What impact did Thatcher's Governments have on Britain? 1979-1997 Flashcards
Thatcher’s Economic Policies in the 1st Term 1979-1983
The Thatcher Governments
- MT swept to power with working majority in 1979 w/ right wing manifesto
- Wanted to halt economic devline through promotion of free market forces
- Wanted to reduce unnecessary government interference and bureaucracy in economy
- Supported ideas of ‘Chicago School’ of economics - inc. monetarism
Thatcher’s Economic Policies in the 1st Term 1979-1983
Monetarism
- Theory that inflation is the greatest economic ill - govs should increase value of money by reducing supply
- The more valuable money is, the more it can buy, so prices will fall
- Can be achieved by reducing public spending and increasing rates of interest to deter lending and credit
Thatcher’s Economic Policies in the 1st Term 1979-1983
Impact of Monetarist Policies 1979-1981
- Monetarism applied by raising interest rates & supplying less money
- Human costs - unemployment, weaker firms that couldn’t afford to borrow went bankrupt
- Unemployment rose by 1M - social unrest, riots in many cities
- 1980-1981: GB lost ~25% of manufacturing base
- MT inconsistent in applying monetarist policies
Thatcher’s Economic Policies in the 1st Term 1979-1983
Thatcher’s Inconsistencies in applying Monetarism
- Accepted recommendations of Clegg Commission appointed by previous Labour gov - awarded 25% pay rise to public sector workers
- British Leyland given more subsidies
- Allowed above-inflation pay settlement of 16% to end steel strike
Thatcher’s Economic Policies in the 1st Term 1979-1983
The Imposition of Monetarism 1981
- By 1981, many felt MT’s economic policies were failing
- Cabinet split into ‘wets and ‘dries’ based on level of support
- 1980 Cons Party Conference: asserted monetarist policies would continue - ‘You turn if you want to: the lady’s not for turning’
Thatcher’s Economic Policies in the 1st Term 1979-1983
Background
- Chancellor Howe shocked MT in 1981 by showing that public sector borrowing was increasing - £9.25B in 1979 to £14.5B by end of 1981 (target was £8.25)
- MT appointed economic adviser Alan Walters - urged dficit be cut by £4B by raising tax
- March 1981 - 350 economists urged gov to abandon monetarism and return to deficit spending, but gov policy was decided
Thatcher’s Economic Policies in the 1st Term 1979-1983
1981 Budget
- Chancellor introduced monetarist Budget in 1981 - cut gov expenditure, increased indirect taxes (price of cigarettes rose from 14p to 80p), took suggested £4B out of economy
- Controversial at the time and remained so
- Many had been hoping for cuts in tax to stimulate spending
- Direct tax didn’t increase - threshold at which people have to pay them (min. wage), which usually rose with inflation, stayed the same
Thatcher’s Economic Policies in the 1st Term 1979-1983
Effects of 1981 Budget
- Critics believed gov would easily be defeated in next election due to continued economic problems
- In long term, 1981 Budget seemed to work
- Inflation fell steadily - 21.9% in May 1980 to 5% by DECEMBER 1982
- GDP began to grow - -0.7% in 1st quarter of 1981 to 1.3% by 2nd quarter of 1982
- Many believed economy was set to improve - optimism contributed to Thatcher’s triumph in 1983 election
Economic Developments of the 2nd Term 1983-1987
Supply-Side Economics
By mid 80s - monetarism less significant, economy stimulated by creating greater demand
Involved policies such as:
* Deregulation
* Extensions of Credit
* Tax reductions
* Decline of union power
Economic Developments of the 2nd Term 1983-1987
Deregulation
- Gov sought to reduce its own role - believed it had led to economic decline
- Decade saw abolition of credit controls, deregulation of transport (enabled formation of more private transport companies), public institutions taking more financial control
- Emphasis overwhelmingly on development of free market
Economic Developments of the 2nd Term 1983-1987
Deregulation of the Stock Market
- October 1986 - Chancellor Lawson deregulated Stock Exchange, which had been operated according to complex old customs and conventions
- London became a centre of world finance - lack of regulation in practices, computers made instant transactions possible
- Attracted significant numbers of foreign investment banks
- 1985-1988 # of staff in London from US firm Salomon rose from 150 to 900
Economic Developments of the 2nd Term 1983-1987
Black Monday
- Warnings about problems of unregulated stock markeys - prices of stocks rose until they were overvalued and then collapse
- 19 October 1987 - in the wake of falls throughout world markets, value of stocks in London Stock Market fell by £50.6M
Economic Developments of the 2nd Term 1983-1987
Deregulation of Banks and Building Societies
- Before the 1980s, banks had operated financial services and building societies offered mortgages for properties
- Building Societies Act 1986 - building societies could act as banks, banks could offer mortgages
Economic Developments of the 2nd Term 1983-1987
Development of Technology
- Allowed financial transactions that previously involved laborious clerical processes to be completed instantly
- 1980 - most personal financial transactions had been in cash
- 1985-1988: number of cash dispenders doubled while people with access to computers and consoles could being online banking
Economic Developments of the 2nd Term 1983-1987
Lawson Boom
- Economy grew more confident after 1983
- Due to Greater availability of credit and reduction in taxes
Economic Developments of the 2nd Term 1983-1987
Greater Availability of Credit
- Due to deregulation, credit became more readily available
- People found it easier to take out loans - mortgages particularly more accessible due to loan banks and lending companies offering them, not just building societies
Economic Developments of the 2nd Term 1983-1987
1988 Budget: Tax cuts
- Tax cuts of £4B - basic rate of income tax cut from 27p to 25p
- 4/5 highest tax rates cut - nobody paid more than 40%
- Wealthier people saw 33% tax cuts
- Tax to small businesses cut
- Aim was to encourage consumer spending - appeared to succeed and created economic optimism among those in employment who were doing well (‘Loadsamoney’ character - Harry Enfield)
Economic Developments of the 2nd Term 1983-1987
Privatisation
- Intention was to gain revenue for gov from ‘popular capitalism’ - people could own shares in private companies
- British Airways, Steel, Telecom, Gas sold off - priority given to small-scale private investors
- Gov raised £7B 1988-89
- Economy also benefited from production of North Sea gas & oil - revenue approaching 15% of national income by 1985
The Extent to which State Intervention & Public sector were rolled back
Thatcher’s beliefs on excessive state activity
- Stifled self-help and creativity
- Replaced supportive role of the family with state-run welfare schemes which contributed to dependency - ‘nanny state’
- Led to economic inefficiency and waste - believed private enterprise always run industry better than the state
The Extent to which State Intervention & Public sector were rolled back
Thatcher’s examples of ‘rolling back the state’
- Privatisation programme - 600K fewer people employed by state
- Sale of council houses - 500K per year became house owners rather than public sector tenants 1980-1989
- Ending of prices and incomes policies and their oversight by gov
- Ending of consultations with unions and employers over economic planning
The Extent to which State Intervention & Public sector were rolled back
Local Government
- Took 28% of public spending and MT felt much of its budget was wasted - particularly in terms of promoting left wing policies
- A series of Acts reduced powers and budgets of local gov authorities - forced to bid for private sector contracts rather than provide them themselves
- Greater London Council, responsible for governance of the capital, was abolished - responsibilities devolved to local councils
- Local gov had powers reduced, but was more closely supervised by central gov
The Extent to which State Intervention & Public sector were rolled back
Education
- 1988 Education Reform Act saw introduction of National Curriculum - planned and monitored centrally and assessed using a common format throughout the country
- This was a response to long-standing concerns about quality of education - marked first gov-prescribed curriculum
- Attainment and progress could be judged in individual schools against national benchmarks
The Extent to which State Intervention & Public sector were rolled back
National Health Service
- MT had no intention of dismantling NHS
- Gov introduced internal markets - NHS trusts could bid for services such as cleaning and catering that were previously done by NHS staff
- Led to greater level of bureaucracy to manage it
- Whole management structure became more complex - 1990: NHS administered by 700 different authorities
The Extent to which State Intervention & Public sector were rolled back
Privatised Industries
- Regulated by new layer of ‘watchdogs’ such as Oftel and Ofgas
- May have made them more accountable, but expanded role of Gov
The Extent to which State Intervention & Public sector were rolled back
Social Control
MT felt state needed to be strong to:
* Remove obstacles from development of free market - eg. union power
* Protect citizens - gov gave more power to police, Law and Order budget rose by 36% 1979-1989, police deployed on national basis (eg. during miners’ strike)
The Extent to which State Intervention & Public sector were rolled back
To what extent did MT ‘roll back the power of the state’
- Gov was too concerned with control in order to ‘roll back’ in terms of intervevntion and public sector
- Reduced powers of those aspects of state which it disagreed with
- Extended state to offer greater accountability and provide wherewithal for free market to operate - albeit under state supervision
The Extent of Political and Social Division within Britain
Divisiveness of Policies
- Contemporary politicians, and many later historians believed that MT’s gov generally had a divisive impact on society
- Many groups benefitted and others became hostile and alienated
The Extent of Political and Social Division within Britain
Sale of Council Homes
- One of the most popular measures of MT’s ‘popular capitalism’
- Idea was that home owners would have more stake in society
- Raised £18B as 1.24M homes were sold
- Downside - shortage of public sector stock as many tenants taking advantage of the scheme could have bought houses on the open market
The Extent of Political and Social Division within Britain
Context of the Miners’ Strike 1984-1985
- MT called for closure of unprofitable pits, but this process had started before she had - continuity, not change
- Issue largely seen in terms of breaking union power
- National Union of Miners recently electer Arthur Scargill as new president - largely responsible for organising flying pickets in 1972
- MT appointed Ian McGregor as Chairman of National Coal Board - wanted to modernise industry and shut unprofitable pits (had done similar job as head of British Steel)
The Extent of Political and Social Division within Britain
The Miners’ Strike 1984-1985
- Many pit areas were close-knit communities - almost all local men worked in the mines
- Absence of alternative forms of employment - closure would have devastating effect
- NUM called for industrial action without formal ballot - leaders feared they would lose ballot
- Throughout summer of 1984 - violent clashes with police and miners
The Extent of Political and Social Division within Britain
Enemies Within
- MT and many of her supporters saw wider agenda among leaders of NUM - believed they were using the strike as a vehicle for socialist revolution
- Began to speak of ‘enemies within’
- Felt survival of British democracy and capitalist way of life depended defeating the strike
The Extent of Political and Social Division within Britain
Defeat of the NUM
- Employment Acts in the early 80s reduced union power - mass picketing and closed shop now illegal, strikes had to be voted for in ballot
- Gov was stockpiling coal for emergencies
- Gov chose time for confrontation - closures in spring and summer when coal demand was lowest, so industrial actions would happen then
- Gov prepared to use law - police action, courts freezing union assests (illegal strike)
- Strike wasn’t solid - some areas refused to join, workers drifted back to work to support families
The Extent of Political and Social Division within Britain
Impact of Miners’ Strike 1984-1985
- Gov had won notable victory - union power declined
- There were other struggles - print workers who struck against modernisation in 1986
- Workers generally had to come to terms with new conditions, largely due to modernisation and technical developments which saw the decline of manual production
The Effect of Thatcherism on Politics and Party Development
Poll Tax: Background
- MT believed local councils should be more accountable to electors
- Felt if all adults contributed equally to local authority taxes, they would be more critical about how money was spent
The Effect of Thatcherism on Politics and Party Development
Poll Tax
- A flat rate tax based on individuals rather than an unequal one based on householders
- Introduced firstly in Scotland to huge opposition - most were paying far more, biggest burden on the poorest, cost 2.5x more to collect
- Some suggested it cost more to collect than to raise
- Even more opposition when it spread to rest of UK - significant marches and protests (eg/ Trafalgar Square in 1990), many refused to pay
- Poll tax outlasted MT - abbandoned in 1991, replaced by council tax similar to old system
The Effect of Thatcherism on Politics and Party Development
Effects of Thatcher on Political Parties
- Little doubt that Thatcherism changed political landscape in GB
- In some ways, politics became more divisive - greater extremes of left and right
- Growth of ‘hard right’ in Cons which supported free market forces
- Infiltration of organisations such as Militant Tendency within Labour
The Effect of Thatcherism on Politics and Party Development
Conservatives
- MT never wholly trusted by many in Cons leadership - little doubt of her popularity in smaller members, appointed supporters to high office as she gained confidence
- ‘Wets’, who she was originally forced to appoint to ministerial positions were dismissed or demoted - particularly in areas covering economy (eg. Employment to N. Ireland dpts)
- One-Party Conservatism (with commitment to welfare) was forgotten
- Those promoted to high office tended to be self-made men - traditional wealthy leaders with aristocratic connections associated with ‘wets’
- By late 80s, MT was seen as imperious - party joined ranks to bring about her downfall
The Effect of Thatcherism on Politics and Party Development
Labour
- Moved to the right - inkeeping with direction in which all politics was moving
- Under Neil Kinnock (leader wince October 1983) - expelled left-wing groups (eg. Militant Tendency), editched many left-wing policies (eg. unilateral nuclear disarmament)
- This process was accelerated by appointment of Tony Blair as leader
The Effect of Thatcherism on Politics and Party Development
New Labour
- Labour Party refocused in mid-1990s - appealed to MC and business-orientated voters
- Ditched Clause 4 - policy which advocated nationalisation
- 2002 Peter Mandelson (important thinker within Labour) - ‘We’re all Thatcherites now’
The Effect of Thatcherism on Politics and Party Development
Social Democrats & Liberals
- Social Democrats formed in 1981 - largely by members of Labour who disliked its left-wing agenda
- Enjoyed initial success - failed during 80s to make major impact in terms of MP numbers
- 1988 - merged with Liberals to form Social and Liberal Democrats
- 1989 - changed name to Liberal Democrats
The Effect of Thatcherism on Politics and Party Development
Liberal Democrats
- Accepted mixed economy and privatisation policies
- Battles as to the extent to which the two parties should accept these - lead to costly splits and defections to either of the main parties
The Social and Political Impact of Thatcherism into the 1990s
Politics
Main parties moved closer together - new consensus over promoting free market & limiting gov interference in economy
Not all Thatcherite policies were continued by Major
* More was spent on healthcare and education
* Britain signed 1992 Maastricht Treaty - developing closer ties within EEC
* Unpopular poll tax withdrawn - replaced with council tax according to 8 bands of property value
The Social and Political Impact of Thatcherism into the 1990s
Disaffection in Politics
- Surveys in 1980s showed 4x increase in # of people who had been on demonstrations
- 1991: 33% of those surveyed felt the British political system worked well - fallen from over 50% in 1973 Kilbrandon Report
The Social and Political Impact of Thatcherism into the 1990s
Party Organisation
- Post-Thatcher years saw both Labour & Cons increasingly directed from centre with attempts to exert more control over MPs
- Particularly problematic for Major’s gov
The Social and Political Impact of Thatcherism into the 1990s
Thatcher’s Legacy
- Many Cons felt that Major had betrayed MT - faced major opposition from the party and his own cabinet ( particulalry over support for closer ties with EU)
- Issue over terms of membership of EU and impact on national sovereignty - severely damaging split within Cons, contributed to overwhelming defeat in 1997 GE
The Social and Political Impact of Thatcherism into the 1990s
Society
- Divisive effect - particularly between those who did well and those who suffered
- Many argue effects of MT’s policies were the outcomes furthest removed from what she had hoped
The Social and Political Impact of Thatcherism into the 1990s
‘Victorian Values’
- MT envisaged society in which enterprise culture thrived but people acted responsibly, helped each other in times of need
- ‘Traditional family values’ and support systems were at the fore
- Critics argue enterprise culture generated atmosphere of selfishness, greed, lack of self restraint
- More voluntary work & charitable giving - 1985 Live Aid concert raised £5M for famine
The Social and Political Impact of Thatcherism into the 1990s
Lack of Self-Restraint
- Family ties fragmented - divorce numbers grew by 20% 1981-1993, # of children born out of wedlock trebled 1979-1991
- Crime rates rose significantly - drug trafficking doubled 1981-1988, # of reported rapes trebled
The Social and Political Impact of Thatcherism into the 1990s
Back to Basics
- Emphasis on Victorian Values resonated in theory, if not in practice
- Major spoke of ‘Back to Basics’ in terms of self-discipline and responsibility
- Ideas came to little - scandals within his own gov
- Emphasised tension between greater freedoms within Thatcherism and self-restraint
The Social and Political Impact of Thatcherism into the 1990s
Thatcher’s Overall Successes
- Created enterprise culture
- Moved Politics to the Right
- Made some aspects of government more accountable
The Social and Political Impact of Thatcherism into the 1990s
Thatcher’s Overall Failures
- Promoting economic ideas such as monetarism, which would have created more responsible and controlled economic behaviour
- Reforming public services
- Rolling Back the State
- Healing divisions within society
