Economic Boom under Blair

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  • Economic boom under Blair
    • Brown would have complete control over economic policy as chancellor
      • part of agreement he wouldn't challenge Blair in leadership election
    • Lab. inherited very favourable economic climate
      • Brown's priorities
        • prove ton Middle England Lab. could be trusted with the economy & was pro-business
          • escape image of 'tax and spend' economy
        • keep inflation low
        • keep govt. spending under control
    • 'prudence with a purpose'
      • growing stable economy to improve public services
      • after 2001, injection of money into public services
    • big increases in new school & hospitals
      • wages increased for nurses, doctors & teachers
      • exam results up & waiting times down
    • Lab. argued spending essential to make up for years of under-funding & neglect under Cons.1979-97
    • in order to avoid raising taxes, Lab. (like Cons.) continued to use private sources of funding for improvements in public services
      • some criticism of funding new projects through Private Finance Initiative (PFI)
      • buildings usually finished quickly by debt stored up for the future
    • by 2007 inflation kept under control, record numbers of people in work, living standards remained high & consumer economy boomed
    • some economists warmed boom based on rising house prices & high levels of credit card spending & personal debt not increased productivity
      • Will Hutton
      • danger this 'bubble' might not last
    • when Cons. left office 1997 inflation = 2.6% by 2007 it was 4.8%
    • pension reform = £8bn of pensions lost
      • v. popular savings ratio was 9.7% 1997; fell to 3.7% 2007
      • UK total share values was £120bn lower
      • raid on pensions was a 'stealth tax'
        • other examples of stealth tax
          • rising national insurance contributions
          • removing marriage tax allowance for couples under 65
          • removing tax relief on mortgage payments
          • reducing level of tax-free savings under TESSAs, PEPs & ISAs
            • in 1999 untaxed amount could be saved was £12,000. 2007 it was £7,000
    • by 2007, 29.1m people in work - 2.5m more than 1997
    • in 2007, 5.4m (many 16-30 y/os) had never had a job & lived on benefits
    • 37% increase in jobs were in the unproductive public sector which made B increasingly a client state
    • policy to borrow in order to fund expansion of public services
      • costs of services outran revenue returns leading to increased borrowing
      • govt. borrowing encouraged consumer credit boom
      • B. not well prepared for international recession that set in by end of 2007
    • 'Golden Brown' policy to sell off half of B's gold reserve as gold prices falling
      • subsequent recovery of gold market meant B had sold at a heavy loss of £3bn

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