Thatcher's Economic Policy 1979 - 1990
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- Created on: 04-01-18 17:13
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- Thatcher's Economic Policy 1979 - 1990
- Deregulation
- successes
- removing red tape made growth & trade easier for businesses
- encouraging entrepreneurship & wealth creation
- Loan Guarantee Scheme made it easier for small businesses to borrow money
- Enterprise Allowance Scheme encouraged the unemployed to start up their own businesses
- giving them £40 a week up to 7 years
- financial dereg. freed the City of London & financial markets from tight controls of BoE
- 'Big Bang' 27th Oct 1986 deregulated London Stock Exchange
- opened the way for computer screen trading & replacing old boys network with free comp
- foreign banks could not operate as stockbrokers
- blew away old tradition & credited with restoring London's position as world finance centre
- could compete with Wall Street
- 'Yuppie' Young urban professional & London became a place where bigger risks taken & bigger fortunes made
- removing red tape made growth & trade easier for businesses
- failures
- productivity didn't increase much
- 2.2% growth in GDP in 80s no better than in 70s
- growth in 2nd half of decade balanced by under -performance at beginning of decade
- successes
- Monetarism
- successes
- top rate of income tax fell from 83% to 40% by 1983
- standard rate fell from 33% to 25% by 1983
- supporters argues reducing direct taxation would incentivise wealth creation by allowing people to keep more of what they earned
- failures
- 1981 budget applied even more monetarist principles & Howe called it 'the most unpopular budget in history
- VAT increased 8% - 15% in 1979
- taxes on petrol, cigs, alcohol increased in almost every budget 1979-1987
- critics argued transferring burden onto indirect tax system was regressive & hit poor people hardest
- cutting public spending led to clashes between Cons central govt & many Lab controlled local councils
- T's govt. saw left-wing councils as enemies due to their ideology & blamed of wasting resources
- fiercest battles fought in GLC with Ken Livingstone
- T treated many GLC policies on education & transport as provocations
- Livingstone demonised as 'loony left'
- Cons introduced rate capping on local councils
- met with opposition esp. in Liverpool who refused to produce budget
- 1986 Local Govt Act abolished metropolitan local authorities set up by Heath
- powers of central govt. greatly increased
- short term - clear victory against loony left
- long term - damaged local accountabilty
- successes
- Economic Realignment
- successes
- led to investment & regeneration in some areas
- Heseltine, who continued to argue for greater govt. intervention, spearheaded redevelopment projects in Liverpool & London docksides
- in Canary Wharf development on old West India docks became 2nd most important financial district after CoL
- symbol of shift to service industry
- failures
- old industries faced challenge from foreign competition
- north-south divide sharpened
- coal mines, steelworks shipyards couldn't embrace change
- dereliction in Scotland, S. Wales, Northeast, Northwest & Midlands
- coal mines, steelworks shipyards couldn't embrace change
- increased problems of ill health, depression, alcoholism & drugs in inner-cities
- 1981 series of riots April - July in Brixton, Handsworth & Chapeltown
- Scarman Report identified causes as high unemployment, poverty & race
- despite the report & policy changes, further riots in 1985
- Scarman Report identified causes as high unemployment, poverty & race
- successes
- Unemployment
- successes
- Youth Employment Schemes were created whereby employers received a subsidy to take young people on
- Employer National Insurance rates were reduced for lower paid jobs
- failures
- many industrial plants closed down permanently with the worst hit areas being the Midlands, North, C. Scotland & S. Wales
- manufacturing output fell by 15% in 2 years
- by 1983 unemploy. rose to over 3m; the highest ever post-war
- 13.5% of the total workforce were out of work
- didn't fall below 3m until 1987
- those in manufact. industries hit hardest, often men more than women
- successes
- Inflation
- successes
- inflation fell reaching a low of 2.5% in 1986
- interest rates used to control inflation
- failures
- higher interest rates made borrowing more expensive
- increased value of £ made exports more expensive
- economy went into recession
- many businesses went bankrupt
- high unemplyment
- many businesses went bankrupt
- inflation peaked in May 1980 with 22%
- inflation didn't stay low for long
- successes
- Privatisation
- successes
- 1979-90 number of individuals owning stocks & shares rose from 3m to 9m
- competition increased, thus encouraged improvement & innovation
- 'outsourcing' became increasingly widespread eg refuse collection
- brought in a lot of revenue for the govt.
- Oct 1979 BP, Feb 1981 British Aerospace, Oct 1981 Cable & Wireless, Feb 1982 National Freight Corp., Nov 1983 Associated British Ports
- failures
- employees lost jobs as businesses cut back on staff
- workers could no longer rely on long-term job security or reliable pension provision
- successes
- Deregulation
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