What were the effects of Thatcher's economic policies?
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- Created on: 28-03-17 09:28
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- What were the effects of Thatcher's economic policies?
- Origin and evolution of Thatcher's views on the economy?
- Views based on moral upbringing and 'new right' thinkers
- Thatcherism stand for living within your means; incentives; wider spread of home ownership
- Wanted to smash undemocratic practices of trade unions; promote individualism; overcome inefficiencies of state ownership
- Promote growth and red tape and lift tax burden on successful businessmen
- Fight against inflation
- Willing to risk higher unemployment to reduce inflation
- Inflation stood at 11% 1978; by 1980 22% due to spiraling pay demands
- Refused to print money to cover inflation (punished careful savers and reward reckless borrowers)
- Chicago based economist Milton Friedman argue inflation only be effectively tackled by restricting amount of money in circulation called Monetarism
- By 1983 fans of Monetarism (Chancellor Nigel Lawson) gave up on setting targets for money supply
- Supply-side policies replaced Monetarism; cuts to income tax, welfare payments and deregulation
- 1980-1 budget slashed government spending
- 1980-1 manufacturing production fell by 14%; 1982 unemployment 3million
- Inflation never rose above 9% for rest of 1980s
- Privatisation
- Sale of state-owned companies, removal of government monopolies and contracting out of services as important
- Promote competition between industries
- Sales would create wider incentive for ordinary people to work harder
- Before 1983 British Aerospace, British Sugar and British Petroleum sold off
- 'Popular capitalism' - shares sold off cheaply; 1979-90 no. shareowners increase 3million to 11million
- Distribution uneven; individuals have 38% 1975 to 20% 1990
- £19 billion earned from sale of state assets
- Privatisation of British Rail between 1994-7 = highly confused situation where government cont. subsidise private firms
- Deregulation
- Keen to remove rules and regulations that stiffed competition and innovation
- Removal of exchange controls in October 1979; fueled greater overseas investment
- City of London grew after 'Big Bang' 1986 which relaxed rules on ownership and trading of banks
- British people become more used to borrowing to pay for consumer goods
- Rise in private household debt; £16billion 1980 to £47billion 1989
- Easier mortgages meant mortgage debt rose from £43billion to £235billion
- Taxation and incentives
- 1980 top rate of income tax cut from 83% to 60%; in 1988 cut again to 40%
- Top 5% individuals pay same amount of tax in 1988 than they did in 1978; 83%
- Income tax reduced from 33 to 25% and inheritance tax cut from 75 to 40%
- Average tax bill rose by 6% 1979-90 due to rise in VAT from 8%to 15% 1979
- Trade Union legislation
- 1980 Employment Act - workers did not have to join trade union- only strike against direct employers
- 1982 Employment Act - unions could be sued for illegal strike action
- 1984 Trade Union Act- strike had to be approved by majority of union members in secret ballot
- Miners
- NUM President Arthur Scargill; did not ballot NUM members about strike action; miners in Nottinghamshire to leave NUM
- Disaproval rating never fell below 79%
- Union members fell from 13.5m 1979 to under 10m 1990
- Working days lost to strikes fell 10.5m 180-4 to 0.8m 1990-4
- Manual work force fell from 47% 1974 to 36% 1991
- Origin and evolution of Thatcher's views on the economy?
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