole sections of Labour’s traditional political support leaked away. Some Labour voters became ‘Thatcher Conservatives; some voted Liberal or SDP. Some supported the far Left in attacking the Labour leadership from within. Some became apathetic and did not vote at all.
The collapse in Labours popularity would not prove easy to turn around.
The basic foundations of the Labour Party were crumbling as demographic change loosened the traditional loyalties of the working class. The unions were no longer such a source of strength. Many traditional Labour strongholds in local government were seen as having lost touch with the people they were supposed to serve. It seemed that the Labour Party might have passed the point of no return and might cease to be a potential party of government.
Pundits speculated about the fundamental realignment of British politics.
Why Labour suffered a heavy defeat in the 1983 election
-Foot led the party and the campaign in an uninspiring way.
-The party was weakened by its internal disputes.
-The party’s ill-thought-out manifesto was largely a concession to its left wing and in particular to the CND. Among its pledges was the promise to abandon Britain’s independent nuclear deterrent and reintroduce nationalisation. The Labour MP Gerald Kaufman wittly, if despairingly. described the manifesto as ‘the longest suicide note in history.
* Margaret Thatcher was riding high on the Falklands factor.
* The apparent pacifism of Foot and Kinnock during the Falklands War made
the Labour Party look unpatriotic at a time of national crisis.
How did Neil Kinnock change the Labour Party
Neil Kinnock replaced Michael Foot as party leader in 1983. This was to prove a turning point in Labour’s fortunes. Although Kinnock had earlier been on the left of the party, he was realistic enough to appreciate that the hard left path was unlikely to lead Labour back to power. He began a wide-ranging policy review Which rejected many of the programmes, such as unilateralism, which the party had saddled itself with under Foot. A key moment came in 1985 at the annual party conference when Kinnock denounced the Militant tendency councillors whose extreme activities had earned the contempt of the electorate. He told the party that it had to adapt to the real world or it would be condemned to permanent powerlessness.
There is strong argument for regarding Kinnocks conference speech in 1985 as having destroyed the SDP. By advancing the notion of a party wedded to reform and determined to avoid extremes, he had stolen the SDPs clothes. A reformed but still radical Labour Party meant there was no need for an SDP. It has also been suggested that had the Gang of Four shown patience and waiting they would have found Kinnocks Labour Party perfectly fitted their ideas.
Yet in battling with the left and laying the base for the modernisation of the Labour Party, Kinnock had sacrificed his own party-political future. He had, in effect, to execute a series of U-turns, on nationalisation, on the nuclear issue
and on Europe. These Were coutageous moves on his part and unavoidable ifhis
party was to progress, but the consequence for Kinnock personally was that he was never again fully trusted either by his party or by the electorate. He stood down after his second election defeat in 1992. His successor, John Smith, was very popular in the party but had little time to build on this before his premature death in 1994. Smith was succeeded as leader by Tony Blair
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s -Mrs Thatcher and Ireland
In 1979, the year she took office, Margaret Thatcher was made all too aware of the task facing her in Northern Ireland. In March, two months before she became prime minister, Airey Neave, the man whom she intended to make her Northern Ireland secretary, was killed when a bomb planted under the bonnet of his car exploded as he drove out of the Commons’ car park. The killers were the INLA, an extreme breakaway group from the IRA, which claimed responsibility in a released statement: ‘Airey Neave, got a taste of his own medicine when an INLA unit pulled off the operation of the decade and blew him to bits … The nauseous Margaret Thatcher snivelled on television that he was an “incalculable loss” - and so he was - to the British ruling class.’
Five months later it was a member of the royal family who fell victim. At the end of August 1979, Earl Mountbatten, uncle of the Prince of Wales, was blown up by a bomb smuggled aboard his holiday yacht in County Sligo. The explosion also killed Earl Mountbatten’s daughter and grandson, and two others in the holiday party. The murders were synchronised with the detonation of two remote-control bombs at Warrenpoint in Northern Ireland which killed eighteen British soldiers of the parachute regiment. The troops were deliberately targeted because the IRA considered that particular regiment to have been responsible for Bloody Sunday’ in 1972 (see page 85).
The INLA was right in thinking that Thatcher would take a tough stance over Northern Ireland. But her approach did not exclude negotiation and cooperation, where these were thought possible. In 1980 she had a number of meetings with Charles Haughey, the Irish PM, with a view to establishing ‘closer political cooperation’ between Dublin and Westminster.
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - Death of Bobby Sands 1981
Such gains as were made on the diplomatic front were overshadowed by developments in Northern Ireland itself. In March 1981, in protest against the refusal of the authorities in the Maze prison to treat him as a political prisoner, Bobby Sands, a convicted bomber, went on hunger strike in H-Block of Maze prison. Mrs Thatcher told the authorities to stand firm in the face of such coercive martyrdom. The result of the intransigence on both sides was that Sands died after refusing food for 66 days with 9 more dying before strike called off in Oct 1981. His death made him an iconic figure to the nationalists of Northern Ireland. Margaret Thatcher claimed that the hunger strikes were a defeat for the
IRA because their main aim, Special Category Status for IRA prisoners, was not granted and her intransigence meant she became a hate figure for republicans in Nothern Ireland. Yet, despite the intense anger towards the British government that his death aroused among them, there was a more positive consequence; Sinn Féin, the legitimate republican party, began to pick up votes in elections. Although Sinn Féin was the political wing of the IRA, the growing willingness of nationalists and republicans to use the ballot box was at least a sign that violence was not looked on as the only recourse.With republicans such as Gerry Adams beginning to see the advantage in ballot box and the gun strategy.
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - The Brighton Bombing 1984
A political solution was still a long way off, however. This was dramatically illustrated on 12 October 1984, when Mrs Thatcher narrowly escaped being assassinated in the IRA bombing of the Grand Hotel in Brighton. The bomb had been concealed in a bathroom wall three weeks earlier and was timed to go off in the early hours of the morning when most of the Cabinet, who were using the hotel as a base during the Conservative Party conference, were expected to be there. In the event, five people were killed, none of them ministers, and 30 others injured. Later that day Thatcher gave an impressive performance, insisting that the conference must go on and declaring that democracy would never bow to terrorism.
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - Anglo-Irish Agreement, August 1985
A major step towards democracy was taken a year later with the signing of the Anglo-Irish Agreement by Margaret Thatcher and the Irish premier, Garrett Fitzgerald with the hope of enhancing security between irish republic and UK and strengthen the moderate nationalists against Sinn Fein. It contained three main provisions:
* The Republic recognised Northern Ireland as being constitutionally a part of the UK.
* The British government gave an assurance that it supported full civil rights for all in Northern Ireland and acknowledged the strength of nationalist desires for a united Ireland.
* The two governments committed themselves to close cooperation over cross-border security matters.
With hindsight, the Agreement can be seen as an important stage in the advance towards a peaceful settlement. However, at the time, it was bitterly condemned by many of those it most closely concerned. Mrs Thatcher, who had genuinely intended it to be a basis for reconciliation in Ulster, was shocked at the vehemence of the response; she recorded that it was ‘worse than anyone had predicted.’ The reasons for opposition to the Agreement were as follows:
* The unionists objected to the involvement of the Irish government in Northern Ireland’s affairs, fearing that it gave encouragement to the notion of a united Ireland under the rule of Dublin. At a massive unionist rally, where 200,000 attended, in Belfast a few days after the signing of the Agreement, Ian Paisley cried out emotionally, ‘Thatcher tells us that the Republic must have some say in our Province. We say never, never, never, never!’ The unionist MPs showed their bitterness by resolving not to attend Westminster, copying a tactic that Sinn Féin had continually used.
* The republicans rejected the Agreement for a reverse reason; its terms confirmed the very thing they were fighting against: Northern Ireland’s continuation as a part of the UK. They pledged themselves to continue ‘the armed struggle. Confirmed N.I. was apart of the UK.
* Some members of Thatcher’s government were unhappy with the Agreement on the grounds that it might be wrongly interpreted as a concession by the government towards the men of violence in Northern Ireland. Ian Gow, the housing minister, resigned, although he continued to be on good terms with the prime minister. In 1990 he paid the ultimate price for his tough line on Ulster when he was blown up outside his home in Sussex by an IRA car bomb.
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - Massacre at Enniskillen 1987
The IRA’s commitment to ‘armed struggle’ was murderously evident in November 1987 when it exploded a bomb at a Remembrance Day service in Enniskillen in Northern Ireland. Eleven people were killed and 60 others, including women and children, maimed. So poignantly tragic was the fate of these innocent victims that there were many in both the Catholic and Protestant communities who openly doubted that any cause could ever justify such suffering. The IRA, however, stated that the carnage would not deter it from its mission. Its official terse comment was ‘The British Army did not leave Ireland after Bloody Sunday:
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - Death on the Rock 1988
The undeclared war continued. In March 1988, in the British colony of Gibraltar, the SAS shot and killed three IRA members before they had time to detonate a car bomb intended to decimate British troops at a changing of the guard ceremony. There was official disquiet, although little public sympathy for the victims, when eyewitness accounts suggested that they had been shot without warning. At the funeral of the three a week later in Belfast, a crowd of some 5000 attenders were fired on by Michael Stone, a loyalist gunman; three died and another 50 were injured. Three days later two off-duty British soldiers drove, presumably by mistake, into an area where an IRA parade was being held. They were dragged from their car by the crowd and killed.
In October 1988, in an effort to deny the terrorists ‘the oxygen of publicity, Margaret Thatcher’s government imposed a broadcasting ban on the IRA.
This involved blanking out the voices of terrorists and their supporters, and substituting actors’ voices. As even the government later reluctantly admitted, it was all rather pointless since the IRA personnel could still be seen and their message heard.
Did the Conservatives improve or worsen the Northern Ireland troubles in 1980s - Measures to bring stability
Despite the catalogue of death, efforts continued to be made to bring stability to Ulster. In the final years of the Thatcher government, the following measures were introduced:
* 1987: the Central Community Relations Unit was established to foster greater contact and understanding between Catholics and Protestants.
* 1989: the Fair Employment Act required employers who had more than 25 workers on their books not to discriminate when allocating jobs and promotions.
* 1990: the Northern Ireland Community Relations Council extended the support and resources granted to the Community Relations Unit three years earlier.
These minor advances kept alive the idea that the government was not totally consumed with the fight against terrorism in the province; it had time for the smaller things. But as the number of outrages and the death toll mounted, it was evident to all that only a political solution could end Northern Ireland’s agonies.
Thatcher policy in first term vs in second and third term
First Term - Dominated by the implementation of Monetarism.
Second and Third Term - Dominated by Privatisation, deregulation and Supply-side economics
Driven by her belief that Britain’s economic problems were caused by:
1. High levels of government spending, which led to borrowing, high taxation and inflation
2. Unnecessary government interference in the running of the economy
3. Combination of weak management and powerful trades unions = continual
increase in wages and decreasing productivity, inflation and lack of competitiveness.
Monetarism
To bring inflation under control, the Thatcher government chose to adopt monetarism, a financial theory particularly associated with Milton Friedman, an influential US economist. Friedman taught that the root cause of inflation was government spending. It followed, therefore, that in order to control inflation, governments had to restrict the amount of money in circulation and reduce public expenditure. In keeping with Friedman’s notions, the Thatcher government began to cut government spending, hoping that this would reverse the position in which Britain’s PSBR was always in deficit. To control inflation further, interest rates were kept at a high level in order to deter irresponsible borrowing and keep the pound strong on the international financial market. The success of these measures was indicated by the fall in the rate of inflation from nineteen per cent in 1979 to five per cent in 1983.
While monetarism was successful in reducing inflation it did so at the price of job losses. Unemployment rose at a disturbing rate every year after 1980. This might have been acceptable had the drop in inflation been accompanied by economic growth. But the opposite was happening. In 1981, falling orders for manufactured goods had seen the start of an economic recession.
Impact of Monetarism- Inflation
Interest rates were used as a mechanism to control inflation; they were raised to 17 per cent in 1979 . However, the downside was that the higher interest rates made it more expensive for businesses to borrow. They also increased the value of the pound which made it more difficult for businesses to export. Therefore, the high interest rates of the early 1980s led to a decline in both output and demand. The economy went into recession with many businesses going bankrupt, which in turn led to high unemployment.
Even worse, initially, inflation went up, peaking at 22 per cent in May 1980.
Thereafter it fell, reaching a low of 2.5 per cent in 1986. Attempts to control. inflation in the later 1980s led to a further recession and eventual entry into the European Exchange Rate Mechanism (ERM). By 1990 it had again reached double figures.
Impact of Monetarism - Social Unrest
In reaction to the recession, serious disturbances occurred in a number of English cities, In April 1931, in Brixton in south London, hundreds of black youths ran riot, burning shops and looting property. It was only with the greatest difficulty that the police eventually contained the trouble. In July similar violence occurred in the following cities:
* St Paul’s region of Bristol
* Toxteth area in Liverpool
* Moss Side in Manchester.
Although local conditions helped to explain the disturbances, they were in a general sense a result of Mrs Thatcher’s tough monetarist policies which had led to increased unemployment. The following common factors combined to ignite the troubles:
* Poor job prospects in the deprived inner-city areas.
* Alienation of young black people who felt they were discriminated against by the police, who, in a six-day period in April, in Brixton, had used the
‘Sus’ law against more than 1000 people, the majority of whom were black.
* The high incidence of unemployment among school leavers. Overall, unemployment in Brixton was at thirteen per cent. It was estimated that unemployment for ethnic minorities in Brixton stood at 25 per cent and black youths, in particular, at 55 per cent.
Impact of monetarism - Taxation
The belief that people rather than governments spent money more efficiently led to a shift away from direct taxation, such as income tax, to indirect taxation such VAT: i.e. away from taxes on people’s incomes or property and towards taxes on the goods and services on which they chose fo spend their money. Hence the top rate of income tax fell from 83 per cent to 40 per cent by 1988 and the standard rate fell to 25 per cent from 33 per cent over the same period, but VAI went up from 8 per cent to 15 per cent in
1979, Similatly Laxes on petrol, igaretes anders heleent ap in almost every
single budget between 1979 and 1987. Supporters argued that reducing direct taxation would incentivise wealth creation by allowing people to keep more of what they earned. Critics argued that transferring the burden onto an indirect taxation system was less progressive and hit poorer people harder.
Impact of Monetarism - Local Governemnt
In order to control the overspending of Labour local authorities the Conservative government introduced rate capping. This limited the amount of money that the council was allowed to raise in local taxation. In 1985 a number of authorities, including Shefield and Liverpool, tried to rebel against the cap and refused to set budgets. Eventually, threatened by bankruptcy, they had to back down. In 1986, the Local Government Act abolished the bif metropolitan local authorities that had been set up by the Heath government;
Locapowers of the central government were greatly increased at the expense of local government. In the short term, this was a clear victory against the loony left but, in the longer term, it damaged local accountability.
However despite the rhetoric on controlling public spending, Thatcher in fact never managed to cut public spending in real terms, partly because spending on social security went up due to high levels of unemployment.
Impact of Monetarism - Government borrowing and spending
It followed, therefore, that in order to control inflation, governments had to restrict the amount of money in circulation and reduce public expenditure. In keeping with Friedman’s notions, the Thatcher government began to cut government spending, hoping that this would reverse the position in which Britain’s PSBR was always in deficit.
Spending increases on unemployment benefits.
Impact of Monetarism - Unemployed
Because the Thatcher government saw the control of inflation as the key economic threat to the British economy, maintaining low levels of unemployment was no longer seen as the primary aim. Instead British industry had to be prepared to be more competitive and if this led to a rise in unemployment then that had to be accepted. In fact the impact of monetarist economic policies in the early 1980s on industry was drastic. Many industria plants closed down permanently. The worst hit areas were the Midlands, the North, central Scotland and South Wales. Areas in the south and southeast were not hit as badly. Some commentators described what was happening as the ‘deindustrialisation of Britiain’. Manufacturing output fell by 15 per cent in 2 years. In the West Midlands production fell by a quater. Steel production alone was cut by 30 per cent, to less than 14 million tons.
By 1983 unemployment rose to over 3 million, the highest it had been in the post- war period. This was 13.5 per cent of the total workforce. The government did introduce some policies to combat this. Youth Employment Schemes were created whereby employers recieved a subsidy to take young peop;e on, and employer National Insurance Rates were reduced for lower paid jobs. Nevertheless the unemployment rate did not fall below 3 million until 1987. The governmnet remained firm in its conviction that controlling unemployment. was more important that controlling unemployment. In some areas which had been dependent on heavy industry, such as Liverpool, the unemployment rate went as high as 25 per cent and remained in double figures throughout the 1980s. In particular, far fewer people were being employed in the manufacturing industry. Workers found their traditional skills were not in demand because they had been rendered out of date by mechanisation or by flexible working practices. The economic realignment towards service industries also meant that men were hit harder than women and in many homes women became the main breadwinners.
Impact of Monetarism - Public Support
The government did not always see the rioters as helpless victims of social and industrial change. There was a strong feeling on the right that the disturbances were deliberately started or exploited by political troublemakers. Comparing his father in the 1930s with the ‘layabouts’ of the 1980s, Norman Tebbit, the minister for employment, told applauding delegates at the 1981 Conservative Party conference: He didn’t riot; he got on his bike and looked for work, and he went on looking until he found it!
Tebbit was one of the tough guys in the Cabinet. Portrayed in the satirical television programme Spitting Image (see page 168) as a leather-clad, cosh-wielding enforcer, he was certainly one of Thatcher’s staunchest supporters, who urged her not to allow the riots to deflect her from her policies. Such support certainly strengthened her resolve to keep to the promise made at the Conservative Party conference in 1980 when she had declared, to loud acclaim,
‘the lady’s not for turning’. This was a calculated act of defiance against the
‘wets’, ministers such as Francis Pym (defence), James Prior (employment) and Peter Walker (agriculture), who, worried by the effects of monetarism, had urged that the policy be abandoned or modified.
By 1982 the mounting social and economic problems had begun to threaten Mrs Thatcher’s continuance in office. Opinion polls showed that the prime minister’s personal popularity and that of her government had declined.
The government largely unpopular - strong support in South East, however.
discontent amongst youth, ethnic minorities and councils in response to rate capping.
