Privatisation under Thatcher

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  • Created by: bea_damon
  • Created on: 12-05-17 17:39

Privatisation under Thatcher

Advantages

  • The number of shareholders rose from 3 million in 1979 to 11 million in 1990
  • Privatisation of British Telecoms in 1984 and of British gas in 1986 marked the rise of popular capitalism
  • Most successful aspect of popular capitalism was the sale of council houses - over 1 million were sold between 1979 and 1988
  • Sum of £19 billion was used to fund tax cuts
  • The Private Finance Initiative led to the construction of some impressive buildings

Disadvantages

  • However, the distribution of these shares was far more uneven than the Conservatives made out in their 1987 manifesto - 9% of unskilled male workers compared to 50% of professional males
  • Most damaging to the long-term success of popular capitalism was the rapid sale of shares to pension and investment firms - while in 1979 38% of shares were owned by individuals, by 1990 this figure was 20%
  • There was little appreciable difference in the gas and water supply while prices have risen faster than inflation - this may not have been a concern for Thatcher as it benefited shareholders and large executives
  • The privatisation of British Rail was felt to be, even by Thatcher, a privatisation too far - it led to a highly confused situation where the government continued to subsidise private firms that operate the trains. Spending on trains has doubled since 1994 while most commuters would agree that the service has not improved
  • A way in which privatisation was continued after Thatcher was the introduction of the Private Finance Initiative under John Major. Public-private partnerships were set up to inject private funding into traditionally state-run concerns such as hospitals and schools. However, it was clear by 1997 that future generations of tax-payers would have to may huge amounts of money to pay back the firms that provided the initial investment

Evaluation

- Thatcher felt that the selling of state assets was essential to curing British economic stagnation. - It would reduce government spending on loss-making industries and on wages as civil servants would be replaced by government employees- It was believed privatisation would increase competition and therefore innovation - The revenue could be used to fund tax reductions, another of Thatcher's main aims 

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