What impact did Thatcher’s governments (1979-90) have on Britain, 1979-97?
1) The effect of Thatcher’s economic policies
· Thatcher had different ideas from mainstream Conservatism which led to Thatcherism. She believed in conviction politics meaning that politics should be rooted in the fundamental beliefs of political leaders rather than compromise. She rejected consensus politics and moving towards a centre ground. She also had strong economic convictions being against dependency, high levels of tax, debt and powerful unions. She believed everyone should work hard and not rely on the state and that this hard work should be rewarded through low income tax. She also believed the key to economic growth was through individual enterprise and creativity. Furthermore, she believed in economic efficiency arguing that private companies were more efficient than government agencies as they were required to make a profit. To achieve this economically, Thatcher knew spending had to be cut and to control the unions who led to growing taxation. Thatcher was also a passionate believer in the rule of law arguing that British law was central to politics in the democratic process. She was suspicious of radical forms of protests as reform should come through elections and laws rather than through undemocratic strikes. Finally, Thatcher was a firm believer of nationalism and the virtues of Britishness. She was suspicious of black rights groups accusing the police of racism and feminist groups who campaigned for women’s liberation as under British law; justice and freedom were guaranteed for all. She also become concerned over relations with Europe.
· Monetarism, 1980-82 – This broke the post-war consensus. The priority was to control inflation with tax rises and spending cuts. Geoffrey Howe was in charge of this in the Medium Term Financial Strategy to reduce the amount of money in circulation. Howe raised VAT from 8% to 15% but lowered direct taxation from 33% to 30% and top rate from 83% to 60%. Thatcher believed that if income tax went down more people would work hard but increasing VAT hit poor people. Public spending was radical in this period dropping from £11billion to £9billion. This rebalanced the economy so inflation could be controlled. Taxes were raised in middle of a recession which was unconventional. New taxes were introduced on North Sea oil and taxes went up by £4billion. There were also cuts in education and healthcare therefore this was a deflationary budget. 364 economists wrote to The Times in complaint. Monetarism was abandoned in 1981 over a cabinet rebellion rejecting a further £5billion in spending cuts.
· Nationalised industry, 1979-82 – Thatcher held suspicion over state run industry as they did not have to make a profit, she didn’t feel that government money should help industry stay afloat. She appointed Sir Keith Joseph as The Secretary of State for Industry. He allowed some of British national industry to decline. British Steel was no longer allowed government funding so laid off 53,000 workers (this led to further payouts due to…