Thatcher's Economic Policy 1979 - 1990

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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
      • 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
    • 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
    • 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
        • 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
    • 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
    • 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
        • inflation peaked in May 1980 with 22%
        • inflation didn't stay low for long
    • 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

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